Unexpected windfall? Tips for when you exit your business, win the lottery, or inherit money.
I Won the Lottery!
Although there are a variety of ways to make money, having a sudden wealth event is the fastest and usually most stressful way to come into money. There are a variety of ways to suddenly come into money such as winning the lottery, selling your business, or inheriting money. What should you do when you come into money? First, what are some types of sudden wealth?
Winning the Lottery
This is typically the most unexpected way to come into unexpected wealth. The chances of winning the lottery are so small that we typically buy a lottery ticket more for fun then actually thinking we will win! None the less, you should think about how to deal with the potential unexpected wealth that comes with winning the lottery.
This type of sudden wealth is usually more easily anticipated. As a business owner or founder of a fast growing startup you will have a good idea of your business growth and will have a say in when it is sold and for how much. You should still prepare for this sudden wealth as your personal and financial identity will certainly be changing.
This is a bit more common way for people to come into wealth. Sometimes we know the money is coming, sometimes it is completely unexpected. Either way it will still impact your life.
Things you should consider for an expected or unexpected windfall:
- The first thing you should do is to define your hopes, dream, and goals. What is the single most important thing you want your money to do for you? This is, in my professional opinion, the most important thing you can do. Once you have defined and crystallized your objectives, it will be easier to plan for making money fast.
- Know what your getting and why you are getting it. Take the time to get familiar with how much money you should expect and how you will receive it (lump sum, payments over time, etc.)
- As early as you can, assemble a team of professionals. Don't rush into this. Take the time to do your due diligence, schedule meetings with & interview professionals like a CFP® Professional, CPA/Tax professional, Estate planning attorney, and property & casualty insurance professional. Also find someone that can help guide you (mentor, trusted friend, etc.) that will be a sounding board for you without needing to be compensated. Putting together your Professional Dream Team is crucial to making sure you are able to manage your sudden wealth moving forward.
- Be wary of people asking for money, especially friends and family. You may want to consider not telling anyone how fast you are making money and if you have received sudden wealth. Money changes people, and the people around them.
- Don't rush into any large purchases. Sleep on things for a bit. Nothing wrong with going out to celebrate with loved ones, but keep any large purchases on the back burner until you have had time to put together sound strategies for managing your new found wealth.
What should you do now?
Nothing. Take a deep breath, gather your thoughts, and then start working through the list above. There is no rush, even if others are telling you there is.
Once you have have taken the time to write down what is important to you and what you want your money to do for you, look to start the conversation with a professional. We have found that engaging in a conversation early on, before or shortly after coming into a windfall, tends to lead to the best planning and outcomes.
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