How would life change if a million dollars somehow came your way tomorrow? We’ve all played this game – fantasizing about the toys we could purchase with that much money. Then after about five minutes of daydreaming, we snap back to reality. “That’s not going to happen” we say. “It will take me 40 years of hard work, saving and wise investing to reach that financial milestone.”
However, every day people’s lives are changed because they receive lump sums of money worth six or seven figures. How could this happen? Well, it’s not one of those get-rich-quick schemes.
A person could receive a financial windfall in these ways:
An Inheritance. A person is the recipient of money from a loved one or friend’s will.
Life Insurance Payout. Another death issue where an individual passes away, leaving the remaining spouse to receive the death benefits from the life insurance policy.
Lottery. A complete long shot here for sure, but it happens.
Legal Settlements. Injuries from an accident or a lawsuit could produce large cash payouts when the court rules in your favor.
Career Realization. Professions where this might occur could be the professional athlete who just signed his or her first contract and the actor or musician who unexpectedly bursts on the scene.
A Business Deal. The blog you started three years ago goes supernova in popularity and gets bought out by a large company. Hey, here’s to dreaming!
These events would be life altering. They have the potential to change a family for multiple generations. They also have the potential to be a devastating curse (just google “lottery winners going broke” to see how).
If you find yourself in this situation, here are some steps that may be helpful:
1. Wait (maybe as much as six months). There is absolutely no rush to do anything. You have the money. Deposit it in multiple bank accounts if you have to and let it sit for bit. It’s important to evaluate your circumstances and give the change time to sink in. Life is going to be different and it takes time to emotionally prepare for what’s ahead.
2. Avoid immediate spending. With the sudden wealth will come the immediate desire to spend. A person may be able to fight against this urge but if they had a predisposition to spend excessively before, then receiving this money will not help the issue – it will only exacerbate it. In addition, some of the above scenarios may require time for emotions to heal. Don’t medicate the pain of loss by spending.
3. Consult a financial adviser. With numbers this large, consulting a professional would be a wise move even for someone well versed and disciplined in saving and investing. There may be issues you haven’t considered in regards to retirement, paying off debt or estate planning. In addition, a professional would have more knowledge of tax related issues to consider and the best ways to set up a portfolio for long term sustainability. It will be worth the money to pay for a professional’s advice and service in this matter.
4. Watch out for friends or loved ones. It may be that your windfall is not a secret. Perhaps friends and family members are aware of the amounts of money that have come your way. Long lost friends you haven’t seen in 20 years may suddenly look you up, seeking a handout or financing for that can’t miss business deal. Be on guard.
(I’m reminded of the ESPN 30 for 30 documentary “Broke” that detailed the lives and misfortunes of many professional athletes who became instant multimillionaires. They struggled with telling friends “No” and felt compelled to give money to family members who had helped them along the way. Many of them lost millions of dollars along the way. Worth the view if you haven’t seen it.)
5. Give. Think of ways to share this windfall and impact your church, community or other cause that you hold dear. The great businessman and philanthropist Andrew Carnegie once said, “Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.” Give some money away at some point in the process but not immediately (see #1) or recklessly (see #4).
Receiving a financial windfall will be a life changing moment. Proceed slowly and cautiously on the path ahead so the life changing moment becomes a long-term financial blessing.
What other advice would you give to someone who received a giant windfall of money?
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