We all like to fantasize about what we will do if we win the lottery, hit the jackpot in Vegas, or receive a surprise inheritance. So you might think you already have a plan in place, in the event of a sudden windfall of cash.
Quite often, the lump sum of money comes from a life insurance payout and is surrounded by much emotion. Since we know that making emotional decisions is usually a bad idea, following these seven steps can help you make smart decisions in the event this happens to you.
Delay big decisions. The best way to avoid emotional decisions, and the regret that can come along with them, is to hold off on making any big decisions until things have settled down.
Put your money in a safe account. An FDIC-insurance bank can securely hold up to $250,000 in a money market or savings account, without risk of loss. While you evaluate your options, your money will earn interest.
Consider your current financial status. Meet with a financial advisor to evaluate your portfolio, earnings, budget, and so on. With a full understanding of your current status and future needs, you can proceed wisely.
Pay off debts. It might not be the most exciting way to spend your money, but you can’t put a price on financial freedom. Consider paying off debts, and free yourself from years of interest and fees. Now you can put your own earnings toward something more rewarding.
Set up a savings account. It’s always a good idea to keep some cash stashed in a rainy day account, for emergencies. Now you won’t have to worry about how you’d cover a sudden expense, like a new roof or major health crisis.
Live a little. If you’re free of debts and you can cover emergency expenses, there’s nothing wrong with splurging a bit! Just make sure to spend the money on something that will truly bring you long-term joy.
Prepare for your future. It would be unfortunate to reach retirement and feel regret that you didn’t plan more carefully. With today’s retirements potentially lasting twenty years or more, beefing up your savings is a good idea for almost anyone. If you receive a windfall and want to use it to plan for your future, give us a call and we’ll help you evaluate different ways to help you achieve your goals.