If you get a huge windfall as a result of an An inheritance settlement or a lump sum settlement, you’ll be forced to make financial decisions you didn’t anticipate. Having a large sum of money available at once can be both a blessing and a curse. You’re dealing with not just the emotions of receiving the money (maybe from a deceased loved one or a lawsuit stemming from an accident), but also the mechanics of how to spend or save it.
What you do depends on your individual financial circumstances, but a good rule to follow is to give yourself some time to analyze it all and then build a sound financial plan based on how it affects the rest of your finances.
I know it sounds strange, but you’ll make a hasty decision in the first few months that you’ll come to regret later. Waiting a bit before making any An inheritance settlement was one of the best recommendations I learned from Susan Bradley and Mary Martin’s book Sudden Money. They recommend a six-month waiting period, and I agree.
I’ve seen folks regret buying new automobiles, giving a large sum of money away, or upgrading their homes. Make sure you’re not one of them. Place the funds in a high-interest savings account for a few months while you consider your options.
Avoid informing too many people about your fortune. Your family members may approach you with an outstretched hand, requesting a loan or a present. Friends or relatives who are envious of your An inheritance settlement may treat you differently.
After assessing your financial status, you may determine that you are in a position to assist some family members or make a significant donation to a nonprofit organization. But don’t hand over your cash until you’ve devised a strategy. This leads me to the next stage.
Don’t rely on family for financial advice, no matter how well-intentioned they are. You require unbiased, qualified guidance. You should hire a financial planner, accountant, or attorney if you don’t already. They can work together to assist you to determine how to spend your money, organize your estate if you want to leave some of it to the next generation, and deal with the tax implications of the windfall.
Being debt-free is the pinnacle of independence. Consider this windfall to be your reset button if you’re in high-interest credit card debt. Pay off that debt and don’t get into any more credit card debt.
If you have school debt, you can also use this money to pay it off. Many homeowners use a windfall to pay off their mortgage in full, but interest rates are currently so low that depositing that money in a retirement account might give a superior long-term return. Consult your financial planner to determine which path is best for you to have given your present financial status.
Take advantage of the fact that you are young and have a long time to save for retirement. You may not be able to save enough to sustain yourself when you quit working if you wait until just before you want to retire to start saving.
Because they don’t have any money left An inheritance settlement after paying their bills, many Millennials put off investing for retirement. You can put more of your pre-tax salary into your 401(k) now that you have a larger financial cushion (k). Make sure you have enough money set aside to match your company’s match.
Next, if you qualify, contribute to a Roth IRA (up to $5,500 each year). If you have extra money, try increasing your 401(k) savings to 15% of your pre-tax salary, or save more slowly by increasing your 401(k) contribution by 1% per year. If your windfall is big, make it a point to contribute to your 401(k) each year. The current yearly limit is $18,000. Because you fund your own business, this will help you save money on taxes.
This is not the time to spend your entire An inheritance settlement or cash An inheritance settlement on a flashy automobile, opulent condo, or fashionable clothing. You want to stretch this money as far as possible, and if you spend it on a lavish lifestyle, it won’t go as far as you believe.
Choose a few small, meaningful splurges instead. Is it finally possible for you to visit the one spot you’ve always wanted to see? Have you been putting money aside for a down payment, and this windfall has made homeownership a reality for you? Do you have any goals that you can currently achieve? Maybe you wanted to go back to school, so you could grow in your career or change careers.
While some windfalls are significant enough to allow you to quit your day job and live a luxurious lifestyle, don’t waste your money. The National Endowment for Financial Education estimates that 70% of people who get a windfall spend it all within a few years! This guy, for example.
You can take full advantage of getting a significant quantity of money if you have the appropriate pros on your side and a sound plan for spending, saving, and investing your money.
Before the probate court may appoint a personal representative or executor, or before a successor trustee can take over the administration of a trust, all the deceased’s estate planning paperwork and other crucial papers must be identified.
A last will and testament, funeral, cremation, burial, memorial instructions, or revocable living trust are all examples of estate-planning paperwork.
Bank and brokerage statements, stock and bond certificates, life insurance policies, automobile and boat titles, and deeds are all important documentation. Other information sought could pertain to the deceased’s debts, such as utility bills, credit cards, mortgages, personal loans, medical bills, and burial costs.