Dont Blow A Windfall
What to do when (a lot of) money falls in your lap
Whenever you receive a windfall, whether it's from a legal settlement, insurance claim, inheritance or lottery win (we can dream, right?), a flood of emotions is bound to follow. And I'm sure you've heard me say before, emotions and money don't mix well. Take inheritances, for example, which tend to come at a time when you're grieving. It's not uncommon for the money to be accompanied by guilt. On the other hand, receiving a large sum of money can also be happy and exciting; two emotions that can easily tap into your impulsive side. Mishandle these emotions and you can expect to mishandle the money, too. Making the most of your influx of cash will come down to your ability to separate your feelings and think rationally. Brian J. O'Connor of Funny Money Blog; offers some advice on how to manage both the emotions and the money.
For starters, when a large sum of money falls into your lap, do nothing. Yes, nothing. Wait six months to a year before deciding what to do with it. You won't earn interest, but you'll earn insight (giving yourself this grace period allows you to clear your head). Coming into a windfall can also mean dealing with larger amounts of cash than you're used to. O'Connor suggests if it's more than 5 percent of your annual income, then seek out professional guidance (i.e. a certified financial planner). A professional can help you decide how to invest your money, while bypassing the emotions of loss, grief, or excitement that you might be feeling.
If you can't do nothing, do something small. Sometimes we want to celebrate our windfalls. But it's important that today's celebration not get in the way of achieving what you eventually figure out is your goal for this cash stash. Allocate a certain percentage of the money -- perhaps 5% -- and allow yourself to do something you'd enjoy. If it's an inheritance that's burning a hole in your pocket celebrating may not feel right, but doing something that the person who left you the money would appreciate might.
Article was written by Jean Chatzky, personal finance expert, best-selling author, and Editor In Chief at SavvyMoney and provide by SavvyMoney®.