Once I bought a lotto ticket for Florida Lottery, when jackpot went up astronomically. I don’t really recall the exact amount of the jackpot. But that’s it I never played lotto again. But, like every one else I sometimes day dream about getting a windfall of money. Some weird thoughts do cross mind sometimes, like a suitcase full of money coming down from the air crafts above or finding a sack full of currency notes. But realistically, we may receive a financial windfall at some point of time.
Most of us learn to live with a steady amount of money. It usually comes in the form of a paycheck from employer. We are accustomed to it. We can manage our income, budget it, plan for the future, and do everything you’d expect with this sort of arrangement. So how do we handle an unexpected windfall?
You may not have heard it but, most people can’t handle a windfall and squander their money.
Then there are financial events that are unplanned. These usually come in the form of emergencies, like medical events, household breakdowns, and the like.
These can ruin a financial plan and take a long time to recover from. So, we ask every to have an emergency fund, that can be the source of money you need.
Then, there are positive financial events. We call these windfalls, and they usually occur once or twice in a lifetime.
But even though these windfalls don’t come around often, they still occur for many of us. Sometimes it’s just as important to prepare for positive financial events as it is to prepare for negative ones.
Three common windfalls we could see in our lives at some point
As per Forbes, As a whole, baby boomers are expected to receive an estimated $8.4 trillion in inheritances; they’ve gotten $2.4 trillion already with $6 trillion more on the way, according to the Center for Retirement Research at Boston College.
If you have any family at all, you will likely inherit some property or money from an elder relative at the time of their death. It may not be much, but it doesn’t have to be. In the case of a sudden inheritance like this, it’s best not to spend the money all at once.
Because inheritances usually come along during a time of grief, it’s best to take a few weeks or months to let your emotional state settle. Let the money sit in a bank account and don’t touch it for awhile. Then, when you’re used to having the money, you can come up with a more solid plan about how it will best be used.
I am from India, most of us keep our inheritance money only to be willed to our children. We never touch the money it sits in an investment account and get bigger and bigger. Perhaps everyone should adopt this custom, unless there’s a problem with present financial health.
No financial planner will recommend that you spend all your money in to gambling, but people do enjoy playing the lottery and going to the casino.
And some of these people win! Unless you are a very skilled gambler, it’s best not to reinvest your winnings in more gambing, at least beyond a certain point.
If you have luck at the track or the game room, take some of that money and put it into an investment that will benefit you in the long term, not just the few moments you spend on the casino floor.
It is easier said than done, I know. A huge self-restraint is required to not gamble again after winning one. When restrain really becomes tough, you can keep aside a significant portion of your win while using rest to win again.
Structured settlements come your way after you make a lawsuit, as long as you are very likely to win and the opposition doesn’t want to waste the time and money or a trial they are going to lose. They’ll offer you a settlement, one that is organized outside of court.
If you accept, you will likely have accepted a settlement that will be paid out over time, month by month. That’s the “structured” bit. A structured Settlement purchaser can buy your settlement and give you a lump sum so that you can make the most of your money all at once without having to save it up over time.
I was going through the articles that rank top in google listing of “how to handle financial windfall”. All of those articles suggested these steps to keep the money with you
- Not touching the money within first month. To let you get used to the money first.
- Then splurging on a little bit of money within first 6 months. So that your emotional self is satisfied and you tasted the fruit of the windfall
- At the end of the year you’ll need to pay tax. So keeping aside 30% for taxes is a “Must Do”.
- Hiring a financial consultant to decide on the investment options. So that your money can grow, while you sleep
All the points above entirely depend on your will power. It’s my theory that people who manage their credit card well-always pay off balance in full, will most likely protect their windfall money.
Whereas, people who run credit card balance are susceptible to squander their money.
So, if you have a credit card debt, you’re at risk. Get your act together as soon as possible.
Treat your windfall as hard-earned money, protect it as much as you can and let it grow to give you comfort when you need it most.