May 26, 2022

How to Deal With an Unexpected Windfall of Cash

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It’s a nice surprise, but getting a four-figure (or more) payout from a tax refund, home sale, or inheritance you didn’t expect does come with some responsibility to make the most out of that “found money.”

Centers Health Care has a look at five tips on how to effectively deal with a financial windfall.

  1. Don’t Make Quick Decisions

If it’s an inheritance, money can come from a great personal loss. If it’s from a sweepstakes or lottery, it can be incredible joy. Either way, let the raw emotions pass before you make any decisions on any long-term plans for the money.

  1. Know Your Liabilities

A financial advisor can help determine if there are any tax liabilities to go with the money, and they can also help you create a timeline if you want to spend some and invest some.

  1. Get Ready for Pleas

The more people who know about you becoming flush with cash, the more of a pain in the neck it will be for you. Long-lost friends and relatives may reappear in your life to eventually try and eventually make the ask for some money or a loan. Having a financial advisor can also help you with this, as you can tell these people that the money you don’t need right now is tied up in investments.

  1. Revisit Your Retirement Plans

A large amount of cash can help you add to an IRA, convert a traditional IRA to a Roth IRA (that allows you to withdraw money tax free during retirement), or even help you delay taking Social Security payments for a few years, increasing the amount you will receive once you do start collecting.

  1. Save Some to Enjoy

Experts say it’s okay to take 10% or 20% of the money to enjoy for yourself. If the money came from an inheritance, many people feel guilty about spending the money on personal pleasures, but going on a family vacation to somewhere your loved one enjoyed or donating some money to a cause that meant a lot to that person are impactful ways to spend an inheritance.

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