May 26, 2022
How to Deal With an Unexpected Windfall of Cash
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.
- 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.
- 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.
- 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.
- 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.
- 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.
