Haven’t we all dreamed about what we would do if we suddenly received an unexpected windfall of cash? Although receiving a very large amount of money sounds great in theory, the reality isn’t always so fantastic. Whether you’ve been expecting it for a while or it’s a complete surprise, it’s “Sudden Money”- and managing it well can be challenging.
The Financial impact of Sudden Money
Most of us are used to slow increases in our net worth over time. As our income increases gradually and we save and invest for the future, we can adapt and become more financially sophisticated. When the increase is all at once, however, there’s little time to adapt. Being responsible for a level of wealth you’ve never had before can push you out of your financial comfort zone.
Whether you’ve been counting on it for years, such as from selling a business, or if it’s from a divorce or an inheritance, a sudden influx of money can alter your perspective in unexpected ways. With an opportunity to re-think your life, your relationships, and what is really important to you, feelings of guilt and confusion can set in, creating emotional chaos. The influence of others in your life can make it worse, when you don’t know who you can trust or whose advice to take. Dubbed “Sudden Money Syndrome”, it’s the reason why seven in 10 people who suddenly receive a large sum of money will lose it all within just a few years, according to the National Endowment for Financial Education.
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Avoiding Sudden Money disaster
The first step in avoiding disastrous results is to take stock of your life and your situation. Remember that you are still the same person you were, you’ve just been thrust into a new and uncomfortable situation. Here is where an objective professional can help you keep a proper perspective on your abrupt increase in wealth. This is the time to form your plan- the plan for the rest of your life. Before taking any action or making any decisions, allow this plan to take shape. The dream of buying a convertible sports car or a house on the hill sounds great. But with the perspective of your life plan you can consider how it can be put it to better use, including saving for retirement, paying off high interest debt, and setting some aside for taxes.
Making wise choices doesn’t mean you can’t have some fun
And it’s important to note that although putting away for a rainy day is important, managing a cash windfall is not all about saving. You can be smart with your money and still budget for the nicer things in life like taking that vacation you’ve been dreaming about.
The possibilities can seem endless, and you may have trouble deciding on the wisest course of action. Getting advice from a financial planner can help you sort out what to do next. Your B & F investment advisor will show you how you can plan for a secure future, while making the most of the present.
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Today’s windfall, tomorrows investment
An important concept to consider when managing a cash windfall is whether you want to use an investment advisor who earns a commission on certain investments you make or one that does not earn income from anyone other than their clients. Fee only certified financial advisors in San Diego, like Blankinship and Foster provide you with a plan on how best to invest your money and do not receive compensation for steering you toward any specific investments.
At Blankinship and Foster, our financial experts have decades of experience in managing money. Whether you’re enjoying a cash windfall or simply want advice on handling monthly cash flow, we can help you make it work. Call and make an appointment to meet with one of our financial planners. We can help you enjoy your good fortune today, while also planning for a secure future.