You've Just Received Inheritance Money or Won the Lottery, Now What?
Falling into a huge amount of money is something many of us dream about. Winning the lottery, for example, or receiving an inheritance could immediately wipe out all your financial troubles.
But, having your hands on a great deal of money doesn't mean that you're in the clear financially.
Many people handle large windfalls in irresponsible ways and they end up where they started while hanging onto the guilt of wasting so much money. We're here to give you a few suggestions on how to handle falling into large sums of money.
What to Do with Lottery or Inheritance Money
There are many different sums of money that you could fall into. We hope that all of the tips below can apply to any amount of money you receive.
Winning the lottery or receiving an inheritance in amounts that are more than one year of your typical salary and above will significantly change your standard of living. Sudden jumps in the quality of a person's living can be wonderful but they can also be dangerous.
Take a Step Back
Your first thoughts upon finding out about the money are probably about how you plan to spend it. Those thoughts should be muted so that you can take some time to think seriously about your financial situation including things like your debts, loans, future payments, future plans, and living expenses.
Chart out your entire financial situation so you can have a solid grasp of your present and potential future. It may be wise to consult with a financial planner during those stages as well because they have a deeper insight into how to make your money work for you.
Consider spending a week or two sitting on the money so you can understand what it could do for your life before you spend half of it on a Lamborghini.
Investigate Financial Decisions
Speaking of Lamborghinis and all other expensive things, beware of payments, your credit score, and the future.
Know that around one-third of those who win the lottery will declare bankruptcy in their lives. Think of that-- there's a way to blow millions upon millions of dollars and end up with absolutely nothing left over for retirement.
While we all like to think of ourselves as the responsible two-thirds, it's likely a lot easier to go broke after a windfall than you would think.
Those fancy purchases have real consequences for your credit and financial situation. You might not be able to make extravagant payments for the rest of your life. Be sure that you know you want the thing you're buying, and understand how the payments could affect you.
Appraise Your Life as It Was
Were you happy with your life before you won the lottery?
Who were the most important people in your life and what did you enjoy doing together? What little parts of your life did you value and why?
People sometimes leave the bulk of their old lives in the dust when they fall into more money than they could have imagined before. Even when someone falls into a smaller inheritance, they might neglect their normal life for one they imagine to be better.
It's important to remember the old adage that money can't buy happiness. Money is great, and it can surely help you do things that make you feel happy, but those things are fleeting.
Fulfilling lives come from a number of factors (compassion, relationships, physical well-being, mental well-being, work, and more), and many of those factors can be lost when you enter into a new life.
It's like trading out your life for a shinier version. When the shiny version breaks down, though, your original life won't be waiting for you in the same condition it was when you left it.
Be aware of how the decisions you make with your money will affect those around you or change your relationships.
Establish Security for Yourself and Family
Depending on how large your inheritance or winnings are, you should consider setting money aside for your retirement. Retirement savings are typically calculated by multiplying one's yearly income by the number of years they plan to be retired.
Of course, you can't know exactly how long you'll live, but it's good to err on the side of caution. Think about the standard of living you want to have, what it costs, do the calculations, and set that value aside.
You also might want to save for your children's college tuition. If you have younger children, it would be wise to set a portion of that money aside so it's there when the tution bills start.
There are a million other things you could set money aside for, depending on the specifics of your family dynamic. Just try and take care of those things that matter to you early, so that you can focus on the money that's leftover without having to worry if you missed anything.
Get Financial Protection
Even though you may now have a large bank account, getting life insurance should still be considered. More money may mean larger expenses, getting life insurance in place eliminates any financial burden your family may face due to an unexpected death.
Life insurance can also be a great way to pay it forward and pass an inheritance yourself to those that mean the most to you. It will allow them to live better lives for decades to come.
Need A Little Help?
Handling your inheritance money is hard. Living the best life you can is hard. Sometimes we need a little help with these things.
Explore our site to get more tips and tricks on how to move forward with your life in the best way possible.