Whether you have received an inheritance or won the lottery, before you splurge, take time to consider all the financial angles and come up with a solid plan. There is a reason most lottery winners wind up broke. Shady financial advisers may shower you with dubious investment schemes. Long-lost relatives could reappear with hard-luck stories. You might be tempted to quit your job, buy a more expensive house or make other costly decisions that could make your jackpot quickly disappear. The bigger the jackpot, the greater the chances that you will be the victim of bad decisions.
Many people view a windfall as “found money” and treat it differently than money they’ve earned. They’re much more likely to use it in a way they’d regret.
Win or inherit enough and banks will lend you enough money to put you in debt. Yacht brokers will call, as will Realtors will call who have your dream home on the market.
Some financial planners advise waiting until you give yourself time to come up with a solid plan for how you’ll use the money. If your inheritance includes an IRA, there are special rules that you will want to consult with financial planners on.
The biggest mistake people make with a windfall is not figuring out how to make the money last. If the money is big enough, assemble a financial team that includes a financial planner, a CPA (certified public accountant) and perhaps a lawyer. If you are unaccustomed to handling large amounts of money, a financial planner is the most important part of the team. You will want to do a search of planners who have a CFP™ (Certified Financial Planner) in their title, and someone with whom you are comfortable discussing your personal financial needs and goals.