Getting an unexpected financial windfall can be life-changing, and you want to make the most of this opportunity. Perhaps you won the lottery, received a large inheritance, or sold a business for a large profit. Whatever the case, it's important to pause and think carefully before spending any money or making any rash decisions. Instead, follow these tips to manage your newfound wealth responsibly and in a way that will pay off in the long run.
Make a List of Goals
Before you make any financial decisions, it's important to get very specific with yourself about your financial goals and priorities. Do you have student loans you'd like to pay off? Are you hoping to buy a home in the next year? Do you want to prioritize saving for retirement? Are there family members you are hoping to help with your windfall?
By spending time reflecting on how you would like to transform your future with this money, you are more likely to actually make it happen.
Pay Off Debts
While it can be tempting to buy a new car or house or even put your entire windfall into investments, in most cases it makes sense to prioritize paying off debts. This is especially true for high-interest debts like credit cards and some personal or auto loans.
The interest means that the longer you carry the debt, the more you will pay over time. Pay them off now, and you will free up the money you are currently spending on monthly payments as well as avoid paying unnecessary interest over the years. If you are curious about how much interest you will need to pay while paying down debt more slowly, simply use an online debt calculator.
Hire a Wealth Management Company
Finally, the most important way to manage your newfound wealth is to work with a professional wealth management company. They will assign you to a trusted financial advisor who will ask questions about your finances, listen to your goals and priorities, evaluate your overall financial picture, and then create a plan for you. They will ensure your money is invested soundly so that it grows over time instead of being frittered away.
While most people dream about receiving a large windfall, the reality can be a bit overwhelming. Be sure to work with a local wealth management company such as MidwestOne Bank and follow these tips to protect your new assets.