So You Just Inherited A Million Dollars, Now What?
So, you just inherited a million dollars. For most people, it’s just a daydream: a long-lost relative has named them in their will and left them everything. But the real scenario that has led to your new financial windfall may have involved the loss of someone close to you, and the emotion that comes with such a loss can sometimes impair your decision making ability.
Suddenly coming into a lot of money, whether it’s through an inheritance, winning the lottery, or breaking into a lucrative career (sports, entertainment, etc.) often brings a commensurate number of challenges along with it.
The sad reality is that many people who suddenly go from low or moderate income to wealthy very quickly, often end up declaring bankruptcy within 3-5 years. So, how can you protect your newfound wealth and avoid the pitfalls many others succumb to?
Don’t Do Something, Stand There!
One of the worst things you can do is make hasty decisions. Avoid immediate purchases or paying off debt right away. Truly, the best thing to do after receiving a large amount of money is to do nothing for a while.
Take a breath, become inaccessible and evaluate all the ways life may be different for you as you move forward. Put your money in a basic savings account at a reliable institution and gather yourself.
It’s totally fine to get out of town for a vacation if you need to escape for awhile, but the idea is to not make any major decisions (or new friends) during this evaluation period.
Get Advice And Create A Plan
Before you can get on with living your best life, you need to create a sound financial foundation to ensure you are able to enjoy yourself as much as possible.
This should include:
- An accountant to ensure your taxes are properly accounted for and paid.
- A financial planner to ensure your personal balance sheet is properly managed.
- An estate attorney to ensure the proper legal infrastructure is in place to protect you and your loved ones.
These professionals can also serve as a moat or buffer between you and those who may want a piece of your financial windfall.
Learn How To Say “No”
From unsolicited calls from your local banker to friends and family you haven’t heard from in years, don’t be surprised when you suddenly become very popular. You’re likely to be inundated with a parade of “can’t lose” business opportunities from friends and family who will have no shame in asking to “borrow” a few thousand here and there.
To avoid becoming a human ATM, it is imperative that you you learn early on to say no to all of these overtures, no matter how sincere or well-intentioned.
Depending on the exact amount you inherit, you and your family’s lifestyle can be permanently changed in a significant way. But to maintain that lifestyle you’ll have to be smart, disciplined, and informed about your money and how it is working for you.
Do not become reckless. Take time to map out a plan with your advisors and stay disciplined.
When You’re Ready, Live A Little
Once you’ve put together a plan and spoken to the right people to ensure your money is protected, go head and splurge a little. Enjoy yourself. If necessary, talk with your team of professionals to see what type of purchases you can reasonably make without squandering your new financial stockpile.
Additionally, consider helping a loved one. The best part of being wealthy is being able to help the people you care about. Whether it’s paying down or paying off someone’s student loan, helping a financially struggling friend, or donating to a charitable cause that is meaningful to you–giving back in this manner will make you feel exponentially better about your life.
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