Did you recently come into a large sum of money? Perhaps from an inheritance, a lawsuit settlement, or even from lottery winnings? You're probably thrilled about your windfall, and you should be. However, it's important that you take steps to protect your new-found wealth. There are plenty of stories of lottery winners or heirs who don't know how to handle their new wealth and blow it on frivolous spending. If you truly want this money to be life changing, you need to make sure it lasts for the rest of your life. Here are three tips to help you protect your new assets:
Set a budget. You may think that budgets are no longer necessary. However, that couldn't be further from the truth. You now need a budget more than ever. A budget will tell you what you can afford to spend and what you can't. It will also help reel you in when you feel tempted on spending money on a needless expense. If you need help setting up a budget, you should visit a wealth manager, who can advise you on how to make the money last as well as what level of spending is right for you.
Don't quit your job. Yes, a million dollars may sound like a lot of money. However, it's not that much if it has to last 50 years. Before you quit your day job, take a hard look at your life expectancy and whether you can really make your money last. You may find that it makes more sense to continue working and use your new wealth to boost your retirement savings. Maybe then you can look at retiring a few years early instead of quitting today.
Another issue with quitting your job is that it gives you more free time. Many people fill that free time by spending money. When you combine increased spending with reduced income, that's a recipe for financial disaster.
Build a solid team. Finally, it's important that you have knowledgeable people advising you on how to handle your money. Financial management may not be your area of expertise, so it's important that you work with people who are knowledgeable about those kinds of issues. Most banks and financial firms have private wealth management divisions. These departments serve people who have a high net worth. A private wealth management department will often have investment managers, accountants, and all of the professionals you need to form a solid financial team.
For more information, talk to your bank's private wealth management department. They can help you formulate a plan for dealing with your windfall.