Diehl & Hubbell Digest 2023
There are many stories of lottery winners who have won huge sums of money and 5-10 years later were broke. You may never win the lottery, but you could come into a large sum of money, whether it’s an inheritance, the sale of a business, or a legal settlement. What is your best plan of action to avoid becoming like one of those destitute former lottery winners?
The first question to ask is do you need to use this money to pay your living expenses? Maybe you received a legal settlement due to an injury that won’t allow you to work. Maybe you sold your business and will need to live off the proceeds. Maybe it’s a large enough sum of money that you can consider retiring now. Those choices require entirely different strategies than what could be described as a windfall, or money that you don’t need to pay your living expenses right now.
If this money is not needed to pay your living expenses, then you first need to determine what your goal is for the money. Is it to put your children through college? Is it for your retirement down the road? Or is it something else. Once you have determined the goal, you can begin formulating your plan. There are a couple key points to keep in mind.
Be careful of spending this money on items that will increase your monthly expenses, like a large house with property taxes, insurance, utilities, and upkeep. Or an expensive car (or cars) with high insurance premiums, maintenance and other expenses.
Be careful of friends and relatives who come to you with great business opportunities that involve you providing the money and your friend or relative running the business. In fact, your best strategy is keeping your good fortune private to avoid such conversations.
The two examples described above are decisions that have caused problems for many of the lottery winners mentioned earlier.
Knowing your goal and formulating a reasonable plan is the best way to handle this situation. Part of that plan might be to treat yourself to something – a vacation, maybe – with part of the money. Importantly, working with a financial advisor you trust can help you put this plan together and avoid some of the pitfalls described above.
Thomas J. Walsh, CFA
Registered Principal, with securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC.
Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.
Walsh Asset Management, LLC and Cambridge are separate entities.
Branch Office: 3914 Miami Road, Suite 201, Cincinnati, OH 45227 513.624.6618