.What to Do With a Windfall

What to Do With a Windfall

By Emily Guy Birken  January 13.2020

Theoretically, a sudden windfall should reduce your financial worries. Who doesn't appreciate getting suddenly richer?

However, making good decisions with a large infusion of cash can feel overwhelming, especially if your windfall comes about because of something negative. For instance, when I received a life insurance payout after my father passed away in 2013, the money was both emotionally charged and stress-inducing, and I was terrified of making a misstep.

If you've received a windfall, taking your time and making intentional decisions about the money will serve you better in the long run. Here's how you can do that.

Take A Break Before Making Any Decisions

No matter how you received your newfound wealth, you're likely to have a number of strong emotions associated with the event. And we all know that emotions and rational decisions can struggle to coexist. That's why it's a good idea to take a little time before you make any decisions whatsoever with your new money.

If the money came to you because of a negative situation, such as a death in the family, the end of a lawsuit, or the sale of a beloved business, your emotions will inevitably color your view of the money. 

I personally found that I wanted Dad's insurance money to no longer be in my hands, because having it was a reminder of my loss.

Even if you have positive associations with the money (after a lucky weekend in Vegas or a surprise profit-sharing bonus from work), those fuzzy feelings may prompt you to make risky decisions to keep the good vibes coming. Letting some time pass between receiving your windfall and deciding what to do with it can help you view the money more dispassionately so you can make the best possible decisions with it.

So how long should you pause before deciding what to do? Depending on the size of the windfall, you might want to wait as long as six months (or longer) before making any decisions. This will give you time to process your emotions so that you're psychologically ready to make these big choices.

Put It Someplace Safe

What you do with your money while you wait to make the big decisions depends partially on where your windfall came from. Life insurance benefits and other inheritance money can sometimes stay safely in the same account you'll be paid from.

In these cases, it's common that your money will even earn some interest while it stays put. Simply keeping the money in place can be a good way to give yourself the emotional breathing room you need without worrying about making a preliminary decision.

To continue reading, please go to the original article here:

https://www.wisebread.com/what-to-do-with-a-windfall