Some Steps to Managing Sudden Wealth

Take a Breath and Pause

Experiencing a windfall of sudden wealth can be overwhelming. Before diving into decisions about how to manage it, take a moment to breathe and let the reality sink in. Emotions can run high during this time, so allowing yourself a brief pause can help you approach the situation with a clear mind.

Assess Your Situation

Once you've collected yourself, the next step is to thoroughly assess your financial situation. Determine the exact amount of wealth you've received and in what forms (cash, investments, assets, etc.). Understanding the full scope of your newfound wealth will provide a foundation for making informed decisions moving forward.

Seek Professional Advice

Managing sudden wealth often requires expertise beyond everyday financial knowledge. Seek guidance from professionals such as financial advisors, accountants, and lawyers who specialize in managing windfalls. They can help you navigate tax implications, investment strategies, and legal considerations specific to your situation.

Create a Financial Plan

Developing a comprehensive financial plan is crucial. Start by identifying your financial goals and priorities. Your plan should encompass budgeting, saving, investing, and spending strategies tailored to your new financial status. A well-thought-out plan will provide structure and guidance for managing your wealth effectively.

Diversify Investments

Avoid putting all your wealth into a single investment or asset class. Diversification spreads risk and can potentially enhance returns over time. Work with your financial advisor to create a diversified investment portfolio that aligns with your risk tolerance, financial goals, and time horizon.

Pay off Debts

If you have outstanding debts, consider using a portion of your new wealth to pay them off. Eliminating debts can provide peace of mind and improve your overall financial health. Prioritize high-interest debts first to minimize interest payments over time.

Plan for Taxes

Understanding the tax implications of your sudden wealth is essential. Depending on how you received the wealth (inheritance, lottery winnings, stock options, etc.), taxes may apply differently. Consult with a tax advisor to develop strategies for minimizing tax liabilities while staying compliant with tax laws.

Set Aside an Emergency Fund

Even with sudden wealth, having an emergency fund is critical. Aim to set aside 3-6 months’ worth of living expenses in a liquid, easily accessible account. An emergency fund provides a financial safety net for unexpected expenses or changes in circumstances.

Stay Grounded

Sudden wealth can bring significant changes, but it's important to stay grounded. Avoid succumbing to extravagant spending or making impulsive decisions that could jeopardize your financial stability in the long run. Maintain perspective and make decisions that align with your long-term financial goals.

Consider Philanthropy

If you're inclined, think about charitable giving as part of your wealth management strategy. Establishing a philanthropic foundation or donating to causes you care about can be fulfilling and may also provide tax benefits. Consult with your financial advisor to explore charitable giving options that align with your values and financial goals.

Review and Adjust Regularly

Financial planning is an ongoing process, especially after receiving sudden wealth. Regularly review your financial plan and adjust as needed based on changes in your life circumstances, financial goals, and market conditions. Stay proactive in managing your wealth to ensure long-term financial security and fulfillment of your goals.

Our Process

The financial advisors at Wilmarth Private Wealth Management of Raymond James understand the range of emotions that can emerge due to an instant wealth event. Let’s put a plan together to enhance your current situation while maximizing investment opportunities to maintain, help grow and utilize your newly acquired wealth.