How to Handle a Financial Windfall

It could come through a life insurance settlement, the sale of a house, or a pension plan payout. A big check, a financial windfall, can be hard to handle by yourself. Here are some rough guidelines to help you start thinking about what best to do with the money no matter what your situation.
• Make sure you have an emergency fund. Financial planners generally like up to 6 months of living expenses in a checking account or money market fund for those rainy days
• If you have dependent children, set up and fund college savings through a 529 plan
• If you have credit card debt, consider paying it down. High rates can snowball very quickly
• Consider buying long-term care insurance for yourself if you don’t already have it.
• Think holistically. Coordinate this money with your existing savings in pension plans, 401(k)’s, and annuities. Make sure that your overall asset allocation stays in a range that’s consistent with your age and risk profile.
• Consider consulting with an investment professional who can look at the whole picture and make recommendations based on your complete financial situation.
• Don’t be in a hurry. Often you need to wait a while before you can make major decisions, and money decisions are no exception.

The bottom line here is that you need to treat a financial windfall with care. Properly treated it can help you and your family live the life you want for decades to come.

Lynn R. Najman, CFP®

1 Comment

  1. consistent and wise words.

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