3 Things You Need To Know If You Inherit A Windfall

Want To Be A Millionaire?  Of course, who doesn't, right?

Recently a young 30 something brought an interesting situation to my attention.  She learned she will be inheriting a significant amount of money, in the several million dollar range.  Her first reaction was “Whee!! I can travel the world!”  Fortunately, someone much wiser recommended having a conversation with me before she goes off the rails and takes all the money with her.

I was happy to see her asking questions before she received the inheritance.  Here are the top 3 tips I gave her about what to do once she becomes a millionaire.  I thought I would share them here in case you or someone you know is as fortunate.

1)  Establish a Trust to hold your assets.  Give serious thought to how you spend money.  Try to maintain the discipline of retaining your current lifestyle.  Consider your current budget.  If possible, work with a trustworthy investment professional that will construct a portfolio where you earn dividends that cover your lifestyle expenses.  This way, you won't be depleting principal.  The person that created the estate you inherited probably followed a similar conservative philosophy.  Honor their memory.  Google “sudden wealth” or “lottery winners” to learn what often happens.  Sadly, most people that receive sudden money are worse off financially within 2 years of receiving their windfall.  My first recommendation is for you to find a Certified Financial Planner that specializes in financial education.  Before you invest or spend a dime, work with a professional that will help you increase your financial wisdom to a level that will support having such a large amount of cash.  Part of the process should include a holistic financial plan.  That means the professional will work with you to build a plan that includes every aspect of your life's dreams, goals and aspirations.  Your plan should not be stagnant and the professional should be someone that will not only tell you what you need to do, but show you how to do it.  They should guide you while holding you accountable for the outcome. That will be your best first investment.

2) Pay off your debt.  Commit to living your life debt free and avoid the temptation to accelerate your lifestyle to match your sudden wealth.  Also, avoid the temptation to give away your inheritance, with the exception of donating to a charity whose focus is something that resonates with your life purpose.  If you make a habit of making large personal gifts, remember one thing.  The amount you gift to an individual will never be the right amount.  Still want to be a millionaire?

3)  Depending on where you are in your career, consider getting an advanced degree.  Do your research regarding job opportunities in your chosen field.  Since income should not be an issue, this is a perfect time to expand your knowledge.

If you move forward with prudence and common sense, becoming a millionaire and heiress should not alter your life in a negative way.  Best of luck, and congrats!

p.s.  If you want to find out if you are prone to wealth wisdom or money foolish, click here to take the Money Archetype Quiz!