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What Do I Do With A Windfall?

Lisa Brewster

Windfalls come in all shapes and sizes

I remember a guy who came to see me years ago from out of state. He’d won a big lawsuit and his part of the settlement was over $1,000,000. He never dreamed he would see that much money in his life. He took a vow of poverty, promised to “not change anything” and to not be one of those foolish people who spend it all. This was his ticket.

Well, three years, two wives and one very unfortunate trip to Vegas later, he was broke.

Maybe your windfall comes from an inheritance. Or maybe you won the Lotto.

No matter what the source of your windfall, here are some things to keep in mind.

This will not last forever. One of the features of horizontal drilling techniques is that gas comes roaring out of the ground at a ferocious rate. In fact, half the money you ever make off one well may come to you in the first year. The monthly checks get much smaller very quickly. Unless you have a guarantee to the contrary, you need to assume that any windfall coming your way is finite. Don’t build a permanent new lifestyle around a temporary increase in cash flow.

This will not solve your problems. Oh sure, you’ll be able to pay off the nagging credit card bills that have been hanging over your head. But if you think you’ll never have another spending problem just because you now have (what seems to you) a lot of money, you’re being naive. More dollars in your pocket just means your (spending) eyes will be bigger. Just ask my friend that went to Vegas. He came back with (among other trinkets) a large yellow tow truck that cost him over $100,000. “It just looked so cool!”

This may create new problems. If you haven’t figured this out yet, you’re about to be introduced to cousins you never knew you had, “friends” you’ll wish you didn’t have, and no-miss-investment-opportunities that various and sundry con men will pitch to you. Ask anyone who has a lot of money – it’s a lot of work to keep the riff-raff away.

If you don’t make a plan for this money, someone else will. Before you buy anything more expensive than groceries, before you pay your momma back for being so wonderful to you all these years, before you make the preacher say “Hallelujah!” with your donation, and for sure before you go test drive a new luxury car – STOP.

Stop and realize that there will be a plan made for your money. The only question is who will make it. If you spend first and plan later, you’ll likely spend more than you intended and plan less than you should.

If you plan first and spend later, you’re much more likely to spend thoughtfully on items that you can really afford, having planned your affairs so your wealth will be nurtured and grown, rather than wasted and shrunk.

Now that you’ve got a lot of money, you can afford a lot of things you’ve heretofore only dreamed of.

But the one thing you cannot afford is to be without a plan.

Byron is a Certified Financial Planner and Managing Director of the Planning Group at Argent Advisors, Inc.
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