financialforum Financial Windfalls
Receiving money from an inheritance or insurance settlement after the death of a loved one can be a blessing — with proper management and assistance. By Phil Dyer, CFP
W
Watch How Much You Spend
■ Going on a spend- ing spree is what gets many windfall recipi- ents in trouble because they don’t realize how quickly they are burning through their money.
hat would you do if you suddenly had a million dollars? Would you go on
a dream vacation or buy a new car or a larger house? Whether the source of this money is from lottery winnings, a lawsuit settlement, a life insurance policy, or an inheritance, the outcome often is dismal. Studies show 70 percent to 80 percent of people who enjoy a financial windfall are completely broke within 10 years. Consider the following tips to improve
your chance of successfully navigating the pitfalls of financial windfalls: ■ Avoid making impulsive spending decisions. Behavioral finance experts recommend a six-month to 12-month “cooling-off” period before going on a shopping spree or making major changes in your spending habits, although spend- ing money on necessities — such as need- ed home repairs — is fine. ■ Get professional advice. Some financial windfalls, such as lawsuit settlements and inheritances, might come with sub- stantial tax liabilities, so consider con- sulting a qualified tax professional. In addition, a fiduciary financial planner — one who is bound to act in your best interests — can be invaluable in making critical decisions about the windfall. Be cautious of advisors who immediately start talking about the need to make sig- nificant investments or who heavily push certain products. ■ Give yourself grieving or adjustment time. Some windfalls, such as an insur-
5 0 MI L I T A R Y O F F I C E R S E P T EMB E R 2 0 1 0
ance settlement or an inheritance after the death of a loved one, come with major emotional baggage. Don’t try to make critical financial decisions while you still are grieving; put the money somewhere safe, such as in a CD or a money market account, until you are ready to move forward. ■ Be cautious of family and friends. Large financial windfalls tend to bring out of the woodwork friends and family members who are seeking loans, looking for start-up capital for their “surefire” business idea, or offering unsolicited investment advice. Set up a system from the beginning
to deal with any money requests you receive. For example, you could say, “I am receiving lots of requests for assis- tance from this money, so please submit your request in writing with as many de- tails as possible. In six months, I will sit down with my financial and tax advisors, sort through the requests, and deal with them at that time.” You might be surprised how many
people will back off after they realize they aren’t getting money right away and you will be using a financial team to help you make decisions.
MO
— Former Army Capt. Phil Dyer, CFP®, is deputy director, Benefits Information and Finan- cial Education. To find a financial planner near you, contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or
www.moaa .org/garrett, or visit
www.moaa.org/financial center for other resources.
PHOTO: SEAN SHANAHAN
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140