How to Manage Sudden Wealth

fortpitt in Wealth Management 19 April, 2024

Whether you’ve received a large inheritance or won the lottery, staying alert and informed is important when you have gained sudden wealth. Rather than spending the money all at once or immediately investing it, you should be thorough and thoughtful about how you spend it and reserve your wealth. This guide explores what to do with sudden wealth and how to make the most of it.

1. Hire a Capable Team of Professionals

A large sum of money requires careful thought and management, so it’s essential to avoid putting yourself, family members or friends in charge of all of it. It’s better to hire a team of experienced professionals to guide you instead. Some professionals you might need assistance from include:

  • Lawyer: Lawyers are objective and can read and understand the fine print. They keep your best interests in mind, give valuable input on tough decisions and can set up charitable intentions and an estate plan if it is something you want.
  • Tax planner, CPA, or accountant: The right tax advisor or accountant can help you handle income and capital gains tax. They’ll also help you avoid significant tax bills and advise you on better strategies going forward.
  • Wealth advisory team: These professionals have experience in helping those who obtain sudden wealth. They often provide critical support and guidance and help you make informed decisions.
  • Other professionals: Depending on what you decide to do with your wealth, you might request help from various other professionals. These can include an estate planning attorney for estate matters, risk management professionals, a banker, a real estate agent, or a loan officer for specialized assistance and advice.

2. Create a Realistic Spending Plan

A realistic spending plan helps you account for anticipated expenses and income. It also helps you understand your finances in depth, allowing you to budget and control expenses more accurately. A helpful spending plan is the 50/30/20 rule. This budgeting strategy involves spending 50% of your wealth or income on essentials, putting 30% toward your wants and reserving 20% for paying debt or saving.

This method can help you avoid overspending if you stick to it. You can also create a plan for investing to maintain your wealth. This may ensure the financial security of future generations when you create a sustainable withdrawal rate strategy.

3. Determine Your Values

Many feel they need to spend the money immediately, make many large investments, or donate to nonprofit organizations. While these are excellent uses for the money, first give yourself time to think about where your priorities lie and what your core values are.

What do you want your legacy to be? What do you want your money to accomplish? What type of lifestyle do you want to live? What future do you want for yourself and your family? You must answer these questions before creating a strategy so it can address your specific personal needs, circumstances, and goals.

Form Long- and Short-Term Financial Goals

4. Form Long- and Short-Term Financial Goals

For long-term financial goals, use structured plans to help you achieve broader financial objectives when you know where to focus your time and energy. Long-term plans can also help you mitigate risks when you use a balanced and diversified wealth management strategy.

However, it’s also important to consider short-term goals. For example, you might want to pay off debt, relocate to an income-tax-free state, update trusts and wills, or give family members monetary gifts. For long-term goals, you could create a structured financial plan based on your core values or tailored investment advice. You may want to create a strategy for leaving a lasting legacy, determine suitable charitable giving goals and policies for donations, or create a strategy for minimizing taxes.

5. Protect Your Identity

If your sudden wealth gains media attention, be sure you protect yourself and your family from scams, cyberattacks, and unwanted requests. Some actions you can take to protect yourself include hiring a credit monitoring service, setting up unusual activity alerts on credit cards, and hiring a security detail if you and your family must make public appearances. You should also ensure your team of professionals sign a nondisclosure agreement to protect your privacy.

You may also be able to protect yourself from cyberattacks by temporarily deactivating your social media accounts, adjusting privacy settings on social sites, and removing personal contact information from the internet where you can. You may also need a new private phone, phone number, and email address.

6. Resist Making Large Purchases

One of the most important things you can do with sudden wealth is exercise restraint. While it is tempting to make extravagant purchases, it’s better to aim to maintain a position of long-term wealth. This means resisting impulse buys and large purchases. Instead, use the money to pay off debt, take care of taxes, and save toward your long-term goals.

7. Think Carefully About Lending Money

Using your wealth to provide financial assistance to a loved one can be a kind act. Still, it’s essential to carefully consider who you lend to. When you acquire sudden wealth, family members you barely know may ask you to lend or give them money. This may allow them to take advantage of you or avoid paying you back at all. It’s often best to direct these family members and friends to your advisor if they have requests for money, which can help you distance yourself from the financial request, keeping your relationship personal and not transactional.

Implement a Comprehensive Wealth Management Plan

8. Implement a Comprehensive Wealth Management Plan

It might help to work with a wealth management company like Fort Pitt Capital Group for complete assistance in achieving financial and life goals that align with your personal values and financial priorities. Wealth management firms offer sudden wealth advice and provide ongoing support for increased financial stability and security. Professionals like the advisors at Fort Pitt can help you in various areas, including:

  • Comprehensive asset coordination: Financial advisors can organize your assets and focus on liquidity to encourage a consistent income. This service can also help reduce risks and improve tax efficiency.
  • Retirement income management: This service helps you convert your asset structure into consistent income during retirement if you’re looking to create a retirement plan with your sudden wealth.
  • Intergenerational investment planning: Whether you aim to transfer some of your wealth to family members or a nonprofit organization, private wealth management companies can help you create and manage an effective plan.

Leverage Private Sudden Wealth Management Services With Fort Pitt Capital Group

With the right strategies and mindset, you can help secure a better financial future for yourself, your family, and future generations. Fort Pitt offers comprehensive wealth management services, including retirement income management, asset coordination, risk management, and intergenerational investment planning.

Our experienced advisors will work closely with you to understand your unique situation, needs, and priorities and customize your strategy based on these factors. We can also make adjustments if your priorities change over time. For sudden wealth advice or management strategies, contact our team for more information today.

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