Planning For A Financial Windfall

Financial windfalls can come in a variety of forms, such as an inheritance, life insurance proceeds, large gifts, structured settlements, retirement lump-sums or even lottery winnings.  Upon receipt, most are not prepared to handle such a large sum and often make many mistakes.  The large amount poses an obvious temptation to spend and many are not prepared.


How many times have we heard the winner of a large lottery say, years after the fact, they wish they had never won the money in the first place?  The expectations from family, friends, neighbors, etc. can be a heavy burden and a strain on your relationships.  Whether you received your windfall as a result of good fortune or proper planning, many may expect more than you are willing to give.  And as a result of poor planning many have squandered their fortune away.  It can be a difficult challenge, but with proper planning these pitfalls and others can be avoided.


So what are some of the considerations?  First, are you capable of handling the funds yourself or do you need to contact a financial adviser or CPA?  Expert advice can help to manage the tax implications (now and in the future), develop a new budget, determine the new cost basis if assets are received, develop an investment plan, or revisit your previous retirement plan.  You may also want to consider retiring your existing debt obligations.  However, it may not always be to your benefit to eliminate debt immediately.  This is also a wonderful time to consider the educational needs of your children or grandchildren.  Are there college needs being met and do you want to help?


If the windfall comes in the form of lottery winnings, you will have to determine if you want the winnings paid out in installments over time or in one lump sum.  It is vital to consider the opportunity cost, which is the potential of gaining a greater overall return by taking and investing the single lump sum.  This can also be true of lump-sum retirement distributions vs. retirement annuity payments.


Receiving such a windfall may also change your insurance needs.  A focus on auto, home, and personal liability insurance is essential.  You may not need to carry as much life insurance on yourself, or other family members.  Also, you may be able to self-insure your home and autos, but still continue liability coverage against the claims of others.


It is obvious that a lot of thought and planning will need to take place to properly manage such a windfall.  As wonderful as receiving or earning this windfall can be, it is imperative to consider the factors mentioned as well as others.  Avoiding the temptation to immediately start spending but rather taking the time to plan wisely, can help you meet your goals and enrich your life.


Aaron Archambo is a financial advisor and the vice president of Archambo Financial Advisors, Inc.

Securities Offered Through Dominion Investor Services, Inc.  Member FINRA & SIPC.


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The full range of services offered at Archambo Financial Advisors are designed to meet your financial advisory needs today, tomorrow and well into the future. Archambo Financial Advisors can lead you through the many financial stages of your life.

310 S. Osage

Bartlesville, OK   74003

Fax: 918-336-2214

Securities Offered Through Dominion Investor Services, Inc

Member FINRA and SIPC


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