I work with people in a wide variety of situations. Many are paycheck-to-paycheck, struggling to make ends meet, and looking to pay off debt. Some, however, have received large sums of money from inheritances, settlements, and commissions, and are wondering what to do with this large sum.
Each and every time, there is a certain path I advise the household to follow to protect that money and make sure it is a blessing and not a curse. This new wealth can be either a great blessing or a great curse, so what you do right now is critical.
First, the most important thing to do is to pause and breathe. Whatever this amount is, it’s highly likely you’ve never seen an amount of money this large before. That can stir up some interesting emotions inside of you, ranging from excitement to fear to guilt.
The last thing you want to do is to make big decisions with money based on fleeting emotions. With the “Jackpot!” mentality, it is easy to make a whole lot of money disappear in a tiny amount of time. There may be a whole lot of things you want to do with this money, some of them very good. But if you impulse with it, whatever you’ve received can disappear in all of 20 minutes. Pause and breathe.
Second, assess what your situation was before receiving this large sum of money. Think about what you were trying to accomplish before this was even on your radar; think about the struggles you were having. Aside from having more money in your accounts, those things have not gone away.
The impulsive spending habits have not disappeared. The money fights have not been resolved. Your heart is still in the same place as it was before. And that can sometimes be a very dangerous place to be in.
It’s why NFL players and lottery winners have a disproportionately high rate of bankruptcy compared with the rest of the population. The influx of money does not change the condition of the heart and mind. The same habits that inhibited success before this money often lead to greater ruin. Assess what your situation was before receiving this money.
Third, develop a plan for paying off your debts. If you receive this large sum of money, often it can completely pay off your debts and even leave you with some leftover. If you have this large sum sitting in your account, there’s no reason to leave unpaid bills around. Credit cards, cars, student loans, etc. can be wiped out forever, and you don’t need to go back to that way of life.
This needs to be a methodical process, though, not slipshod and random. If you’re not sure how to pay them off, just go one at a time, from smallest to largest. If you’re feeling overwhelmed, it’s okay to press pause for a little while to gain your bearings. Even if it takes you a few months, that’s okay. It’s better to do it in a slow and responsible way than a fast but irresponsible way. Develop a plan to pay off your debts.
Fourth, think about what you will do to protect this money. It will be easy to let it all slip away from you; there will always be demands, likely more when you get more money. But you need to decide what is and is not a priority for your household.
It’s okay to say no to some things, and we have to do that. The toughest part of having a large sum of money when you haven’t had it before is saying no. That may mean putting it in a savings account for a while as you figure out where it needs to go and how to make sure it will grow and remain in your household.
It is also important to develop an estate plan so that when you die, this money will not ruin your heirs. If you give your money to a spoiled brat, that brat will become even worse, and that large sum that you’ve worked to protect will disappear. Find a good estate planning attorney in your area to direct how this will be handled after you die. Think about what you will do to protect this money.
Finally, develop a team who will advise you. This will include a good estate planner, but also a CPA, financial coach, and maybe even a marriage counselor. A large sum of money comes with a certain spiritual burden and responsibility, and that can affect your relationships. Listen to the advice of trusted counsel. In the multitude of counselors, there is safety (Proverbs 11:14). Build your dream team.
If this is you, let’s talk about what you can do to make sure this is a blessing for your household. Schedule your free Discovery Session to protect this newfound blessing.