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Large Sums of Money
Smart Investing When You Receive a Windfall
By Cara J. Stevens
Unlike cheese and wine, newly-found money does not age and appreciate gracefully on its own. It must be tended to immediately, as it can quickly trickle out of your grasp while you stand there appreciating its beauty.
"Too many times we see people who receive small amounts treat these funds as play money," says Susan Hirshman, a vice president and planning strategist at JPMorgan Fleming Asset Management.
If you're reading this article in hopes of someday receiving a large unexpected sum, you're probably eager to learn how that money may one day come to fall in your lap. The standard ways people usually receive a large sum of money are through an inheritance, gift, sale of a company or property, life insurance, winning the lottery, a lawsuit, marriage or divorce, and every once in a while they actually earn it through stock options or a bonus.
"We were fortunate to be part of the Internet stock bubble," says Phillip* of Los Angeles, Calif. "My wife and I each worked for small startups that went public, so we made almost $100,000 from the stock options. While it wasn't enough to retire on, it did pay for a down payment on a house in a great community."
Many families benefited from the boom of the late '90s, though like the Phillip and his wife, most people did not earn enough to change their lifestyle permanently. Tens or even a few hundred thousands of dollars can increase your comfort level by paying off debt or helping you plan for the future, while an income of millions changes everything.
Whether your new fortune is small or large, you should assess your current situation before you begin your planning.
"There are five major areas to look at when you're creating a financial plan: insurance, estate planning, retirement, taxes and investments," says Jay Freeberg, a CPA and certified financial planner in Westbury, N.Y. "The first two – insurance planning and estate planning – must be taken care of first. If your family and future are taken care of, you can then look at allocating the rest of your funds for savings and investment."
