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Preparing for Financial Windfalls

Updated: May 6

“We’re in the money!” – Gold Diggers of 1933

“Money, Money, Money, it’s so funny. In a rich man’s world’ – ABBA

“Mo money, Mo problems” – The Notorious B.I.G.


As all three song lyrics suggest, money comes with a lot of baggage. Excitement, trepidation, confusion, and problems, especially if you experience a windfall such as an inheritance or a big bonus. Where do you begin after the initial excitement has worn off?


FIGURE OUT WHAT’S IMPORTANT


If you haven’t already, start with clearing out all the unnecessary clutter in your life and figure out what’s important to you. This is an excellent opportunity to take stock of your life and where you see yourself going. Is a shiny sports car important to you, or is time with family more meaningful? We don’t judge. Just be clear on your priorities and know yourself and what you want out of life.


MAKE A LIST AND CHECK IT TWICE


After you decide what’s important, make a list of all your financial obligations. Credit cards? Mortgage? School Loans? Then, what do you want to do with the money? Don’t just list tangible, luxury goods. List all your goals, such as setting up a foundation or a donor-advised fund, starting a business, or leaving money to the next generation through estate planning. There are so many options and decisions to be made, be strategic and make a plan with your financial advisor.


INVEST, INVEST, INVEST… IN YOUR RETIREMENT


Max out your retirement savings. IRA, Roth IRA, 401(k) – contribute the maximum amounts because your windfall could add up to your dream retirement. Specifically, if you receive a large bonus, most companies will give you the option to set aside a portion to your retirement plan, which is a good idea to reduce your tax burden. If your bonus includes stock options, Abel Financial is equipped to handle complicated exercise scenarios.


LONG-LOST FRIENDS KNOCKING AT YOUR DOOR


It’s inevitable, although we don’t want to believe it. There are people who might take advantage of your windfall. That’s why having a plan is critical. Being generous is a natural tendency, so you should set aside a portion for family and friends. Whether it’s financial help for a friend in need or a big family vacation, it all has to be in the plan.


FINANCIAL WINDFALLS


Over the next decade, a major transfer of wealth will take place from baby boomer parents to their millennial children. Over $68 trillion will exchange hands. Maryland is one of only a handful of states that impose an inheritance tax, so tax planning will be an important consideration. Find a financial advisor you trust and start planning now for your financial windfalls.


THE VALUE OF WORKING WITH A FINANCIAL PLANNER


Financial Planning is not just about managing investment portfolios. More importantly, it is about having someone you trust to guide you when the unexpected occurs and to make sure your family has a trusted resource to rely on. At Abel Financial Management, we are local, family-oriented, and truly independent financial planners with a mission to help you make smart decisions with your money. If you or someone you know faces decisions like these, we invite you to have a conversation with us.




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