What’s a windfall? Think of it as good fortune. Whether you’ve won the lottery, are expecting a sizable bonus, or just received a generous inheritance, there are many factors to consider with having a large sum of money at your disposal.
Unless you receive a substantial amount of money, you may consider continuing to work, with a few adjustments. Even a large inheritance of a million dollars could diminish quickly, if you don’t do some planning.
Here are some things to consider when you come into a large sum of money.
Invest part of it
Maybe you have a wish list for money, such as paying off bills, buying a new car, remodeling the house, or donating to your favorite causes. But your money may be more valuable in the years ahead if you invest at least a portion of it today.
For example, let’s say you just inherited $50,000 from a relative. You spend half of it to pay bills, take a vacation, or buy a car. You’d still have $25,000 to invest. By putting that money to work in the financial markets, you may be able to grow a much bigger nest egg than the original $25,000. It’s always important to keep in mind that investing involves risk, including the potential for loss of principal.
Here’s a hypothetical example to demonstrate how $25,000 could potentially grow over the next four decades, based on a 7% per average annualized return. (Of course, your return could be more or less than 7%).
- Over 10 years your investment could nearly double to about $49,000
- Over 20 years it could nearly quadruple to about $97,000
- Over 30 years it could grow nearly 8-fold to more than $190,000
- Over 40 years it would grow 15-fold to almost $375,000.
(Note: Hypothetical examples are for illustrative purposes only and not intended to represent the performance of any particular investment product, nor does it take into consideration any product expenses or fees. The results would be reduced if the costs were included).