I often get calls from individuals or couples who find themselves coming into a windfall of some sort, b”H. Although we all dream of winning the lottery, such sudden wealth is more likely the result of an inheritance, a retirement package, or a lucky investment. Whatever the source of the mazal, these people are in a position they were never in before. While many people are quite sure that an influx of money would solve all their problems, it is not that simple. The newly rich are often unprepared to take on the challenge of managing their money. In their haste to do something, they can make serious errors that result in unfortunate losses. Money management must be learned, and it is crucial to surround oneself with an experienced and trusted financial team.
Here is some advice, some common sense I learned from my family and from my financial teachers and counselors over the years.
* * *
The first thing to do is to thank Hashem for your new financial situation. Realize that all your assets are on loan from Hashem, and that He asks you to properly manage these funds. Money is a bracha, but you need to make a hishtadlus (efforts) to do what Hashem would want you to do with your new wealth.
When you receive the money, put it into an FDIC (federally insured) bank account right away. Take a deep breath, and do not touch the money. If your children or family are aware of your circumstances, explain that there will be no immediate changes until you have come up with a financial plan.
Set goals for how you want to proceed, now that your financial situation has changed. If you have credit card debt or other high interest rate obligations, you may want to pay off such debt. Or you might desire to pay off or reduce a mortgage when refinancing is not an option, especially if you have a high interest rate.
Do you want to maaser (tithe) and give tzedaka? Do you want to help a family member or friends? Does the home need repair? Do you want to relocate or retire? Does your spouse have to continue working? Do you need a new car? A vacation? Will you take a trip to Israel, help the kids, or pay off loans? Do you have a wedding coming up?
All these are issues to contemplate, but any decision should be part of the overall financial plan you develop together with your team of financial experts. Don’t be in a rush to act. Rather, relax and strategize carefully as to how you will proceed. Do your research carefully to find an experienced certified accountant as well as a lawyer who can help you adjust to tax and legal issues that could emerge from your new financial reality. Things like taxes and other legalities must be clearly understood, so that no unforeseen financial surprises emerge.
Once you have found these professionals, let them recommend a sound financial advisor. Interview a few of their choices, asking about their investment philosophy. A good investment strategy is one that creates a diversified portfolio of proper investments based on your total financial situation and your risk tolerance. It will probably take a few months to devise a well-thought-out financial plan, in which diversification and allocation of investment funds are key. Never put all your eggs in one basket is the old adage one must carefully observe. If you are new to investments, be very conservative, especially at first, and learn how to manage your assets. This takes time and experience.
Be wary of long lost relatives or friends who now approach you looking for a loan. Do not buy an annuity or other investment that is illiquid or an investment that is costly to exit, until you carefully discuss it with your financial experts. What sounds too good to be true usually is not true, so when all those get-rich investment offers come your way – run the other way. Anyone who tells you about an investment “can’t lose” or is an “opportunity of a lifetime” or tells you that you must take action immediately – please avoid them like the plague. Any legitimate and worthwhile investment opportunity needs to be reviewed by experts who can advise you of the risks and tell you whether the investment makes sense for your situation.
Beware of high pressure charities. Discuss with your rav as to how to maaser properly, and carefully choose tzedakas that are worthy of your support. Do not make any pledges; instead, give regularly without incurring future obligation. Do not be pressured into a pledge, as you can only take such action once you have a firm grip and financial plan in place.
As I said in previous articles, a good parnassa and money in the bank can and should be a bracha – but if not handled properly or poorly managed, they can be a terrible burden and, chas veshalom, even a curse. Appreciate what you have, and organize your finances for your enjoyment, and make others happy, too, by sharing what Hashem has given you.