The day before he cashed in, his wife had asked him to return a $5 carton of orange juice that was beyond their household budget. While waiting in line, Souami saw that the Powerball jackpot had increased and decided to spend his refund on a couple of lottery tickets.
Ultimately, that splurge was the best financial decision of his life, resulting in a $315 million payday.
Of course, Souami didn't get to keep the entire prize. Rather than receiving his winnings over time in installments, Souami opted for a lump sum payment. After taxes, he ended up with around $183 million — hardly a payday to cry about.
But coming into a large sum of money unexpectedly can pose challenges. If you ever end up in such a fortunate situation, knowing how to handle it is critical. Here are some tips for managing a windfall.
1. Create a spending plan
When you’re on the receiving end of a financial windfall, it’s natural to adopt some lifestyle changes. But it’s also important to create a budget and a spending plan so you can manage your newfound wealth accordingly.
You can map out your expenses the same way you would on an average income. Allocate excess funds to the things you find most important, whether it's hobbies, travel or charities. And be mindful of the cost of acquiring expensive assets such as homes and vehicles, factoring in things like ongoing maintenance costs.
2. Set yourself up with investments
Coming into a large sum of money puts you at an advantage from an investing perspective. On the one hand, you don't have to take on much risk. A massive pile of cash into a relatively conservative investment portfolio can deliver sizable returns.
At the same time, because you have so much money to work with, you can afford to play around with more speculative investments and see if there's any financial upside. You can also afford to look at less liquid assets, like art and real estate.
But as with your spending, you need a plan. While setting yourself up with multiple asset classes may be beneficial, you still need to do the research and choose high-quality investments.
3. Get help from a financial professional
Coming into a windfall doesn’t guarantee you’ll be set for life. You’d be amazed at how many lottery winners end up blowing their jackpots and winding up broke. That’s why it’s crucial to get help managing your assets.
