You have suddenly received a large, lump sum of money. So what do you do?
I get questions all the time about what to do when you receive a lump sum of money.
This is money typically received through:
1.) A severance package once you have been laid off from a job.
2.) An inheritance that someone has left in their will.
3.) A tax refund check.
In either scenario, I would say you have three choices:
Open a brokerage account: Right now, many people are thinking that they want to handle their own money. A brokerage account will allow you to place trades and use as much or as little of the funds as you wish. Be sure you are comfortable with the maintenance fees and the cost of each transaction.
Engage an investment professional: You will be able to sit down with this person and discuss your financial goals, fees, and how risk averse you may be. Be sure the individual is licensed and check for any disciplinary history.
Put the proceeds in a savings account: If this is “found” money or money you were not expecting, you may want to just save it. You can get a jump start on that emergency fund or retirement account. I hate to suggest this in the same sentence, but you may also want to pay down any lingering debt you may have. People typically want to do something fun with unexpected money, but I say this is the time to be responsible and get a few steps ahead on the road to financial health.
Understand that the way you receive this money may have tax implications that will need to be addressed so make sure you keep accurate records.
This may seem like the perfect time to take that vacation or buy that flat screen, but instead take this moment to make a better long- term financial decision. One that will benefit you down the road long after the vacation is over and the TV is obsolete.
Black Enterprise Columnist Jennifer Streaks is a Financial Expert, Author & Pundit. Continue the conversation by following here on twitter @JStreaks or visiting her website www.JenniferStreaks.com.