Smart Ways to Enjoy a Windfall

Your spouse's uncle in Canada died and left you $185,000.

Now the dust has settled, the papers are signed and someone's ready to send you a check in U.S. dollars for the amount. What should you do?

It's not a princely sum, but it's clearly enough to give a shot in the arm to your personal finances, not to mention your buying power. That's a good thing.

But no doubt, your mind is abuzz with possibilities, everything from round-the-world travel to quitting your job to a new car to supporting your favorite causes. I'll bet it's a sizeable list.

So what to do? The situation calls for careful thought. Although many people experience such a windfall sometime in their lives, they sure as heck don't happen every day. Whatever you do, the important thing is to get the most out of the opportunity, and to safeguard it against the many pitfalls you'll encounter.

For starters, here are a few reminders of what you shouldn't do.

• Don't do anything fast. It's easy to leap at the first opportunity to spend, invest or give. I'd wait a while to settle in and to fully appraise what's best. There may be significant tax issues; as a buddy of mine will tell you, $27,000 won on "The Weakest Link" becomes $18,000 real fast. One exception: It probably makes sense to pay off high-interest debt as soon as you can.
• Don't tell others -- unless they need to know. Many will arrive at your doorstep with "ideas" for what to do, which naturally benefit them more than you. And among friends, you may not want others to think of you differently.
• Don't rev up spending habits. New wealth, new standard of living? Again, wait for the dust to settle. Spending, once ratcheted up, is so, so hard to ratchet back.

Click here for the video version of this story from Jennifer Openshaw.