Financial windfalls come in varying ways, often unexpected or suddenly.  Whether an inheritance, company stock profits or sale, insurance settlement, or lottery winnings…. the unexpected pile of cash can create an initial sense of euphoria and a false sense of security. The vast majority of people blow through a financial windfall fairly quickly.  Whether large or small, it can seem like “play money.” And that is where the danger may lurk.

What should you do if you happen to be the beneficiary of a financial windfall?

10 steps to creating a firewall around your newfound stash of cash

1.First, do nothing. The temptation may be to buy a new car, take a luxury cruise, or upgrade your living arrangements. That can begin an unwise cascade of purchases that may leave you feeling regret. We suggest you wait at least six months before embarking on any life-changing decisions. The time spent waiting and planning allows the “shock” of your newfound wealth to wear off.

2.  Talk to a trusted advisor. Find someone who has your interests at heart, not his or hers. If you are expecting to receive a windfall or have already received an unexpected inflow of assets, let’s talk and see how we can incorporate it into your overall financial plan.

3. Doing nothing also means not quitting quit your job. It may be tempting, but lost wages and the lack of social interaction from your work buddies may lead to remorse, even if you don’t especially enjoy your job. Besides, without work, you run the risk of blowing through your money much quicker than you had anticipated.

4. Reduce debt. It may be time to pay down or pay off high-interest debt. Once eliminated, you no longer have that onerous outflow of interest payments on your loans.

5. If you don’t have an emergency fund, now is the time.  Set aside reserves of at least six months of expenses. Having reserves set aside will reduce your financial stress.

6. Additionally, you may decide to allocate additional funds toward savings and retirement. Everyone is unique, with various goals, personal circumstances, and financial resources. Taking care of your future self can give you immense peace of mind for present day.

7. Think about tax and estate planning. No one is sure what may or may not happen to the tax code this year or next. But it’s critical that we get a handle on the tax ramifications of your inheritance in order to maximize the financial benefit.

For example, did you know that you may be required to take distributions if you inherit an IRA? What if you are already taking required mandatory distributions?

Life changes are an ideal time to update your estate plan, especially if the inheritance increases the complexity of your financial situation.

8. Be cautious. Less-than-reputable salespeople and relatives may suddenly warm up to you, with the unspoken goal of separating you from your cash. That’s why a trusted advisor is critical. If you have a well-thought-out financial plan, it’s much easier to pass on potentially exploitative offers.

9. Consider charitable giving. Do you have a favorite charity? Would you like to help a niece or nephew finance their education? Now is the opportunity to explore the possibility of helping others.

10. Have some fun. There’s nothing wrong with treating yourself. Current goals and dreams can be realized, but also opens up the possibilities of larger goals.

Or, maybe you’d like to spend money catching up on the everyday things of life you’ve been putting off. Everyone has a hot button!

With a financial plan in place that manages your windfall, you’ll feel much more secure enjoying the benefits of your wealth without the nagging worries that you might run through your nest egg with not much to show for it.