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Follow these five steps to
help maximize the benefit of
an overnight bonanza and
steer clear of the pitfalls.
1. Plan for Taxes
Depending on how you
came by the money,
you should assume
that at least some of
it will be taxable. One
exception is an
inheritance, which may
be tax-exempt, but
only if it falls below
the exemption of $5
million per person.
Any amount above
that is subject to a
40% levy.
If the proceeds come
from the sale of a
business or a bonus
from your employer,
you should find out
how much is taxable –
especially if you’re
suddenly bumped into
a higher tax bracket.
Consult with your
Financial Advisor and
professional to
estimate how much of
the money is actually
yours to keep.
2. Build a Safety Net
How prepared are you
to recover from
setbacks? One of the
best ways to use
some of your new
money is to shore up
your sense of
financial security.
Build a reserve fund
that will cover three
to six months of living
expenses if you lose
your job or pay for
emergency home
repairs. And if you’re
deep in debt, consider
using your good
fortune to dig
yourself out.
Finally, work with your
Financial Advisor to review
your insurance coverage to
determine whether it makes
sense to increase your life
coverage or purchase
disability insurance. You may
need to consult with an
insurance expert if you
determine that you need
more coverage – just be
sure to keep your Financial
Advisor in the conversation.
Both tactics will help protect
your family should something
happen to you.
3. Plan for the
After you have
addressed immediate
financial needs, talk
to your Financial
Advisor about
strategies for
investing some of the
money by adding it to
your portfolio or to a
qualified retirement
account such as a
traditional or Roth
4. Splurge
You might want to
treat yourself or your
loved ones to
something special, but
keep in mind that it’s
easy to overspend
and end up with
nothing. Also consider
the hidden costs
associated with a
major purchase. For
instance, you may
have enough cash to
buy a boat, but you’ll
also likely need to
budget for such
expenses as marina
fees, gas, and
Bradley adds that
splurging on your
family doesn’t have to
mean buying flashy
cars or jewelry.
Sharing experiences
with your family can
bring greater lasting
happiness. "A
vacation with your
family can be a
memory you’ll
treasure for years to
come," she says.
5. Avoid Common
Investors sometimes
believe that a
financial windfall has
launched them into a
new income bracket.
This can be a mistake.
Be wary of taking on
significant new
responsibilities, such
as buying a bigger
house. If you can
already afford the
increased mortgage,
that’s fine, but
newfound money
should support your
existing lifestyle, not
elevate it.
"An influx of money is
an opportunity,"
Bradley cautions. "It
also presents
investors with new
Handling them deftly
requires careful
Talk With Your
Financial Advisor
Incorporating a windfall
into your long-term
financial strategy
Prioritizing your newfound
Consulting a tax expert if
Wells Fargo Advisors is not
a legal or tax advisor.

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