In response to my post about handling a windfall, a reader named Eliza asked:
What do you do when the windfall is accompanied by tragedy? My darling husband of 27 years lost his battle with leukemia, leaving me a widow at 50. Yuck!
Now I am not only dealing with my grief and that of my two sons, but I also find myself with a couple of million dollars. I’m gripped with fear that I’m going to do the wrong thing and blow it.
I am still working and I did take one large vacation, mainly because we couldn’t bear the thought of staying in the house during the holidays.
How do I not end up as one of those people who goes broke in a few years?
This is an excellent question and, for the most part, my approach wouldn’t really differ from what I wrote before. Setting aside the emotional side of things (hard to do, I know) the underlying issues are quite similar.
First and foremost, I would take my time and avoid making any rash decisions. This is probably even more important in an emotionally charged situation involving the death of a loved one. There’s no need to make rapid-fire decisions.
From there, I would seriously consider paying off any outstanding debts. Consumer debt is a no-brainer, but I would also consider attacking any existing mortgage debt. Though I fully understand the arguments in favor of dragging out a low rate mortgage, I’ve never once regretted our decision to pay off our mortgage early.
Next up, risk. From Eliza’s message, it seems clear that she’s somewhat risk averse. And with this windfall, her need to take risk has almost certainly changed. She’s now sitting on a sizable nest egg and probably doesn’t need to take outsized risks to ensure her long-term solvency.
As for investing the money going forward, I have no idea if Eliza is a DIY’er by nature, but even if she’s planning on engaging the services of a financial advisor, I would suggest some self-education. These three books would be a good start:
In short (and imho), even if you’re relying on someone else’s advice to guide your decisions, you should put yourself in a position to critically evaluate that advice as it comes in. Nobody cares about protecting/growing your assets as much as you do.
In other words… Trust but verify.
And through it all, I would (personally) keep working — at least for awhile. This is especially true given what she has been through. If nothing else, going off to work each day will serve as a much-needed distraction. It also builds in another layer of financial security, at least until the dust settles.
Oh, and now that she’s sitting on a sizable portfolio, it probably wouldn’t be a bad idea to talk to an attorney that specializes in estate planning. This is especially true given that she has a couple of kids and might want to leave a legacy.