Managing A Windfall

You’re going to be tempted to do crazy or even stupid things with that money. That’s why you have to put something in place to make sure you stick to that commitment. Maybe you can have a lawyer or a financial adviser put that money into something like a blind trust. The goal is to put one or two steps between you and your ability to spend the principal.

Financial planner Carl Richards has some advice for lottery winners (or people who inherit, or otherwise come into a financial windfall) to help them not become part of the “90 percent of lottery winners [who] go through their winnings in five years or less.” The first, and most common, advice given is to put the money in safe investments, and to only spend the interest earned. Having a lawyer set up a blind trust for you is also a good idea, because it separates you from the holdings in the trust. Some of his other advice sounds destined to collapse: making a commitment to talk to a committee of a few trusted people before touching and spending the money (these commitments are so easy to renege on), and writing a letter to yourself describing “how much you love your life now and how you never want to go back to work again” and reading it whenever you want to spend money (which would also be easy to ignore or lose). Basically, the surefire way to hold on to that money is to not spend it all, so setting aside some fun money to spend, and safely investing the rest of it is the way to go.

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