Coming into sudden wealth can be exciting and overwhelming — whether it’s from the sale of a business or a large inheritance. You’re thrilled that you’ve reached financial independence, but you may be nervous about making mistakes with your money. William Scofield, Senior Vice President and Director of Wealth Planning at Regions Private Wealth Management in Memphis, Tennessee, recommends considering these seven financial tips before spending your new wealth.

1. Assemble the Right Team of Advisors

Meet with a team of experienced professionals including a wealth advisor, attorney, tax advisor, insurance professional, and portfolio manager to gain valuable insights into how they can assist you in making crucial decisions concerning your wealth. These experts can help you define and prioritize your short-term and long-term financial goals and objectives, provide guidance on investment opportunities, and offer advice on whether purchasing additional insurance is a prudent choice. By consulting with this diverse group of specialists, you can gain a comprehensive understanding of how to effectively manage and grow your wealth in alignment with your unique financial aspirations.

2. Maintain Long-term Goals For Your Finances

Park your wealth in an account that offers minimal risk and high liquidity until you decide how you want to use it. Get used to having your wealth before making major decisions of what to do with it.

It is easy to get sucked into day-to-day market swings and financial temptations. The financial media can be a noisy place that advocates short-term focus — whether that be on quarterly earnings, the latest technical chart predictions, or the Federal Reserve Chair's comments. 

While some of those may have meaningful systemic impacts on the market or an individual investor's portfolio, most millionaires know they need to ignore the short-term chatter and focus on their personalized long-term investment hypothesis and allocation. This prevents them from making emotionally driven mistakes, such as market timing, herding behavior, etc., that can potentially cost them thousands or millions of dollars over the long-term. 

Put simply, they have a long-term plan that they keep front of mind when they are making daily decisions. 

3. Update Your Will and Estate Plan

When you come into a significant amount of money, it's important to take the time to review your will and make any necessary changes. This process of updating your will and other legal documents is crucial to ensuring that your wealth is inherited by the right individuals and organizations, and that your wishes are honored. By carefully updating these important documents, you can have peace of mind knowing that your assets are distributed according to your desires and that your loved ones are provided for in the future.

4. Consider Setting Up a Trust

If you want to ensure that your heirs are able to use the money in a way that aligns with your specific wishes and goals, one effective option is to consider setting up trusts for your beneficiaries. By establishing trusts, you can provide a framework for how the funds are to be used, offering greater control and peace of mind. Additionally, certain types of trusts can also be utilized as a strategic tool to help minimize estate taxes, potentially maximizing the amount of wealth that is ultimately passed on to your loved ones.

5. Your Insurance Policies

Take a moment to carefully review and reassess your current insurance policies to ensure that they provide comprehensive coverage for your needs. It's important to consider whether additional insurance may be necessary to safeguard your financial future. For example, you might consider obtaining an umbrella liability policy to shield yourself from potential lawsuits, or acquiring extra life insurance to ensure that your beneficiaries have sufficient resources to cover estate taxes and preserve their financial security. By taking the time to reassess your insurance needs, you can make informed decisions that provide enhanced protection and peace of mind for you and your loved ones.

6. Create a Long-term Wealth and Investment Plan

Before you invest your hard-earned money, it's crucial to take the time to carefully define your long-term financial goals and objectives. By creating a comprehensive written wealth plan, you can articulate a clear roadmap that outlines the steps needed to achieve these aspirations. This plan serves as a guide, helping you stay focused and on track as you navigate the complexities of the financial markets.

As you consider your investment plan to achieve your financial goals, it's essential to assess your risk tolerance. Understanding how much risk you can comfortably handle is a critical component of successful investing. Take the time to ask yourself how comfortable you are with the potential fluctuations in the stock and bond markets, and use this insight to inform your investment decisions. By aligning your investments with your risk tolerance, you can create a balanced and sustainable portfolio that reflects your individual comfort level and long-term objectives.