Congratulations! You have just sold your family business.
This is a huge accomplishment and you are probably feeling a wide range of emotions, but what comes next? How do you deal with sudden wealth?
According to Jay Zagorsky, a research scientist at The Ohio State University “People who become suddenly wealthy soon waste half of their fortune on spending or bad investment choices”. You don’t want this to happen to you.
In this article, we’ll give you some sudden wealth advice for managing your finances after selling the family business.
Let’s get started.
Why a Sale of Your Business Isn’t the Last Step?
The sale of your business represents the culmination of years of hard work and dedication, a new phase of your life with access to huge amounts of money. But it’s not all rosy as you might have imagined, you have a lot of decisions ahead of you. You need to be as careful as possible to avoid any problems associated with this financial windfall.
When not knowing what to do with sudden wealth, you may end up with a plethora of complications such as psychological and social problems.
What’s more? Since there is also a huge difference between being rich on paper and having to manage physical assets, individuals who experience sudden windfall may lose their money in a few years because of bad investment decisions, unbridled spending, and poor tax planning.
If you want the proceeds of your business sale to last and grow, the most important decision you need to make is to learn how to manage this unexpected money so that you don’t lose it in a few years.
What is Wealth Management?
Wealth management is simply the process of managing your money and assets in a way that maximizes your financial security and helps you achieve your financial goals. It involves everything from managing large amounts of money to budgeting and investing to estate planning and insurance.
The wealth management process typically includes the following steps:
- Defining your financial goals
- Assessing your current financial situation
- Developing a custom-tailored wealth management plan
- Implementing the plan
- Monitoring and revising the plan as needed
If you’re looking for how to handle sudden wealth, then you need a wealth management consultant. A professional will work with you to develop a personalized approach for your unique situation.
5 Steps You Need to Take for Wealth Management After Selling a Business
If you have recently sold your business or planning to do so, the following steps will help you make the right decisions financially.
Understand Your Tax Obligations
The first thing you should do when you come into big wealth is to understand your tax obligations.
A tax professional can help you with this process as it relates to the sale of your business so that you don’t overlook any important details. The last thing you want is an unexpected tax bill that could have been avoided if only you had consulted with someone from the beginning.
Don’t Make Spending Decisions Immediately
You’ll likely have access to massive wealth from the sale of your company, but it’s important not to make any major purchases immediately. You need time to process everything that has happened and figure out where you want to go next. This will help prevent impulse buying and help ensure that every decision is well thought out.
Create a Comprehensive Financial and Life Plan
It can be easy to make short-term decisions when there is money in your pocket — but one of the most important steps to wealth is creating a plan that covers all aspects of your life — not just financial planning. Make sure this plan includes areas like health insurance, retirement plans, etc.
Clear Your Debts
One thing people tend to overlook is that they have a lot of debt,” says Christopher Winn, a fee-only advisor providing financial planning in Portland, OR. “If you’re going to be liquidating assets, you need to make sure those debts are paid off first.”
Clearing any outstanding debts or loans in your name is one of the most important processes when it comes to managing sudden wealth. This will give you the freedom to move forward with other goals, like retirement planning, future investment planning, and estate planning.
Have Experienced Professionals in Place
Most importantly, make sure that you have experienced professionals in place who can help you manage large sums of money going forward. This includes accountants and financial advisors who know what they’re doing and can give you solid advice.
Selling your company can be an exciting time — but it’s also important not to lose sight of the fact that there are still plenty of financial issues that need attention afterward as well. So, keep these tips in mind during this transition period so that your money doesn’t go anywhere
Having said that. Remember, the most important thing about managing sudden money is to contact a financial advisor to help you make the right decisions.
At Interactive Wealth Advisors, we specialize in sudden wealth management and can help you make the most of your new situation. Get in touch with us today to learn more.