Money Changes Everything

It's not every day that cash drops in your lap. Three financial wizards help three newly affluent women make the most of their windfalls

by Kate Ashford
windfall money from sky
Photograph: Photo courtesy of Karen Struthers/

Don't consider it a windfall
This isn't really “found” money—it's appreciation of an asset, which is just proof of a good investment. Until you sell that asset, it's an unrealized gain. Don't count on it, and don't forget to calculate costs such as closing fees when you estimate your winnings.

Set up an emergency fund
The general rule is to put three to six months' living expenses in a fairly liquid account, like a money market account. If Laura sells the condo, she should use some of the proceeds to set one up.

Pay off unsubsidized student loan debt
Laura is carrying about $30,000 in unsubsidized student loans with an interest rate of eight percent. Paying them off would be like getting an eight percent return on her investment, which is a pretty solid yield. After the emergency fund, the condo proceeds should go toward this.

An unexpected inheritance
Dallas, Texas

Her windfall: $600,000 plus roughly $18,000 a month (indefinitely) in gas interests

Where she got it: Her mother's estate

Her goals: Retire; continue to pay for her own health insurance, since she's self-employed; give back to the community

When Michelle's mother died last March, Michelle was floored to learn that she'd be inheriting more than half a million in cash and receiving between $12,000 and $24,000 a month from her mother's gas interests. Michelle has no idea what to do with all that cash, although she has used some of it to pay the balance on her credit cards. “When I paid off my debt, it was ‘Thank you, God’ and ‘Thank you, Mama,’ ” Michelle says. “She always took care of me.”

Money wasn't exactly free-flowing when Michelle was growing up. “My mother would buy one pair of good pants and one good white blouse, and she'd take very good care of them,” Michelle says. “She saved the good towels for special occasions and drank orange juice out of Flintstones jelly glasses. She lived a very frugal life.” Michelle, who is single and has no kids, owns a promotional sales company and would like to be able to retire early and spend more time volunteering. “I do not want to be that person who blew such an unexpected gift,” she says.



Don't invest it all at once
“Michelle falls into the category of people who would be mortified if they squandered an inheritance,” Field says. “She's very different from a lottery winner. She's going to have an emotional attachment to the money.” To make things easier, Michelle should work with a financial adviser to figure out how much to invest. Then, she should invest the first third of that amount now, the second third in six months and the last third in one year. That way, a volatile market won't wipe her out, and the process will help Michelle get used to investing.

Keep working
“One million isn't what it used to be,” Field says. Michelle still owes $200,000 on her mortgage, and she doesn't know yet how long her mother's gas interests are going to provide income. An adviser can help her find the magic savings number at which she can quit her job.

Write a very specific will
Since Michelle has no spouse or descendants, she should make sure that she sets up a trust with designated beneficiaries and that she has a current will. “The worst thing is to not name exactly whom you want things to go to and let the state decide,” Field says.


Find out how long the energy interests will last
If there's a way to estimate the lifetime of the gas lease, Michelle should do it. “That will play a huge role in determining how quickly she can meet her financial goals,” Porter says.

Revisit personal goals
Michelle should sit down and map out her short-term goals (less than five years) and her long-term goals.


Consult a fee-only financial planner
Since they don't get commissions, they're more interested in making you money than in selling you a product. Find one at

First Published February 6, 2008

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