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Coming into money can be life-changing, regardless of the circumstances under which you receive it. Financial windfalls, such as divorce settlements, usually unleash as many dreams of what to buy as they do dollars to spend.

Whether that chunk of money is thousands or millions, wise planning can make those dollars work to improve your financial future.

Your Money Mentality: Take a moment to ask yourself a few questions. What does wealth mean to you? Are you a saver or a spender? Do you live below, at, or above your means? How do you feel about debt?

Receiving a settlement carries with it ample opportunities, the first of which is a chance to start fresh with an honest evaluation of your personal money personality. Experts say attitudes toward money don't necessarily change in accordance with bank balances. So, it's important to understand your motivators and potential pitfalls. You may not like the truth you uncover, but you can always improve if you know where to start.

Decisions, Decisions: A significant financial windfall is usually a once-in-a-lifetime event. Deciding what to do with the money depends on your unique situation, including your personal obligations and hopes for your future. No matter what you decide, aim to create a long-term benefit that might not otherwise have been possible.

Here are 10 tips that you might find helpful in determining how to allocate funds. Whether you hit the lottery, sign a multi-million dollar sports contract, settle a divorce, or receive inheritance or life insurance proceeds, the following tips can help you make the most of your windfall.

1. Use your lawyer: An objective perspective could prove invaluable when anticipating scenarios or events you either currently face or will likely come upon.

2. Draft a will: It's important that your asset-transfer intentions be documented in case anything should happen to you. An estate planning attorney can help you draft the appropriate legal documents to name beneficiaries and outline your wishes for bequests.

3. Speak to a financial professional/tax advisor: Your team of advisors will become more important to you than ever before. Depending on the size of your windfall, new financial and tax planning strategies may be in order to optimize cash flow, maximize accumulation, and protect your wealth in perpetuity. A variety of instruments, including annuities, trusts, and life insurance contracts should be examined to determine which products will best serve the needs of you and your family.

4. Establish a budget:Be careful not to embark on a new lifestyle that may be unsustainable. Remember, as a one-time event, a settlement must be handled carefully so as not to be exhausted. Examine your monthly financial obligations and establish a reasonable budget to include not only the necessary costs of
living, such as your home, utilities, taxes, and food, but also your entertainment expenses, including an occasional splurge. You don't need to deprive yourself, but it's important to keep an eye on spending in order to preserve your new wealth.

5. Refrain from buying impulsively: When net worth substantially increases overnight, it may be tempting to race out to the nearest luxury car dealership and pick up a vehicle in every shade. But impulse buys are not the best ideas. Not only are they an expedient way to whittle down your wealth, they also may not be
decisions you would make if you had taken the time to better evaluate them. Furthermore, an experienced financial advisor may be able to suggest ways to obtain the same assets in a more tax-favored way. Your patience may pay off.

6. Hold off on lending or giving away money: Your settlement may seem inexhaustible at first. And, the people around you may reinforce that there's enough for everyone. But, it may be smart to keep your generosity in check, at least in the days and weeks immediately following your windfall. Before you begin gifting or lending money, be sure that you've solidified your own financial future and really considered which causes you want to support.

Don't be surprised if family, friends, and even strangers begin asking for money to borrow or keep, especially if your windfall was public, as if through a lottery win. You may find it difficult to say no, but at least for the short term, you should hold off on spreading the wealth.

7. Don't quit your job or change your lifestyle all at once: If your settlement is large enough for you to quit your job, don't. Not yet, anyway. Sudden and sweeping life changes can leave people feeling disoriented and may contribute to feelings of depression. Keeping your normal routine in tact while making small changes over time can help you feel stable and grounded.

Believe it or not, you may come to appreciate your home or job more when the burden of financial anxiety is lifted. Perhaps you don't need to sell your house and buy a bigger one — maybe a renovation would suffice. Maybe you'll like your job better when you know you have the freedom to leave if ever you want to. Or, maybe the new home and the life of leisure are the way for you to go. Whatever choices you eventually make, be sure you have given yourself enough time to weigh the pros and cons before you make an irreversible decision.

8. Make a financial priority list: Different than a budget, a financial priority list should include both short and long-term goals for your money. Are their educations that seed funding? Is your retirement shored up? Have your debt obligations been fulfilled? Is there a home project you've been hoping to undertake? Is there a charity or other non-profit you believe in that you wish to support? Is there a big vacation you've always wanted to take?

Write down your priority list in three categories: Immediate, Near-Term and Long-Term. Once you have your list, speak to your financial advisor about the actionable steps to take to bring the items on your list into being.

9. Be careful who you trust: Unfortunately, money can bring out surprising and unsavory characteristics in people you may know well. Be wary about who you
trust with specific information about your windfall. You never know how or when this information may be used. Also, before you donate money, be sure to verify the legitimacy of fundraisers or solicitors claiming to represent a charitable organization.

10. Dig deep: Your settlement has most certainly brought new possibilities to your doorstep. Now is the perfect time to answer a question you most likely
thought about long before you received your windfall: "If money was no longer a concern, I would ______." Once you realize what goal fills in that blank, you can make it happen. Though you can't buy happiness, an equitable settlement can help your vision of the future materialize. Plan wisely and for the long term, but be sure to enjoy the process along the way.


Click the following for information on a divorce financial analyst and start planning for your security post divorce.

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  • Comment Link Robin Graine Monday, 29 April 2013 11:54 posted by Robin Graine

    Excellent advice. Your CPA and Financial Planner should get just as many calls, during a divorce, as your divorce attorney -- sometimes more. Not enough said about this topic.

  • Comment Link Guest Tuesday, 20 July 2010 13:21 posted by Guest

    These are some great tips: These are some great tips thank you. I am also semi-self-employed as an amateur trader in the stock market. I got into it after I won a little bit of money and didn't want to put it in my bank (with a cosigned account that I didn't want my husband to touch). So what about my assets that have been earned as a result of this venture? I found an interesting resource about stock trading and other personal trading options but I wanted advice from a divorce forum as well. I want to continue to trade but I'm worried that will affect my settlement in a negative way. Unfortunately the income I've made at a regular job is not large enough to sustain myself, so the settlement was kind to me. But I view this as more of a hobby as opposed to a way to supplement my income.

  • Comment Link Guest Thursday, 24 September 2009 20:22 posted by Guest

    Do Not Destroy Your Assets: At times, during divorce, both parties don't really care and as such let their lawyers sort things out for them. This should not be the case.

  • Comment Link Guest Thursday, 27 August 2009 12:42 posted by Guest

    Unique Cases for Estate Planning: An estate planning attorney needs to address each client’s estate plan so that it addresses the client’s specific needs and goals.
    Some unique circumstances include:

    • Unique Assets-such as artwork, antiques and collectibles, intellectual property, farms and timberland, and racehorses.

    • Charitable Gifts-gifts to charities, whether through using charitable trusts, creating private foundations, or by establishing gift programs.

    • Marital Agreements-premarital agreements which ensure that his client's assets will be disposed of in accordance with the client’s wishes.

    • Gift Tax Reporting-preparing and filing gift tax returns, including asset valuation issues and audits.

    You really need a reputable and trusted Chicago estate planning lawyer.