Watching Your Wallet: How to handle sudden wealth

FRESNO, Calif. (KFSN) -- Receiving an inheritance or financial windfall can be life-changing, but rushing into decisions could cost you.

"Depending on how you inherit the money, the type of account vehicle that it's inherited, the form in which it's inherited can create taxes," says Portfolio Advisors CEO Tina Mistry.

Inherited life insurance policies, winnings, retirement accounts, mineral rights and 401(k)s can all be taxed differently.

Mistry says it's best to get professional help to discuss next steps.

"Being careful, understanding and knowing the type of account that you're inheriting and understanding the tax consequences of when you take that money out or when to postpone taking that money out," she said.

"There can be a tendency to see this large pile of money and feel like you want to make these big purchases without setting enough aside to make sure taxes are paid," says financial advisor AJ Flores.

Flores says to have a long-term plan in mind.

"That same tendency to want to spend it, take a vacation, all totally fine, but I think the same thing that comes with increases in salary is lifestyle creep," he said.

He suggests giving yourself a waiting period.

"Categorize the different levels of debt you have, which are the most expensive to carry and paying those down could be a really good idea," Flores said. "You can also kick-start your investment savings."

Investments can go beyond building wealth.

"We know that inflation exists," Flores said. "We want to combat inflation in the long term, and investments are a powerful way to do that."

You may also want to consider increasing your savings or retirement contributions.

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