Sudden Money: 6 Tips to Manage a Windfall

It’s happened to all of us, at least in our dreams: a lottery win, a big inheritance, a streak of luck at the gaming tables.

Even if the amount is more modest, sooner or later some unexpected money is likely to fall into your lap. Manage it properly, and it can improve your quality of life. Mess it up, and it could ruin your life.

But whether it’s millions or just a $3,000 tax refund, here’s how to get the most out of unexpected money.

1. Stop

Woman gesturing "silence"
HBRH / Shutterstock.com

Don’t do anything at first: no shopping sprees, no donations to charity, no lending money to friends and family. Don’t even tell anyone. The last thing you want to do is risk wasting your windfall by acting on impulse or by encouraging friends and distant family to volunteer their assistance or hold their hands out.

The greater the sum, the longer you should take to assess your financial situation and identify some short- and long-term goals. If the amount is significant, a month isn’t too much. After all, the money is not going anywhere.

2. Pay off high-interest debt

"Paid in Full" stamp
Tomasz Guzowsk / Shutterstock.com

Once the planning stage is over, the first step should be obvious. If you have debt, especially the high-interest kind, pay it off. Using a $5,000 bonus to eliminate a $5,000 credit card balance with a 24% interest rate is the same thing as earning 24% interest, risk-free and tax-free — something difficult to do elsewhere.

There are instances in which paying down debt makes less sense. For example, if you’re paying 3% on a mortgage and can earn 10% in the stock market or elsewhere, you’ll obviously come out ahead by leaving your debt intact. But in general, paying interest is bad, and reducing your debt is the best thing you can do with any extra money, windfall or otherwise.

3. Put some aside for emergencies

Pig and rainboots under umbrella
Maria Dryfhout / Shutterstock.com

All right then — you’ve thought about what to do and destroyed some debt. Now can you go to the mall?

Not yet. Put some of that cash aside for a rainy day. If you’re a paycheck away from a financial emergency, now’s the time to fix that.

Ideally, you want an amount at least equal to six months of living expenses in an emergency account that’s readily accessible, like a savings account or money market fund. For more, check out “9 Ways to Build an Emergency Fund When Money’s Tight.”

4. Grow the rest

Jars of change with plants sprouting.
TZIDO SUN / Shutterstock.com

If you’re fortunate enough to inherit an amount like $100,000, the best thing you can do is to turn it into $200,000. How? By investing it.

If you’re not sure what to do, now’s the time for a little research. Start by checking out “10 Tips for Sane, Successful Stock Investing.”

5. Seek expert advice

Couple meeting with financial planner in office.
Monkey Business Images / Shutterstock.com

It’s best to hire an expert if your windfall is of considerable size. Interview several financial advisers paid by the hour, never those paid by commission. And don’t ever deal with anyone without first checking their credentials.

Ask friends for referrals, and check the National Association of Personal Financial Advisors.

And don’t ever simply turn your money over to someone else. Helping you understand your investments is an adviser’s job. Being responsible for your own money is yours.

For more tips on finding the right help, check out “3 Steps to Finding the Perfect Financial Adviser.

6. Enjoy yourself

Woman on the bow of a sailboat.
soft_light / Shutterstock.com

Finally, use some of that money to treat yourself to a great experience, like a trip to a place you’ve always wanted to see. One of the main reasons to have money is to enjoy it.

Obviously, the weight you’ll put on the steps above depends largely on the amount of your windfall. Inheriting $10 million is a lot different from a $2,000 bonus at work. But the principle is the same: Take your time, think it through and decide where the money will deliver the biggest bang for the buck.

Have you ever come into money? If so, did you use it wisely or blow it? Confess and enlighten others in comments below or on our Facebook page!

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
70% of Older Adults Botch This Basic Retirement Question
70% of Older Adults Botch This Basic Retirement Question

Can you answer this fundamental retirement income question?

8 Award-Winning Products That Impressed 40,000 Shoppers
8 Award-Winning Products That Impressed 40,000 Shoppers

The Product of the Year awards help shoppers find the best pet products, personal care items and everything in between.

Beware These 5 Common Work-From-Home Scams
Beware These 5 Common Work-From-Home Scams

You can spot scammers and con artists with a little know-how.

9 Affordable Products That Could Save Your Life
9 Affordable Products That Could Save Your Life

Some of these products you may already own. Others you’ll want to order from Amazon ASAP.

14 Uses for WD-40 That Save Money, Time or Headaches
14 Uses for WD-40 That Save Money, Time or Headaches

WD-40 is handy in a lot more situations than you likely realize.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

Eat This Food If You Want to Avoid Alzheimer’s Disease
Eat This Food If You Want to Avoid Alzheimer’s Disease

One type of food associated with the Mediterranean diet offers especially large benefits.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

18 Amazon Purchases That We Are Loving Right Now
18 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.