5 Tips for Making the Most of a Financial Windfall

by Gina Blitstein · 0 comments

Congratulations! You’ve come into a financial windfall! Whether it’s the proceeds from winning the lottery or a contest, an inheritance, a lucky trip to Las Vegas, a legal settlement, a successful investment or an insurance payout, you’ve got some extra dollars in your possession. Now what?

It’s human nature to go wild at the thought of having a large sum of extra money that’s not earmarked for living expenses. We fantasize about luxuries we can’t presently afford – real estate, vacations, vehicles, jewelry – all the trappings that come along with the “good life” that we’ll most likely never enjoy in our current circumstances. It’s easy enough to spend an imaginary windfall in our minds – even to spend it multiple times! But when it’s real – we have to stop and consider some realities so as to make the most of a fortunate situation.

You’ve undoubtedly heard the sad stories of “overnight millionaires” who squandered their fortune almost as quickly as they acquired it. Don’t become one of them! Whether you come into a modest or substantial amount, it’s easy to get caught up in the excitement and the perceived limitlessness of your finances and spend unwisely. Here are some suggestions for dealing responsibly with extra money.

First – secure the money where it isn’t immediately available to you (like a safe deposit box) so you can’t spend a dime of it until you do the following:

  1. Make a list – List of all your dreams and desires your extra money could bring to fruition. Brainstorm every conceivable thing you’d want to do or buy. Through this exercise, you’ll discover that even your windfall won’t make all those dreams a reality. That’s an important revelation – there’s even a limit to your new “fortune.” You’ll still need to chose how you spend carefully so as to get the most from it.
  2. Use it to grow your overall wealth – You’ll never have a better opportunity to grow your wealth – not just for a brief time or on a few splurges – but for your whole life as you do with a significant chunk of money to invest. Investing will ensure that, no matter how much your windfall is, that it turns out to be truly life-changing money for you.
  3. Eliminate debt – While it’s more fun to buy a motorcycle than to pay bills, eliminating your debts will free up your cash flow so it can be spent on more productive things that will – on a daily basis – increase your financial quality of life.
  4. Spread it around – That original list you made probably included things you’d like to buy, things you’d like to do, ways you’d like to help others… Allocate a portion of your windfall to some of those things so you won’t feel deprived of enjoyment from it.
  5. Consult professionals – More money brings more responsibility if you intend for it to really make a significant impact on your life. The wisest action may be to contact an accountant, attorney or financial adviser to help you make prudent decisions about your windfall. They can advise you on matters such as taxes and investments, enabling you to keep as much of your money as possible and handle it responsibly. Consider as many options as possible from these experts before you decide how to proceed with your money.

Enjoy your windfall – but don’t squander it by thinking only of the present. Rather than regarding it simply as money, think of it as an opportunity to provide financial security for your future.

How would you make the most of a financial windfall?

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