What To Do With A Windfall?

The following article was written by one of our contributors. You can know more about him at the end of this post.

Before you read our contributor’s article, let me give you the definition of the word “windfall” first.


What is a windfall?

Windfall is a sudden and unexpected piece of good fortune or personal gain, a good example of a windfall is when you win the lottery or when you receive an unforeseen inheritance.

Just look at how happy the man below is with all his cash. I’m sure you’ll feel the same when you experience a windfall too.

what to do with a windfall

Now, have you ever received a large sum of money that you didn’t expect?

What most of us don’t know is that when people come into a windfall of money, it tends to cause more problems than solutions to their finances. Most people don’t have any idea on what to do with the money or how to manage it properly. This doesn’t mean that windfalls are bad things, but they do require a little more time and attention than regular income.

Most people that receive windfalls tend to spend it. They justify the spending because it was money they weren’t expecting. While each person can do what he or she wants with their money, many will spend it.

It is common for people with windfalls to get into debt. Why do they do this?

They think they have more than they really do. They use the cash as justification to incur debt.

Let’s say that you get a $10,000 windfall. You take that amount and go buy a $20,000 car. You justify the purchase by saying that you are only going into $10,000 worth of debt instead of $20,000. You are now getting a nicer car and only incurring half the debt.

This tends to be the type of rationale for most. Instead of just buying a $10,000 car and not incurring any debt, they push for more.

Windfalls don’t have to put anyone in debt and there are ways to make sure that you handle it properly. The key parts are understanding how much is going to be received and to create a plan around it.

3 Steps You Should Do When You Experience A Windfall

Stop and Think

Okay, you just got a nice windfall that you didn’t expect. Awesome! The first thing that many people want to do is go out and start spending. They want to celebrate their money and buy some cool stuff. Since it is not money that was expected, spending it is an easy choice. That doesn’t make it the right one.

The first thing you need to do is stop and think. Don’t do anything with the money. You need to think about how much you are getting and what you really need to do with it.

Do you need to spend the money immediately?


If you stop and think about your new windfall, then you can start creating a plan.

Identify Your Needs

We all know wants versus needs. The general problem these days is that many people think they need everything. You really only need food, clothing, and shelter. Those are necessities. Everything else is really a want.

That being said, it is extremely important to identify what your needs are and how your windfall can help achieve those needs.


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Get Help

Have you heard of how many lottery winners go broke after winning it big?

windfall and lottery tickets

The reason why this happens is because they just go on a spending spree. They don’t know how to handle the amount of money they have, so they just spend. They think they have so much money, but when you are buying big homes, new cars, and giving money to friends and relatives, the cash can go quickly.

Before you do anything with your money, you should seek help. There are many services that are there to provide financial assistance and advice. There are professional money managers that can help you decide what would be best with your windfall.

If you already have a financial adviser, then set up a meeting. If you don’t, think about getting one to help you with your windfall. They can help you come up with a plan, and show you how long the money will last depending on what you want to do with it. People that get professional financial advice are more likely to use their windfall to better their financial situation than those who take matters in their own hands.

Final Thoughts

Windfalls can be an unexpected pleasure, but they can also lead to poor financial decisions. This can actually put you in a worse financial situation than you were in before you received the windfall. In order to make the most of it, one should stop and think, create a plan, and seek advice.

Author Bio

Don writes for Money Smart Guides, a personal finance blog that helps people get out of debt and learn to start investing for their future.
He wrote a book, 7 Investing Steps That Will Make You Wealthy, which simplifies investing and provides 7 actionable steps to help you get the most of out of investing.

Photo Credit: Jesus Solona and JMoney

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  1. says

    Man, I wish we would get a windfall of money! I know exactly how to handle it:
    1. Take 1/2 and put it in our emergency fund. (We’re trying to build up a 6-figure emergency fund!)
    2. I would put 1/4 in one of our online investment accounts (preferably with the highest yield!)
    3. Put the rest in an annuity of some sort – one that will cover all of our vacations for the rest of our lives :-)
    Is that too boring!?!? LoL. Much needed article – thanks for posting!

  2. says

    I’ve heard many times that people who win the lottery often end up in worse shape – but I would still love to have the opportunity to prove that there are exceptions to every rule!

  3. says

    We should all be so lucky to receive a windfall…and wise enough to know what to do. I absolutely agree with the first step, stop and think. In fact, I have written about the fact that if I did receive a windfall I would not do anything for 6 months – 1 year. While I have a good idea of what I would do, it often pays to be patient, and consider (and reconsider) the various options before making a definitive move.

  4. Kathy says

    It depends on how much the windfall was. If it was under a million, I’d invest it. Maybe we’d get a 2nd home in Alaska with part of it. But if it was in the realm of the $300+million lotto jackpot, I’d like to set up a foundation that helped military veterans start their own business, or a charitable foundation that gives to charities that help animals or sick children.

  5. says

    Proper planning is really important. That’s why so many multi-million dollar lottery winners end up broke. If I got a large windfall I’d buy a farm that I could use as an animal sanctuary, save for retirement, and take my family on a once in a lifetime trip.

  6. says

    I just won the lottery, I have to go….

    If it was the ‘big one’, pay off the bills or sell most of my stuff, and buy an island. Otherwise, I would just slug on and continue with my financial goals

  7. says

    Stop and think seems like both the hardest and most important thing to do. Obviously, questions like, “What am I going to do with all this money,” immediately ensue. Sometimes the best thing to DO with your money and is stop, think, and maybe even take a few days away from the topic of money. Rest, relax, then think about the big windfall.

  8. says

    I have never enjoyed a substantial windfall, so I can’t speak from experience, but I can say that if I somehow won the lottery, my first action would be to do nothing. I’d sit on the money for a few months, continue working (though probably not as hard as I would have before the win!) and think about what I want, need, etc. Then, I would pay off my mortgage, get my husband a new vehicle, and make some investments.

  9. says

    If every I would have a windfall, I will list down my priorities, first thing is to put up an investment properties, build a solid emergency fund, contribute to my retirement and to my daughters education. That man in the picture was obviously very happy! :)

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