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What to do with a Financial Windfall

What to do with a Financial Windfall

Sudden financial windfalls come in many forms. Some people have no idea they are in the works or how to deal with them. Putting the money aside until you assess your situation can help you manage your good fortunes better and place you in a considerably healthier overall financial position. These are a few things you should do when you come into the money before you spend a dime.

Assess Your Debt

The first thing you want to do is look at your overall debt situation. Is your windfall enough to pay off some or all of your debt? The key is to assess and identify the debt that has the highest interest rate. You want to pay that debt entirely off, if possible, first. The best way to go is to make a list of your debts in order of interest rate from high to low. Then to start at the top and work your way down.

If you cannot pay all of your high-interest debt off with your windfall, pay as much as possible and focus your attention on other high-interest debt. Some people focus on paying the most significant debt off first, but that is not always the best plan. Without careful consideration, high-interest debt can quickly spiral out of control, becoming massive unsecured revolving debt. In other words, it can become your own financial albatross. That is why you want to pay that debt off first.

If you can pay off your highest interest debt, then move on to the next most high-interest debt. Continue on until you are at least within the realm of lower interest rate debts that will be easier for you to manage in the long-term.

Laying Out a Plan

Before you do anything, make sure you take care of your good old Uncle Sam. Otherwise, he could come back to hit you with a painful bite in the form of penalties and fees. Work with your accountant to determine how much of your windfall is subject to taxation and how it will affect your income tax rates. Make sure to set aside enough to cover the required taxes.

Second, make sure you set aside some money to enjoy. Life is too short, and there are no guarantees. While it is always wise to think of the future, it can be foolish to do so entirely at the expense of today. Have a little fun with your windfall. You have earned it!

Next, work on your debt situation. It is always good to have a plan going into negotiations and talks with creditors. Having cash on hand places you in a position of power dealing with them. Many of them will be more than happy to negotiate on things like interest rates if you promise to pay the principal in full.

Future Opportunities

Do not forget to look for ways to invest your money. Paying off debt is one thing. It is a good thing. You do want to remove some of the weight debt places on your shoulder. But you should also plan for the future with your windfall. That means setting aside some money for an emergency fund and investing the rest.

If you do not currently own a home, you might be interested in using some of your windfalls to make a downpayment on a home. It is the ultimate investment in the future for your family. If you have a mortgage, consider paying it off if you have already paid off higher interest debts.

Alternatively, you might invest in an investment property or a vacation property that you can use part of the year and rent out to others for the remainder of the year. Your financial windfall has created economic opportunities that, when used wisely, can help you improve your financial situation for life.


  • Assess your debt situation and eliminate high-interest debt when possible.
  • Always take care of Uncle Sam first.
  • Have a plan for using your windfall wisely.
  • Seek future opportunities to put your windfall to work creating future windfalls.

Do not forget to take a moment to enjoy your windfall with a little splurge for yourself and your family. Then get to work using your financial bounty wisely.