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Receiving a financial windfall, whether it’s a surprise inheritance, a lottery win, or a legal settlement, can be both exciting and overwhelming. It’s natural to feel a rush of emotion and to want to spend the money right away, but it’s important to take a step back and think about how to be smart with your windfall.

Here are a few tips to consider if a financial windfall occurs:

Don’t Make Any Hasty Decisions

It’s important to take your time and think through your options before making any major financial moves. Avoid the temptation to make impulsive purchases or investments. It may be helpful to allow yourself a cooling-off period before making any major decisions to allow emotions to calm. This is especially important if your newfound wealth is the result of the death of a loved one, as grief may cloud your judgment. Give yourself time to adjust to the change in your financial situation and to think through your options before acting.

Pay Off Debt

If you have high-interest debt, such as credit cards or student loans, it may be a good idea to use some of your windfall to pay it off. With credit card debt in particular, the interest you are paying may be hindering your ability to pay for other things, but even for lower-interest debts, paying them off before spending in other areas often makes good money sense. And paying down debt will also improve your credit score.

Build Your Emergency Fund

If you don’t already have three to six months of income set aside in an emergency fund, now’s the time to get that taken care of. Having a fully funded emergency fund is important in the case of an unexpected event like a major home or car repair, medical problems, or job loss.

Max Out Your Retirement Accounts and Invest

Once you’ve taken care of debt and set aside money for a rainy day, saving some of your windfall for your future may be your next goal. Even if you’re close to retirement, the power of compound interest can still work to your advantage. You may decide to make it a priority to max out contributions to your retirement account and consider investing the rest for other long-term goals, like buying a home or paying for a child or grandchild’s college.

Beware of Lifestyle Creep and Impulse Buys

A financial windfall can tempt you to upgrade your lifestyle and spending habits, but it’s important to be mindful of overspending and to maintain a level of discipline. Even though your expenses may be lower now that some or all of your debts are paid off, you may be better served saving the excess towards a long-term goal than finding new ways to spend it. And while there’s nothing wrong with treating yourself with some of your windfall, you may want to pause before giving in to the temptation to make large, expensive purchases (or even a lot of little ones) that aren’t true needs. A budget can help you keep track of your spending and ensure that you’re using your windfall in a way that aligns with your goals.

Give Back

If you’re feeling grateful for your windfall, consider giving back to your community or supporting a cause that is important to you. Or, you could put some aside for a child or grandchild to help them buy their first car or home. This can be a fulfilling way to use your money and make a positive impact.

Seek Professional Advice

It’s often suggested to seek professional advice when you come into a large sum of money. Depending on your circumstances, consider working with a tax professional to understand the tax implications and a lawyer to help navigate any related legal matters. Also, speaking with a financial advisor, such as our team, can help you make informed decisions about developing a plan for managing and investing the money.

Be Smart

By following these tips, you can be smart about your windfall and use it to help improve your financial future. The main idea should be to have a well-thought-out plan, make smart financial decisions, be mindful of the long term, and seek professional advice.


Kevin Stoddard is a LPL Financial Advisor with Stoddard Financial in Medfield, Massachusetts. Stoddard helps clients throughout New England to identify, plan, and execute strategies designed for securing their desired financial future. With their Financial Wellness @ Work program, they engage, educate, and empower employees by helping them to understand and appreciate the value of their benefits package.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.