How to Handle a Financial Windfall

Jacob Maslow  |

If you received a financial windfall, would you know what to do with the money? Whether it’s a structured settlement, an inheritance, winning the lottery or even a bonus for accepting a new job, receiving a large amount of money at once can leave you feeling overwhelmed and unsure of which steps to take next.

Know the Consequences of the Windfall

The first and most important thing is to consider the tax consequences of the windfall. Some settlements are tax-exempted, as is the case with many accident and injury cases. But others are not tax-exempt, and you will need to take this into account before spending or investing.

In addition to the tax consequences, you’ll need to consider how else the windfall will affect your life. For example, if you’re divorced, an injury settlement may affect your child support payments.

“The injury award may be held as collateral until any late or outstanding child support payments are paid,” says Erlich Law Office. “This is done in the form of a lien that will need to be satisfied.”

To better understand the consequences of your financial windfall, you might consider consulting with a professional.

Hire a Professional and Create a Plan

A financial professional can help you understand your options and create a plan for your windfall.

A financial advisor can also guide you in making smart investments. If you have no experience with investing, an advisor can help you avoid making mistakes that many beginners make. Advisors cost money, but the return is often worth the cost.

Once you understand your options, it’s time to create a plan for your cash. Your plan may also include getting a life insurance policy to take care of your family after you’re gone.

Invest in Your Home and Education

If you’re going to spend the money, do it wisely. Further your education, or invest in a home for your family. If you already own a home, the windfall may be enough to pay off the mortgage and leave you with more money each month.

If you have debt, you can use that money to pay it down or off completely. Financial gurus often recommend paying off debt before making investments, as debts accrue interest over time.

Invest in Income-Generating Vehicles

If your plan is to make your money grow, investing in income-generating vehicles will help you reach that goal. These include stocks, business and real estate.

Investing in stocks for the long-term will allow you to grow your wealth over a number of years. Investing in real estate properties can provide either a long-term return, or a quick return through property flipping.

DISCLOSURE: The author does not have any stake in the listed equities


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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