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How to Manage a Major Financial Windfall

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How to Manage a Major Financial Windfall

Although many of us joke about what we’d do if we were to become wealthy overnight, a few lucky people stumble into that scenario during their lifetimes.

Whether it’s a byproduct of a major career achievement, the sale of a robust business or a sizable inheritance, it can be advantageous to manage your newfound money carefully so that you make the most of the opportunities it presents.

Man working with older woman using computer

As they say, chance favors a prepared mind.

So, in the event you find yourself dramatically wealthier overnight, let’s review common financial windfall scenarios, identify six errors to avoid and explore actions to consider should you find yourself in this situation.

6 possible major financial windfall scenarios

While not an exhaustive list, the following instances can occur, bringing new money into your bank account in a relatively short time frame.

1. Inheritance

Often, one may have advance warning that they’re set to inherit significant assets (e.g., banking and investment accounts, land, jewelry, money and so forth), however, sometimes an heir may be surprised at the amount inherited through a will or trust.

2. Life insurance payout

The loss of a loved one is never easy, which can complicate the need to decide what to do with a valuable life insurance policy1 for which one is a beneficiary.

3. Career-related wealth

Perhaps you take a new position after graduate or law school that provides you with an enviable paycheck. Then again, maybe you take a great idea, build a company around it and stage a profitable exit strategy or initial public offering (IPO). These are a few ways that professional career advancement could generate new wealth within a relatively brief period.

4. Investment success

Although investing never guarantees wealth — and always carries with it a certain amount of risk, many people have made a modest investment at the right time and watched it pay off handsomely.

5. Legal settlement

Divorce2 and injury lawsuits are two ways through which an individual may suddenly receive a sizable amount of cash through the court system. (Of course, with them may come significant legal bills, too.)

6. Lottery

Ah, the lottery! We’d be remiss if we didn’t give a nod to the remote possibility that you could someday find yourself in possession of the proverbial “golden ticket.”

What could be a delightful, life-changing experience can quickly turn fraught with complexity, however. After all, you may have to decide how to receive the money (a large amount upfront or smaller figures over time) and with whom you are willing to talk about your winnings. (Yes, news of a big win really can complicate relationships.)

Common missteps to avoid after a major financial windfall

Below are four common errors that can create problems in the wake of significant newfound wealth.

  • Spending more than you can afford
    The temptation to run out and buy a new house or a fancy car can be intense. Take your time, create a budget, and you’ll be more likely to make more financial choices that don’t make you cringe later. Without a plan, the depreciation of big-ticket purchases like an expensive new vehicle can become a sore spot later.

  • Failing to consider your windfall’s tax implications
    When it comes to a sudden influx of cash, Uncle Sam is usually not far behind, ready to collect. A good tax attorney or CPA may be able to help keep things running smoothly between you and the IRS, perhaps preserving more funds than you’d be able to do on your own.

  • Being overly generous
    For many people, the first thing they imagine doing if they were to experience a major financial windfall is to provide for loved ones or charities that hold deep meaning for them. Yet extreme generosity can have negative impacts on yourself and the recipients, potentially creating tax obligations that neither of you may want or even draining your resources back to pre-windfall levels.

  • Failing to address debt
    Paying off any high-interest debt (e.g., credit cards and student loans) may not be a thrilling idea, but it may also be among the savviest financial moves you can make immediately after a major financial windfall. Again, there can be tax and other financial implications, so it’s worth researching and talking over your plans with a professional before writing a series of checks.

How to manage your assets more thoughtfully after a windfall

Whether anticipated or not, here are some basics to consider when gearing up to manage newfound wealth.

  • Resist the urge to spend it all at once.
    As mentioned above, it’s important to take time to pause and reflect upon your assets and how you might want to leverage them in your own life. This may reduce the odds of deep regret later.

    » Insight: One place, however, where you might want to consider placing money right away? An emergency fund, a separate checking account that holds enough money to cover six month’s to a year’s worth of expenses. (With a systematic saving plan3 in place, however, you need not wait for a windfall in order to build your emergency fund.)

  • Pull together all relevant information in a single resource file.
    This includes account and property valuation details as well as the names and contact information for your (or, in the case of an inheritance, your benefactor’s) attorney, personal banker, estate executor and/or financial advisor. Be sure to include not only new assets but your existing ones as well. This will help you get the clearest picture of your overall financial well-being, post-windfall.

  • Assemble a team to support you.
    If you’ve never needed to work with complicated financial, tax or legal matters before, you may understandably feel a little out of your depth following a significant windfall. Depending upon the particulars of your personal financial situation, you may want to talk with an attorney, tax advisor, accountant, trust administrator or an experienced wealth management team.

  • Create a long-term financial plan.
    Although you may have existing retirement plans in place, an influx of major funds or assets may warrant a reexamination of your long-term financial goals. For example, might it be time to explore a work-optional lifestyle? Or might you want to take your windfall and invest in a family business or launch a new one?

    Finally, you may want to think about your beneficiaries (including children, grandchildren and charity) and how you might be able to provide for them as never before. This could involve discussions about estate planning or will creation.

The takeaway

A sudden shift in assets — be it from your job, inheritance, a legal settlement or pure luck — can prove to be a once-in-a-lifetime opportunity to advance your short- and long-term financial well-being, plan for your family’s future or advance your professional goals. By avoiding common missteps and developing a plan, your new assets may help you make even more meaningful strides.

Whether you’ve experienced a significant financial windfall — or not, trust that RBFCU Wealth Management, The Garner Davis Group is dedicated to helping you puzzle through how to manage significant wealth.

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

This article was last updated March 2024.


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RBFCU Wealth Management, The Garner Davis Group is a financial advisory practice of Ameriprise Financial Services, LLC.

RBFCU Wealth Management is a division of RBFCU Investments Group LLC.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

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The following sources were last reviewed in February 2024.

1“Understanding Life Insurance Plans.”,

2“Managing Divorce and Finances.”,

3“How to Create a Systematic Savings Plan.”,