You Just Got An Unexpected Windfall. Now What? The 5 Things To Get Right

Receiving unexpected money sure can be nice, am I right? Assuming it isn’t related to a loss (e.g. death or accident), it can be such a pleasant feeling when it happens. We can start to think of the possibilities it buys. Dreams or goals we may have had in the past that did not have funding. But it can definitely come with it’s own risks, both financial and personal. Just because it’s good news to us doesn’t mean it’s good news to our friends, family, or colleagues.

Here are the 5 things, in order, to get right :

  1. Tell Only Those Who Need To Know: Be very discerning in who you share this information with. It is likely not necessary that anyone beyond your spouse even know about it. Not even your kids (and maybe especially not your kids).
  2. Pay The Income Taxes: Once you receive the money, work with a professional to calculate how much you owe in income taxes. Pay those taxes as soon as you can via a 1040 ES voucher. This gets you a clear picture on how much you actually have.
  3. Be Intentional: Do you see the money serving a purpose? There’s nothing wrong with having some fun with it, but are there larger purposes you may have with it? Early retirement, a career change, a house with more space, kitchen remodel, more money for kids’ education, an EV? If it’s an inheritance, is there a way to remember the benefactor?
  4. Manage Lifestyle Creep: It can be tempting to habitually spend more money. Going out to dinner more often. Taking more trips. Upgrading our devices. Leveling up on the type of grocery store we shop at. Check to make sure that anything that becomes more than just a one-off expense is intentional. It can be very, very difficult to pull back on an expense once it becomes embedded in our lifestyle.
  5. Update Your Estate Plan: Has anything about your legacy changed with this windfall? What impact might it have on your beneficiaries? If you anticipate any possible changes, it’s time well spent to meet with your estate attorney to update your estate plan.

The larger the amount, the higher the magnitude the impact may have. It definitely can afford us a cushion and breathing space to pursue things we had not considered possible. Inversely, if we don’t practice #1 through #5, it has the propensity to have the opposite effect: Damage our relationships.Or our future. Maybe even our legacy.

Money plays such a powerful role in our lives. If we lose sight of that and of the fact that not everyone in our lives has the same maturity we do with money, our good fortune can turn into our misfortune. This is tragic when it happens and can be due to others’ envy, resentment, self-entitlement, or perhaps even greed. Hence why #1 above is #1 on this list: It’s not about the money, but it is about the money.