What to do with a windfall – five things to think about first

Receiving a lump sum or windfall can be quite dreadful and exciting at the same time. Tempted to blow it all, or keen to hold it close to your chest? Unsure? Read on!

It may be a planned windfall (perhaps a term deposit, your life insurance policy maturing or the sale of a business or property), or it could be completely out of the blue – maybe an inheritance, or even lotto if you’re one of the lucky ones! However it crosses your path, there’s something about a lump sum that invokes a strong emotional reaction. So, how should you react?

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Some will make the decision to invest the money, spoil close ones or pay off their debts, while others will have no idea on what to do with it, so this cash will just sit in a bank account.

Here are our five thoughts for deciding what to do with a windfall:

  1. Avoid knee-jerk reactions. Notice how you’re feeling – are you anxious, excited, impulsive, cautious? Think of the opportunity you have in front of you – if you are smart about it, how could this money change your future or that of your family? Take some time to be objective and remove those strong initial emotions from your decision making. You don’t have to decide what to do right away.
  2. Start thinking about where you’re at, and where you’d like to be. Is there something you’ve always wanted to do for your family? Perhaps help pay off the mortgage, put the kids through their schooling, or be able to afford that round the world trip? Maybe it’s to leave a legacy or inheritance for your family when the times comes. Perhaps there are competing ideas, and you’re not sure which you should choose. Could you write them down, maybe bust out the list of “pros and cons”, and start building a picture of what you really want? Once you see it on paper you might find things look quite different.
  3. Keep the vultures at bay. Suddenly having a large sum of money can bring about a great deal of stress, which can be compounded by families, charities and salespeople knocking at your door, all wanting to influence your decision. It’s at this time that it’s incredibly important to give yourself the space and time needed to get some clarity of thinking. Be assertive about needing some space, and remind yourself that it’s your decision – not anyone else’s.
  4. Think you can live off the interest? Maybe not. In today’s world with interest rates so low, the idea of simply putting the cash in a bank account or term deposit and living off the interest are pretty much over. While cash and term deposit accounts still have their place, they simply aren’t providing the return that they used to (read our recent article if falling term deposit rates are squeezing your retirement income). Something to think about.
  5. Most importantly – seek professional advice. Yes, of course we would say this, but trust us – getting advice will help you make the best use of your windfall. After you’ve done some initial thinking, a good Financial Adviser specialising in Wealth Generation will be able to help you refine those ideas and seek out answers to the big questions – what drives you, and where do you want your money to take you? After that, the decision making is easy. You may decide to invest some (or all) of it to build wealth for the future, reduce your debt, or something else altogether. The important thing is that you weigh up all the options with the advice from a professional who knows not only the pitfalls, but how to maximise your newly found wealth. It’s a smart move.

If you do choose to ask Cole Murray for help on what to do with a windfall, we’d love to help you – at your own pace.

Our specialised Wealth Generation team are dedicated to provide you with solutions that will suit your unique situation, and not push you in any direction. Depending on your age, debt level and risk adversity, it may be appropriate to create an investment portfolio with a mix of bonds, investment funds and term deposits. We’ll take a look at your total financial picture, listen to you and present the options that have your best interests at heart.

Like to learn more? 

If you’d like to find out more about your options for what to do with your windfall, touch base today and we will help you through your decision making. And if you’re still holding out for that lotto win – good luck!

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