What to Do with a Windfall
- David Haseldine
- 24 minutes ago
- 5 min read
Imagine it: one day, you’re minding your own business, and then BAM you win the lottery, inherit a sizeable chunk of coin from a long lost Aunt, or receive an unexpected payout. Suddenly, you're holding a lot more money than you've ever have had to deal with before. But here's the thing: just as quickly as wealth can arrive, it can disappear if you’re not careful.
It’s a well-known fact that many lottery winners, despite their initial excitement, end up broke just a few years after hitting the jackpot. Similarly, the much-anticipated great wealth transfer, as Australia’s aging population passes on their fortunes, will see trillions of dollars changing hands over the next 20 years. But the question remains: what should you do with that windfall to ensure it lasts, rather than evaporating like so many lottery winnings?
Let’s break it down so you don’t end up on a reality show called “Where Did All the Money Go?”
Step One: Don’t Do Anything—Yet!
Yes, you read that correctly. The first thing you should do with a sudden windfall is absolutely nothing. You might be tempted to go on a wild spending spree, buy that dream car, or upgrade your entire wardrobe to designer labels, but please just hit the pause button.
Take some time to let it sink in. A sudden influx of cash can be overwhelming, and your first reaction might not always be the wisest. So, before booking that first-class trip around the world, give yourself a few weeks or months to process what this windfall really means for your life. Avoid making any large decisions until you've had the chance to fully understand your new financial situation. In short, put the money somewhere safe, sit back, and breathe.
Step Two: Bring in the Experts
Once the initial shock has worn off, it’s time to surround yourself with professionals who know how to handle money. This is not the time to take advice from your second cousin who “dabbles in stocks” or your neighbour who is “pretty good at crypto.” Just like you wouldn’t perform surgery on yourself (hopefully), you shouldn’t attempt to navigate a windfall solo, either.
A great financial planner, accountant, and perhaps a lawyer should form your dream team. These experts can help you structure your newfound wealth in a way that maximises long-term security, minimises tax burdens, and puts you on the right path toward a financially stable future. But remember: not all financial planners are created equal. You’ll want to find one who acts in your best interests, not someone who’s going to sell you the latest high-risk investment product. Look for someone who’s genuinely focused on helping you manage your wealth with care and foresight.
Step Three: Think Long-Term (Avoid the Lottery Curse)
Lottery winners are notorious for blowing through their winnings faster than they can say, “I’m rich!” Why? Because they fall into the trap of thinking the money will last forever. But without a proper plan, it doesn’t.
To avoid the lottery curse, think long-term. Take a look at your current financial picture and ask yourself, What can this windfall do for me 10, 20, or 30 years from now? A good financial planner will help you break down your desired lifestyle and map out a plan. Whether it’s securing your retirement, paying off your home, or setting up a rainy-day fund, thinking long-term will protect you from running out of money later in life.
Remember, a windfall doesn’t have to mean a lifestyle overhaul. It’s tempting to think, “Well, I’ve got all this cash now, time to buy the beach house and the Ferrari!” But living within your means, even with extra cash, will serve you better in the long run.
Step Four: The Power of a Murphy Fund
It’s important to set up a safety net for the unpredictable. As discussed in previous blogs, you’ll want to create a Murphy Fund because as we all know, Murphy’s Law ensures that when things can go wrong, they will. This fund acts as a financial cushion for life’s unexpected events, like medical emergencies, car repairs, or an economic downturn. It’s crucial to put a portion of your windfall into an emergency fund that can cover at least six months’ worth of living expenses.
Step Five: Don’t Forget About Retirement
Now, let’s talk retirement because one day, you're going to want to kick back and relax. A windfall presents the perfect opportunity to supercharge your retirement savings. The great wealth transfer in Australia over the next two decades is expected to provide many people with a significant amount of money. However, this doesn’t mean you can ignore your retirement planning.
If you’ve already got a plan, this is your chance to fund it to the max. And if you haven’t thought about it yet (don’t worry, a lot of people haven’t), now is the time to sit down and figure out what kind of lifestyle you want in your golden years. Putting a chunk of your windfall into a tax-advantaged superannuation account is one of the smartest moves you can make. You’ll be grateful when you’re sitting on a beach enjoying a great Australian red, knowing you’ve secured your future.
Step Six: Invest Wisely (No Rainbows or Unicorns!)
One of the biggest mistakes people make with windfalls is falling for the allure of high-risk, get-rich-quick schemes. Maybe you’ve got a buddy who promises to double your money with some new “hot” investment. But here’s the thing: the smarter move is usually the boring one.
Instead of chasing unicorns, stick with a balanced and diversified investment portfolio. This approach may not make you a millionaire overnight, but it will grow your wealth steadily and reduce the risk of waking up one day and realising that your windfall is gone. You don’t have to be a financial wizard to understand that slow and steady wins the race when it comes to building long-term wealth.
Step Seven: Enjoy It! (Responsibly)
Of course, a windfall isn’t just about stashing all your cash away for the future. It’s okay to enjoy a little bit of it now, too. Set aside a portion for fun things, whether that’s a holiday, a new car, or some well-deserved splurging. The key is moderation.
By planning responsibly, you can enjoy the present while still ensuring a comfortable future. But don’t fall into the trap of thinking the entire windfall is your “fun money.” A little goes a long way, and you’ll enjoy it even more knowing you’ve secured your financial future.
Final Thoughts: What To Do With a Windfall
Receiving a windfall can feel like winning the lottery, but if you’re not careful, it can slip through your fingers faster than you expect. With thoughtful planning, a focus on long-term goals, and the help of trusted financial professionals, you can turn your windfall into lasting financial security. So, before you start dreaming of yachts and private jets, take a breath, make a plan, and get your financial future on track.
Because while it’s fun to dream big, it’s even better to have the financial certainty of knowing you’re set for life.