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How to Handle a Windfall - What to do if you Win a lot of Money

Updated on January 28, 2012

What to do if you come into a lot of money

You may think I am joking, and I have to admit that I am having a chuckle here, because the title of this hub is suggesting "what do I do, now that I have all this money?" While that is a welcome problem to many of us, myself included, there are some things you will want to consider and keep in mind in dealing with your new money. Whether you come to get some unexpected inheritance, or found buried treasure, or won the lottery, you can make some decisions that can hurt you in the long run. People can get carried away in excitement, and end up worse than before they won or received the money in the first place.

So, run with the thought for a minute that it could just be that you could come into some money. It could be any kind of large cash windfall, unless of course it is something illegal. If that is the case or you even suspect it, stay away from it with a ten foot pole! Examples of coming into money like I am speaking of may include things like a gambling win, or lump sum pension distribution, inheritance, or a court settlement that you didn't expect. Whatever the cause is, you need to make good decisions now to not get into trouble by not handling it properly.

I am recalling now the guys that found huge lumps of gold, or some such gem perhaps in a field. It happens folks! Here is the truth of the matter, the odds are against you keeping the money if for no other reason than that taxes and inflation are often enemies of people trying to preserve or protect a nest egg. Look no further than the examples of people that win one million dollars in the lottery. Uncle Sam wants his portion too, and will skim off about a third right off the bat. You don't get the one million in a lump sum. Try getting 50,000 dollars per year for 20 years. So you turn that figure into say 34,000 dollars a year, right? Well not so fast, as inflation will strike your purchasing power over time, and really your one million dollar lottery win will be worth much less in dollars when you compare the two time frames. Imagine if you were told you just won, and went and acted on that without realizing these details? You will be financially better off to know all the fine details involved.

Original funding for the building's construction was obtained from a winning lottery ticket.  House is in Texas.
Original funding for the building's construction was obtained from a winning lottery ticket. House is in Texas. | Source

Important Reminders Regarding your new cash stash.

So what can be done to help "deal" with your windfall? Here are some ideas to keep in mind.

First, Diversify your new money. Risks in some investments will be offset by the relative safety factors in your other investments. In short, not putting all your eggs in one basket.

Second, Know that windfalls like this cannot be replaced and are one time events. Treating this money much more conservatively than normal regular income is a smart thing to do.

Third, If your money is from a lump sum pension distribution, you might want to arrange for an IRA rollover.

Fourth, You can count on inflation.

Fifth, Be Smart and Reasonable. Keep in the back of your mind, that a windfall like this is a perfect opportunity to invest for the future. You would be putting the money right back in to working for you.

* If you do decide to spend it, don't do so too quickly, and come up with a well designed plan. Consider all things at first, so that later you don't regret acting hastily, wishing you had done it a bit different. By keeping these things in mind, you can really maximize your windfall and feel great about it all around.

One Lady's Story


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    • oceansnsunsets profile image

      Paula 5 years ago from The Midwest, USA

      Hi John, that sounds like a good plan though, if you were to win! Its a hard time, a hard economy for so many people, and I hear you.

      Thanks for reading and commenting on this article, and I wish you the very best in your job search and future.

    • profile image

      John 5 years ago

      I would invest in 20% in forests 20% in gold bullion then give away 20% for charity and just enjoy the remaining 40%.

      Unfortunately I am not only broke nut also unemployed so guess that it never will happen to me.

    • oceansnsunsets profile image

      Paula 5 years ago from The Midwest, USA

      Hi Matthew, that sounds like a good idea, I would echo that sentiment! Now, if only we could win, right?

    • profile image

      matthew 5 years ago

      If I win the lottery I would make it last as long as possible!!!!

    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Dallas, you make great points and I tend to agree with what yous said there. Thank you for your comment and stopping by.

    • profile image

      clearly crystal 6 years ago

      hmmm, most people who wanna win, and even play so they can...often don't make plans for their winnings. just saying, if I'm planning to have a baby, think maybe I should get a box of pampers, right? heehee

    • dallas93444 profile image

      Dallas W Thompson 7 years ago from Bakersfield, CA

      Great ideas. Most people who receive large "windfalls," five years later, are back where they started... "broke."

      We settle to our levels of comfort... If we identify with the "rich and famous," (and have financial advisors) then we probably will keep most of the money...

      An important consideration is to realize the money will not make you happy. Your "isues" will remain; perhaps become greater...