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What To Do When You Get A Financial Windfall

CoinsOne of life’s most pleasing experiences is running into a financial windfall. They can be expected (bonus, exgratia) or unexpected (inheritance, striking the lottery, gifts). While the windfall is great, it can create a problem: what do you do with the money (other than spending it, of course)?

Now one of the first things most people would do is to take some of that money and splurge on something to reward themselves. In other words, give themselves a treat. These could be a fancy watch, a gold ring, a new car or perhaps an overseas vacation.

Some people would then use part of the money to do up their house. Make that much needed repairs, extend the kitchen, buy a new sofa set and perhaps change the curtains. As the money is spent on the house, it is not overspending (at least not in their eyes).

Some people may even hold a small party as a gesture of thanks for the windfall, and share their good fortune with their friends, family and neighbours.

If there is some money left over, then they would start looking at a few investment opportunities. They want to make the most out of the windfall and grow the money into a bigger pie. Finally, they bought an insurance policy and also a unit trust fund. As some parts of the money did go into investments, it ought to rid themselves of the nagging thought that they have blown away the money. So they were not spendthrifts after all.

Sadly though, the investments went nowhere in the weeks ahead.

Six months later, the money is all gone. There is no trace and no evidence of the money at all. It is as if the money never came into their world at all. Which as you know is not the case. They did receive the windfall – a substantial fortune at that. But where is the money now? Where did it go to? Gone for the most part but the recipients’ lives are no better off. So all that money did not do much to increase the quality of their lives.

Which you have to admit is pretty sad and tragic even.

Now that I’ve told the sad tale, I will also share the steps you should take to make the most out of any financial windfall that may come your way. In the hope that none of the above will happen to you.

The first and indeed the most important step you should do is this – do nothing. Yes, do nothing with that money. Leave the money in your Savings Account and leave it alone. Forget about the windfall and go on with your life as if it never happened.

Now while doing nothing is a poor strategy and a big no-no for living an extraordinary life, this is the way to go in this particular instance.

Why do I recommend doing nothing as the first step? See, when you run into a financial windfall, your mind doesn’t think it is your money. It’s still thinking the money is other people’s money, and therefore doesn’t require much care. So your mind is thinking that you can spend as much as you want and pretty much do whatever you want to do with the money. After all, it is money from the sky.

But the reality is that the money is your money, whether it was expected or not. And because it is yours, it requires the same care as the rest of your money. In other words, you must plan, manage and care for it just as you would any other money. But for this to happen, you must allow your mind to accept that the money is yours first. So this is why I recommend you to leave the money in the Savings Account for a few months. Leave it there and leave it alone.

As the days go by, your mind will gradually begin to see the money as yours. Once your mind has accepted the money as yours, only then you will treat the money as your own. Only then you will give it the same care and management as the rest of your money.

Of course, you would read a few books on money matters, learn about investments and refer to money professionals in the meantime. While waiting for your mind to see the money as yours, you would educate yourself on financial matters in the months in between. That way, when you are ready to make use of the money, you will have a better idea on what is needed to become a better investor and how to make the most out of the windfall. Even if you carry out some similar steps – give yourself a treat, repair the house and hold a party – you are doing so with full knowledge of what you are doing and more importantly, in full control of the situation.

If you do this, then you will be blessed with many financial windfalls in your life.

 

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One Response to "What To Do When You Get A Financial Windfall"

  1. Norm says:

    Wow, that is the best answer. I’ve been through the situation before, and I was so excited to start investing with the money. The end was that I pay for the price of a stock without checking its previous record ( at that time, I was thinking why delaying a good cause ). I really bought it at higher price than it Ywas previously. Yes, I know that we cannot time the market, but I wish that I was patient enough so that I can get more shares with less price tag. Patience is virtue….

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