Here Are 10 Practical Solutions To Manage A Financial Windfall

By Lucy Lazarony of Next Avenue

What to Do With An Excess of Unexpected Money When Age 50+ Arrives | Unusual Adventures in Travel…. A sum of unexpected money may come your way unexpectedly and when considering its use as part of a retirement fund strategy or for any other personal purpose it should not go unused – there could even be fun ways of using some of it!

Here are a few strategies experts suggest when managing an unexpected windfall.

1. Avoid making snap decisions. A decision taken too hastily can prove fatal for your success.

One client in their mid 50s at Sincerus Advisory received an unexpected, unsolicited offer for their business that quickly led them against our advice to accept, leaving them bored and feeling disconnected for several years after selling,” according to David Wilson, Certified Financial Planner and managing partner of Sincerus Advisory in New York City. After performing various assessments and exercises designed specifically to give purpose and fulfillment following business sales they discovered activities, hobbies, a social network and charitable work which provided daily purpose fulfillment post sale of company.
2. Give Yourself A Break Take Time Out For Relaxation
Wilson recommends people experiencing large financial windfalls take some time out for themselves in order to relax before making major financial or life decisions during what can often be an emotional time of their life. He states “to take some time off before making major life and financial decisions early on during what can often be an emotionally trying period”.

Allow yourself some down time while considering your financial strategies for the coming year.
Wilson recommends that someone who has received a windfall take some time away to reflect and formulate ideas on what comes next for their life and consider any major purchases or sudden lifestyle adjustments during this phase of contemplation. “During this phase, it would be wise not to make any large purchases or drastic lifestyle adjustments,” Wilson suggests.

3. Take some time and think ahead about all of the different ways your additional money could be put to good use in your life.
“Generally speaking, I suggest allocating wealth between four buckets: debt payoff, major purchases, retirement planning and fun,” according to Chris Diodato of WELLth Financial Planning in Palm Beach Gardens, Florida. Typically between 5-11% should go toward such endeavors like travel and recreation opportunities as “fun.”

Take care not to overspending, since your windfall could quickly disappear in an instant. “The worst mistake someone could make with their windfall would be increasing recurring lifestyle expenses”, Diodato notes. For instance, if a family earns $100,000 annually and receives an inheritance worth $250,000 they should maintain their expenses as though earning only $100,000 instead – thus protecting the value of their inheritance from being drawn down prematurely.
4. Pay down high-interest debt. A windfall can be used wisely by paying down high-interest loans such as credit cards.
“Tackle high-interest rate debt,” states Mike Hunsberger of Next Mission Financial Planning in Saint Charles, Missouri. “After that, make an assessment if their retirement planning needs attention; any extra funds may go there instead.
5. Expand retirement savings plans. A windfall could provide the boost needed to maximize savings for retirement.
“To expand your savings while paying less in taxes, optimize your 401(k) contributions – those 50 and over may contribute up to $30,500 by 2024,” advises Alvin Carlos of District Capital Management in Washington D.C. “Likewise, maxing out Roth contributions or exploring backdoor Roth plans is another fantastic way of building wealth tax-free.”
6. Assess Your Retirement Plans. Assuming you’ve just experienced a windfall of some kind and plan to retire early as planned, now would be the ideal time and place for reevaluating retirement plans.
“Can I retire early or forgoing savings for retirement to spend on vacations instead, provided my assets allow it?” asks Justin Pritchard of Approach Financial Planning in Montrose Colorado. Perhaps working less or taking on different duties depending upon current circumstances could also work?
7. Establish liquid savings. Make the most of your newfound wealth and set aside some in checking, money market or savings accounts with instant access for emergency expenses if necessary. Carlos suggests considering high yield accounts that yield at least 4 percent interest or 5 percent returns as options to consider when setting aside money in liquid savings accounts or money markets.
Save several months’ living expenses into these accounts. Gene Thompson, an Independent Certified Financial Planner in Rochester New York who directs Iconoclastic Capital Management as Director of Financial Planning advises to have six to 12 month of living expenses set aside in an emergency fund as this can provide a safety net during unexpected financial storms.
8. Diversify Your Investmentsuiesc Select an array of investments when planning to increase your financial fortunes. “Refuse to put all your eggs in one basket,” according to Thompson’s advice, as this reduces risk while opening up opportunities for steady growth over time.
As soon as you approach retirement, be more conservative when investing your savings.
As you near retirement, investing strategies should become increasingly conservative to preserve capital while still offering some growth, Thompson suggests. “Consider investing in stocks, bonds and other assets that meet both your risk tolerance and time horizon.
9. Examine Your Estate Plan. A windfall could provide the chance to give more to loved ones. Thompson recommends updating your estate plan accordingly to reflect this new financial reality – for instance by revising or creating trusts or designating beneficiaries on accounts or redesignating wills and trusts as necessary.
Always plan for longevity. Given ever increasing life expectancies, it’s critical that funds last throughout retirement,” according to Thompson. He suggests considering long-term care insurance or setting aside funds specifically for health care expenses that arise later.
10. Share Your Fortune. Once your windfall of wealth arrives, share it with family members by giving generously of it back – especially dependents! “Pay it Forward. A tax-free gift could make someone’s year (most likely dependents), giving an average $18,000 per giver per recipient in 2024 without filing tax forms for yourself!” explains Karen Ogden of Envest Asset Management of Ridgefield Connecticut as Certified Financial Planner/Partner
By making an early gift, you may be able to track how it is being utilized by those closest to you or by contributing directly to their favorite charity. Donating now could allow you to see first-hand just what an impactful effect your financial contribution has had.
Pritchard advises, ‘Now is an opportune moment if there are children, loved ones or causes you’d like to contribute towards,” and to reap the satisfaction of giving while alive – you could witness its effect!