HomeMoney & WealthTop 5 things to do with your windfall in 2023

Top 5 things to do with your windfall in 2023

Have you ever indulged in the delightful daydream of what you would do in the event of winning the lottery? Perhaps you envision yourself embarking on a luxurious vacation or acquiring that breathtaking seven-bedroom mansion you’ve been admiring on Zillow. At some point in our lives, we’ve all likely pondered how we would handle a substantial influx of money magically appearing in our bank accounts. But what if this hypothetical scenario becomes a reality?

Whether it be through a generous stimulus check, a substantial tax refund, a significant work bonus, a fortuitous lottery win, or a triumphant streak at the casino, the temptation to swiftly spend such funds becomes incredibly enticing. Suddenly, that expensive sports car or the idyllic overwater bungalow in Bora Bora starts to appear within grasp.

However, it is crucial to pause and reflect for a moment. While spending every penny of your newfound wealth in one fell swoop may provide momentary euphoria, strategically planning for the utilization of this windfall has the potential to transform it into lasting prosperity. Therefore, allow me to share a few valuable tips on how to effectively allocate a financial windfall if you should ever find yourself in this fortunate position.

windfall money

What is a Windfall?

Windfall refers to an unexpected, large, and often sudden financial gain or profit that occurs as the result of an unlikely occurrence rather than planned or regular income streams. Here are two examples of windfalls:

  • Winning big in a lottery or game of chance can be seen as an unexpected windfall that provides sudden wealth gains that were unexpected by its winner. Regardless of the small price of a lottery ticket, if it results in a big jackpot, it’s considered a windfall.
  • Receiving an inheritance can be considered a welcome surprise. Receiving assets like money, property, and investments from a deceased relative can significantly improve one’s financial status and bring unexpected changes that can help one improve their finances unexpectedly.

5 things to do with your windfall

Pay down your debt

If you find yourself burdened with debt, a sudden windfall presents an excellent opportunity to alleviate a significant portion of it. To effectively determine which debts should take priority for repayment, it is crucial to assess the interest rates associated with each loan. Start by identifying the loan with the highest interest rate, whether it pertains to credit cards, home loans, or auto loans. By focusing your attention on this particular debt, you can lay the foundation for substantial progress.

While it may not be feasible to entirely eliminate the outstanding debt with your newfound financial resources, allocating a substantial portion of the windfall towards this loan will yield remarkable strides in swiftly reducing your debt load. Additionally, this approach enables you to potentially shorten the repayment terms, offering a quicker path to financial freedom.

Create an emergency fund

An ingenious approach to maximizing your windfall is to establish a safeguard reserve. This unique fund acts as a financial cushion, allowing you to gracefully navigate unforeseen circumstances like exorbitant medical bills, unexpected vehicle repairs, or sudden unemployment. Cultivating an emergency fund is of utmost importance as it shields you from resorting to debt in times of crisis.

The optimal emergency fund should amass a sufficient sum capable of covering your living expenses for a substantial period, ideally ranging from three to six months. To amplify your financial gains, consider housing your emergency fund in a high-yield savings account or a dynamic money market account. These avenues not only offer appreciable interest rates but also ensure quick and hassle-free accessibility to your funds when required.

Invest in the stock market

For those new to the realm of investing, micro-investing proves to be a promising choice. Utilizing user-friendly applications such as Acorns, Stash, Robinhood, and Betterment, you can effortlessly commence your investment journey with minimal effort.

These apps, including Betterment, offer the added advantage of providing access to financial experts who can offer valuable insights regarding your investment strategy. However, should you prefer a more personalized approach, seeking out the services of a fee-only financial planner within your locality is an astute decision. Fee-only financial planners operate under a compensation structure that revolves around you, the client, rather than earning commissions based on the financial products they promote. Consequently, their commitment lies in prioritizing your best interests.

Collaborating with a financial planner grants you the opportunity to discern the investments that align with your budgetary constraints and long-term objectives, ensuring a well-rounded financial strategy.

Start your own business

Having access to an unexpected windfall of money can give you the perfect chance to turn your entrepreneurial dreams into a reality. Begin by taking stock of what interests and skills are most relevant to you – consider which hobbies or expertise lie closest to where your strengths lie, then select an idea that supports them both to increase chances of success.

Once you have an idea for a business venture in mind, conduct detailed market research. Examine demand for your product or service among target audiences as well as competitors; this research can help validate your idea and make informed decisions.

Next step is to construct an in-depth business plan outlining your goals, target market, competition analysis, marketing strategies, financial projections and more. A thorough plan will serve as the roadmap for your venture while simultaneously attracting investors or partners who could help fund it. You may want to get professional help to make sure you do things the right way.

Buy yourself something small

We understand the irresistible temptation to splurge your newfound funds on that coveted item from your long-standing Wishlist, such as that state-of-the-art entertainment system you’ve diligently saved for. However, exercise caution before hastily clicking the “Buy Now” button. While it is advisable to continue saving for that significant purchase by allocating funds to a dedicated “dream fund,” it is essential not to impose overly strict limitations on yourself. Instead, allow yourself to experience a touch of indulgence with this windfall. Consider spending a small fraction (around 5-10%) of the newfound wealth on something truly delightful for your personal enjoyment. By treating yourself in moderation, you infuse a sense of gratification into the act of saving, making the endeavour even more worthwhile.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment , tax, financial advice or legal opinion. Please consult a qualified financial planner and do your own due diligence before making any investment decision.
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