Tips for Managing a Windfall

It’s a hard job, but someone must do it. You came into some surprise cash and you don’t know what to do with it. We all dream of having such a problem, it happens, but not often. And when it does happen, people often make a huge mess of it. Be careful what you wish for, they say. But there is no reason to make a mess out of a good fortune, People with a little self-control and some financial understanding turn windfalls into huge fortunes. It is all a matter of priorities and diversification. Dividing the money into funds before you spend it all, is the first thing you should do. Here’s where your money should go.

  • Taxes: Before you do anything at all, you are going to need some solid tax advice. What you owe is going to depend on where it came from and where you live. You won’t know how much money you have, until you know the government’s take.
  • Mutual Funds and Investment Managers: You should take a portion of your money and put it to work. Get your money involved and give it a chance to grow. There are endless choices, but do your research and find a company that communicates well and has a good track record. If you want to keep your money working close to home, you might consider something like Australian managed funds. The goal is to put your capital into a source of income without losing the seed.
  • Property: Investing in property is one of the safest ways to park your money, Real estate usually only goes up, and if you have a good advisor, you can avoid some of the pitfalls. Investing in properties for rental can provide you with a consistent source of income, as well as profiting from the increased value of your assets
  • Family, Friends, and Charity: This is obviously a highly personal decision. We all have different relationships and causes to support. Investing in charities can be favourable to your tax situation, but giving it away is something that only you can put a value on. It is important to recognise those you appreciate when the opportunity comes.
  • You: Why should you come last? Well, this is the part of the windfall that people have the most trouble navigating. Once you get a taste for spending, you might have trouble knowing when to stop. There are endless examples of this, even celebrities fall prey to this dilemma. If you can’t resist being a millionaire for a day, take a small amount of the windfall and go nuts, get it out of your system. But set a hard limit. For the rest of the money allocated to you. Take your time, make a list of priorities, and sleep on it. Remember, the money you invested, that’s yours too.

Managing a windfall is quite a test. Most people fail because they don’t see their good fortune as the opportunity it is. A windfall has the potential to be life changing if you manage it properly. Put a large percentage into diversified investments and spend as little as you can on consumables.