Whether it's a lottery winning, an inheritance or a large bonus at work, any sort of big, unexpected windfall of money can be exciting and overwhelming. The recipient of a large sum of money is tasked with the challenge of managing it, and that's not easy.
Some recipients splurge their windfall and lose it within days. Others don't know how to deal with the many requests for a share, and some simply let the money sit in their bank account because they don't know what to do with it.
Here are 5 ways to manage an unexpected sum of money if ever you're lucky enough to receive one:
Keeping it Confidential
Refraining from telling too many people about an unexpected windfall can save you from being drowned by outside noise. If you're lucky enough to win a large lottery prize, public disclosure of your identity may be required. But if you can limit the number of people who know you've come into money, it's easier to keep others at bay in order to make the right decisions based on your needs and wants.
Consulting an Advisor
Depending on the amount of money, seeking legal and financial advice can help organize the sum and understand the parameters around it. Should you invest the money? Are there rules and regulations around this kind of windfall? Best practices can be established by consulting professionals. Ensure you're dealing with someone reputable with proper credentials.
Creating a Budget
A budget or a monthly allowance based on the amount of money, and what you plan to do with it, is a good way to avoid spending it too fast. Creating a budget can help you integrate the money into your everyday spending, so instead of getting too excited and spending it on a whim, you'll be more inclined to use it towards long-term goals, like paying down a mortgage or debt.
Taking a Breather
Similar to creating a budget, taking a 30-day or 60-day breather after receiving the money is a good way to avoid impulsive splurging. The extra time will allow you to reflect on what you really want to spend it on. Whether it's using it for a much-needed vacation, paying down debts, donating to charity or investing, the money won't go anywhere for that initial month or two. You'll have a chance to cool off after the excitement of receiving the money, which can help you act more rationally in the long run.
Paying Off Debt First
Debt can be a huge source of stress. People accumulate debt from a variety of sources, from school tuition and credit cards to cars and loans. An unexpected windfall can clear your debt entirely, or perhaps just a large chunk of it, so it's a good idea to use your winnings towards paying off debt before doing any other spending. It's a rational first task for winning money, and sets the tone for making rational decisions with the remainder of the sum.
Ultimately, someone who receives an unexpected windfall of money can benefit from being cautious and calculated instead of impulsive with their winnings.
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