There are many reasons why you might receive a windfall of money at some point throughout your life.

You can expect or predict when you might receive a lump sum that’s slightly out of the ordinary, perhaps from a work bonus or even selling your business.

Meanwhile, there are other unexpected windfalls, many of which come in the most unfortunate circumstances, such as from a divorce or the death of a loved one.

Yet, no matter the provenance of your newfound wealth, it’s still crucial to carefully manage the money you receive. Otherwise, you could end up squandering it or making less sensible decisions, rather than ones that are in line with your wider financial plan and goals for the future.

So, read on to find out how you can carefully manage a windfall whenever it comes, and how taking financial advice can help you make the most sensible decisions for you.

Take a breath and slow down

First and foremost, it’s worth slowing down and taking a breath whenever you receive a windfall.

You may well know how exciting it can be to receive money that’s separate from your usual income, and it can be tempting to immediately start making decisions with it.

Indeed, you might already have ideas of exactly how you would want to spend a windfall if and when you receive one.

But, this is exactly why it’s important to take a beat first. Otherwise, you might end up making decisions that you later come to regret.

This is especially the case if the money you’ve received has come from one of those more unfortunate examples, such as divorce or bereavement. At times like these, you may want to act quickly because it can feel like this will relieve some of the stress of the situation.

Yet, you may be better served by taking your time and being sure that you’re making choices you’ll be happy with both in the moment and later down the line. So, unless the circumstances mean you need to respond promptly, try to slow down and be patient when you receive money like this.

Try to act rationally, rather than emotionally

As well as acting quickly, it can also be easy to let your emotions take over when you receive a windfall. In turn, this could see you make less rational decisions with this wealth.

This can go for both the fortunate and unfortunate kinds of windfalls. For example, if you receive a work bonus, you might be excited to have this additional money to hand, and want to spend it on a luxury purchase you ordinarily would consider too decadent to spend your income on.

On the other hand, if you’ve inherited money because a close loved one such as a parent has died, the feeling can be a lot more sombre. This will already be a difficult, emotional time, and it can be incredibly hard to make sensible, long-term choices because of how you feel.

For example, it can be easy to still see that wealth as belonging to that person, and so the temptation can be to hold on to it, even if there might be better uses you could make of it.

Whichever type of windfall this is, it’s important not to let your emotions take over. Try to assess your choices as you go and really think about whether you’re making them because they’re the most sensible course of action, or if they are emotionally charged.

It can be difficult to self-examine objectively like this, so ask someone you trust what they think if you’re unsure whether a decision is based on logic or emotion.

Look at how you can make use of the money to further your progress towards your goals

Whenever you receive a windfall, it often presents an opportunity to progress towards your future goals. You could think about contributing some of it to your pension, saving and investing it more generally, or paying off debts such as a mortgage – whatever would best support your wider financial plan.

Of course, this is not to say that you shouldn’t enjoy some of your windfall if you want to. You might understandably feel that you want to make the most of it in the moment, perhaps renovating your home or treating your family to a holiday.

The key is in balance – first, consider whether putting some of it aside for your future could be beneficial for achieving your goals.

Once you’ve done this, you can then freely use the rest on whatever else you’d like, safe in the knowledge that you’re making a sensible choice because you’ve already prioritised your financial plan.

This can help you have the best of both worlds, enjoying some of this wealth now while also setting some of it aside for the bigger picture.

A financial adviser can help you make choices in line with your wider plan

As you can see, putting a windfall to work in the right way can be challenging, with various potential pitfalls to avoid.

This is where a financial planner can help. By working with an experienced professional, you can be sure that you’re making the most sensible decisions when you receive a windfall, expected or otherwise.

Most importantly, your planner will make recommendations and suggestions based on your goals for the future. That way, you’ll be able to put that wealth to work towards living the lifestyle you want.

If you’d like support managing a windfall or organising your finances in general, please do get in touch with us at Cordiner Wealth.

Email or call 0113 262 1242 to find out more today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.