It’s been heard a lot about how people receiving a sudden windfall like winning a lottery or receiving a substantial inheritance go broke (some worse than broke by bearing a mountain of debts) in just a few short years.
According to T. Harv Eker, the best-selling author of ‘Secrets of the Millionaire Mind’, the reason to that is because these people’s financial blueprints are not set for success.
If they’re poor on the inside, they’ll never be rich on the outside. That means they will only mismanage their money well; they will never manage their money well. And managing your money well is a critical aspect to becoming rich or financially free.
So, if you receive a sudden windfall, it may pose as problem, albeit a nice problem. How you handle this problem will either lead you to a more comfortable life, or a road to perdition.
There are two rules you can abide by if you want to head down the path to a life of financial abundance instead of financial ruin.
“Rule No. 1: Never lose money. Rule No 2: Never forget Rule No. 1” – Warren Buffett
Although the legendary investor was referring to stock investing, it is perfectly applicable in the case of a windfall.
Here are a few more tips you can follow:
1. Do Nothing
This is the best way to ensure you don’t lose your money. Unless you’re suffering from a critical illness, facing a business failure or bankruptcy, you should refrain from spending the money for at least six months.
It is understandable that with the big money, it is extremely tempting to buy a new house, overhaul your apartment, or walk into the BMW showroom to order a metallic silver 6 Series with red leather upholstery.
But don’t. It’s not the time yet. For the first six months after you got the money, don’t alter your lifestyle in anyway dramatic to allow yourself time to adjust to it.
Remember, the first rule is not to lose your money. So don’t think of spending it; don’t think of investing it. Just park it in a savings or cheque account and sit back.
2. Fantasise
While it’s not advisable to spend your money in the initial period, you’re allowed to fantasise about what you can do with the money.
Nevertheless, be very careful not to let your wild imagination overwhelm you into taking stupid actions.
And don’t just fantasise about all the luxuries in the world. Also think about how you can put the money to good use that can bring positive long-lasting effects such as starting the business you’ve always dreamt about, setting up an emergency fund, upgrade your insurance coverage, set up an education fund for your kids, and so on.
3. Seek Advice
If you’re no good in handling money, it would be good that you seek advice from professionals such as your financial adviser to help you.
But still, the best person to help you would be yourself. As mentioned earlier, if you’re poor on the inside, you’ll never be rich on the outside.
The fact is, nobody will care about your money as much as you do. And financial advisers or money managers will always have their own agenda in helping you. They need to eat and enjoy life too, you know?
To help yourself in handling the sudden big money, the most fundamental thing is to get your financial blueprint right.
Go read up on how to develop a millionaire mindset or attend workshops that teach you how to handle your money. You can easily afford them now.
Having said that, you can start with reading two of my earlier posts, ‘Developing A Millionaire Mindset’ and ‘Managing Your Money The Rich Way’.
4. Draw Up a Plan
This is a step further from thinking about how to put your money to good use. Thinking without writing it down is of little use.
First thing first should be to pay off any consumer debt such as credit card debts. If possible, pay off a portion of your housing loan to save on some interest expense.
Next, map out all the funds you need such as retirement fund, emergency fund, children’s education fund, business start-up fund, etc.
5. Blow It
Wait. I don’t mean blowing everything. After all that I’ve said, you wouldn’t have thought so, would you?
When there is a sudden windfall, it is only understandable and reasonable to pamper yourself and your family with some of the money.
However, don’t dive right into it like your girlfriend at her favourite fashion boutique’s clearance sale – sheer madness. I’m sorry ladies, but you know what I mean…
Start slowly and moderately. Before you go on a world tour, just take a trip to a country which you’ve always longed to go. The idea here is to prevent you from getting out of hands.
6. Contribute
It is everybody’s duty and responsibility to give back to the society what we’ve gained from it. It is always a joy to know that we’re fortunate enough to be on the giving end rather than the receiving end. Besides, there’s the added incentive of tax breaks. 
Any amount of contribution will make a difference to the people receiving it and you will also benefit in the good feelings you’ll experience.
7. Learn to Say No
One of the things that’s going to happen for sure is there will be a meteoric rise in the number of phone calls and visits by friends, (ex) colleagues and relatives (some even unknown or unmet).
Yes, it may be tough to turn down requests – as always – but it is absolutely necessary to do so.
You have to let everyone know that your windfall doesn’t necessary turn you into an easy target, and that your sudden rise to the high status does not oblige you to provide any financial aide to anybody.
Any help involving money will almost always spoil a relationship. Of course that’s not the point. This kind of relationship is not worth keeping anyway.
Offering favours is always better than offering money. I remember that I once asked a colleague of mine jokingly, “I think I might need to seek financial help from you.”
You know what her reply was? She said, “I don’t think offering financial help is a good idea. But if you’re so broke that you can’t feed yourself, I’ll buy you food.”
I was actually very touched upon hearing her offer. I always knew that lending someone money is never a good idea because I’d had a number of bad experiences myself. My colleague thought I was for real so I understood where she’s coming from.
More importantly, she didn’t turn me down plainly. She did offer to help, albeit in a more unconventional way. And she didn’t say it to brush me off. I could feel her sincerity!
Sure there might be some exceptional cases like there’s this friend who’d always paid back promptly or a family member whom you’d have to help no matter what.
A few exceptional cases are fine. Just refrain from turning too soft. It’s not going to do you any good.
Cheers~
P.S. Did you ever have a windfall? If yes, how did you spend it? Let us hear your story in the comment section below.
If you enjoyed this article please vote for it on StumbleUpon, bookmark it on del.icio.us and Digg it. I’d appreciate it!
You can also have my latest articles sent to your email by subscribing to my blog via my RSS feed so that you won’t miss out on any of my articles.
Related Posts You Should Read
Leave Your Comment on “How To Spend A Windfall Wisely”
Leave a Comment