What to do first when you get an unexpected windfall


Some situations are outside of our control. An unexpected job loss. An unexpected medical situation. These are all situations when you really need an emergency fund to get you through.

But perhaps I’m too focused on the negative. While it seems straightforward that we ought to be prepared for unexpectedly negative situations, what about unexpectedly positive ones? Do you need to prepare for those situations as well?

I say you do.

Wheelbarrows of cash

I had this brought home to me in a recent conversation, where a friend of mine described receiving a not insignificant sum of money from an unexpected source. Faced with debt, a paucity of savings, and upcoming life events, the question was raised: “What do I do with that money?

But before I answer this question, let me just say that I wish people would ask this question more often, even when they don’t receive a boatload of cash. A lot of what I talk about on this site is this question, just in a different form. “I just received this paycheck. What do I do with that money?

Wheelbarrows of options

The options are all tempting.

If you have debt, you know what it’s like to feel that kind of long term burden. (I got out of the habit, but am recently relearning it.) When you have a burden, you want to get rid of it. So throwing money at the debt seems like a good option.

If you have no savings, and especially no emergency fund, you know how precarious your situation can feel. One wrong turn, one moment of bad luck, and you could be saddled with a bad situation (and more debt, which makes it worse). Wouldn’t it be nice to pile up some cash and have it be there for a rainy day?

But this is all normal parts of life. What if you have a major life event upcoming? Perhaps a marriage/wedding, a home purchase, or even the impending birth of a child? Don’t you need that money for that?

If you’re at all like me, the whole situation is overwhelming. So many options. And in addition, it’s not an either/or situation; you could split the money up and put it toward a little bit of everything.

What to do?

The wheelbarrow is empty

I say that the very first thing you do when you receive an unexpected windfall is: Nothing at all.

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I mean it. Do nothing. Pretend the money doesn’t exist. Put it in a box (okay, don’t really do that). Don’t even combine it in your savings account; make a new account and put it there.

Why? Because good decisions require time to process, and the unexpected does not give you time to process.

But because the net result of this situation is positive, doing nothing with the outcome does not incur any penalty. In short, there’s no downside to doing nothing.

Taking time to assess your situation and getting “used” to the windfall is the best way to proceed. Once the giddiness has worn off, you will find that you are better able to make an informed decision.

The larger the amount we’re dealing with, the longer I suggest you wait. We may define “large” differently, and that’s fine, but a month of two at the very smallest, six months to a year for life-changing amounts.

How do you know when you’re ready? Because the urgency will be gone. You will have gotten past the point where it’s “burning a hole in your pocket”, which is a sure sign of a bad decision in the making.

Want a counter example? Read about what happens when those rare souls win the lottery.

What’s in your wheelbarrow?

If you’re in this situation, congratulations. You have been blessed. Like all blessings, make sure you treat the situation with the respect that it deserves. And be grateful.

But enough about me. Have you ever had an unexpected windfall? What did you do?


  1. mpinard

    I have, and 9/10s of it is still sitting in the bank, awaiting its fate, a year and a half later. It was a bequeathment (is that a word?) from a close family member, and I’ve been waiting to find something that would honor her memory, rather than just pay bills (although that 1/10 did go to help finance the last Scotland trip). Good advice! (but now what? still feeling as though I’m waiting for permission…)

    • Mike @ Unlikely Radical

      Heh, well you have my permission…so long as you are intentional about what you do with the windfall. Our pious friends talk about tithing (10%), so I think setting at least that amount aside for something to honor her seems appropriate. Depending on the size of the windfall, something about as much for yourself as well (though sounds like you already took care of that part!). After that, some things to think about:

      Do you have a little bit of emergency fund set aside? If so, how is your debt doing? If your debt is done, how about getting a full 6 month emergency fund together for an extra felling of security?

      The point is to cover the basics first and not get too crafty, unless we’re talking large sums, in which case there are more considerations. (Equal parts congrats/condolences, by the way.)

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