What to Do With a Financial Windfall
Even if you only got a little bit lucky, it still pays to have a strategy.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

It’s a cliché, but it’s also true: Every cloud really does have a silver lining. That was hammered home for me after I was recently rear-ended in a car accident. I wasn’t hurt, but it was a frightening experience, and the amount of paperwork required in its aftermath was sometimes overwhelming.
After I filed my claim and it was processed, my auto insurer deemed my car a total loss. But before I had time to mourn the fact that I was carless—again—the silver lining emerged: I was refunded part of my auto insurance premium (opens in new tab) for the month, and I was cut a check for $11,000, which was what my auto insurance company concluded my 2014 Chevy Cruze was worth. While the settlement wasn’t a Powerball, “quit my job” amount, it did give me pause, because I had to decide what to do with it.
Back to Basics
I knew I didn’t want to run out and lock myself into an auto loan for another car (opens in new tab). With prices for new and used vehicles still crazy high, adding a car payment didn’t sit well with me—especially since my old car was paid off. Plus, the Washington, D.C. metro area has a public transit system that I had used consistently before I had a car. So I did what I’ve been meaning to do for a while: I added money to my emergency fund.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You generally want to have at least three to six months’ worth of expenses stashed in a dedicated savings account in case of a job loss, medical emergency or costly car-repair bill. (Here's more on where to find emergency cash (opens in new tab).) However, with inflation running at about 9%, you should stash more in the account.
Bulking up your savings by about 10% or more will give you more protection in the event of an emergency, says Samantha Gorelick, a certified financial planner with Brunch & Budget (opens in new tab), a financial planning firm. You need to be prepared to cover your expenses at elevated prices if inflation continues, she says.
If you don’t have an emergency fund, an unexpected windfall is a good way to start one. Put your money to work by parking it an interest-bearing savings account. Rates are climbing for both savings and money market accounts at many financial institutions. (For current rates on top-yielding accounts, go to depositaccounts.com (opens in new tab).)
Another personal finance basic to consider: Pay down any credit card debt (opens in new tab) you have. For those carrying a balance, using even a modest windfall to pay it down could put you on a better financial footing and potentially increase your credit score.
In my case, although my revolving balance is typically between $1,000 and $3,000 and my credit score (opens in new tab) gives me bragging rights, paying off some of that debt alleviated some financial anxiety. If you have balances on multiple credit cards, pay off the card with the highest interest rate first, and go from there.
If your debt is mostly tied up in student loans, consider using some or all of the money to pay down your loan balance. The moratorium on federal loan repayments has been extended through the end of the year, but it doesn’t include private student loans (opens in new tab). Although the Biden administration is forgiving a portion of federal student loans (opens in new tab), depending on the size of your loan you could still need to make repayments when the latest moratorium ends.
After you’ve taken care of your adulting needs—or if your finances were already in stellar shape—you could use your windfall to fund something fun, such as an excursion you’ve postponed because of the pandemic. If you’ve been dreaming of a European vacation, this is a great time to go, because the weak euro has offset the ordinarily high cost of traveling there.
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. She's now a staff writer for the magazine and helps produce content for Kiplinger.com. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher.
-
-
Fed Raises Interest Rates Yet Again: What the Experts Are Saying
Federal Reserve The Fed's quarter-point rate hike was welcomed by the market and market pros, alike.
By Dan Burrows • Published
-
Stock Market Today: Stocks Swing Higher After Powell Presser
The Fed raised rates by 0.25%, as expected, and Powell promised to "stay the course until the job is done."
By Karee Venema • Published
-
Best Cash Back Credit Cards February 2023
Smart Buying Looking for the credit card that pays the most cash back? These lenders may pay hundreds of dollars, with minimum hassle.
By Lisa Gerstner • Last updated
-
I-Bond Rate Is 6.89% for Next Six Months
Investing for Income If you missed out on the opportunity to buy I-bonds at their recent high, don’t despair. The new rate is still good, and even has a little sweetener built in.
By David Muhlbaum • Last updated
-
What Are I-Bonds?
savings bonds Inflation has made Series I savings bonds enormously popular with risk-averse investors. How do they work?
By Lisa Gerstner • Last updated
-
Your Guide to Open Enrollment 2023
Employee Benefits Health care costs continue to climb, but subsidies will make some plans more affordable.
By Rivan V. Stinson • Published
-
Watch Out for Flood-Damaged Cars from Hurricane Ian
Buying & Leasing a Car In the wake of Hurricane Ian, more flood-damaged cars may hit the market. Car prices may rise further because of increased demand as well.
By Bob Niedt • Last updated
-
What You Need to Know About Life Insurance Settlements
life insurance If your life insurance payments don’t seem worth it anymore, consider these options for keeping the value.
By David Rodeck • Published
-
Best Travel Rewards Credit Cards February 2023
credit cards Business road warriors and leisure travelers can use travel rewards credit cards to turn miles logged into other things — including more travel.
By Lisa Gerstner • Last updated
-
What Is APR?
credit & debt Even for those who pay off their credit card balances every month, knowing your APR is part of keeping good credit habits.
By Rivan V. Stinson • Published