Did You Get a Cash Windfall? The Case for Doing Nothing
An inheritance or lottery win can be a stroke of good fortune, but if you mismanage your funds, you could end up worse off than before your windfall.


Windfalls of money have the power to change lives. Whether from the sale of a valuable asset, an inheritance or even a winning lottery ticket, sudden large infusions of cash can bring a family out of poverty and secure a solid financial future for themselves and their heirs. Or, they can be squandered and leave the recipient in a worse situation than before the windfall.
When we see a news story on the latest billion-dollar lottery winner, we often daydream. What would we do with such good fortune? Often, yachts, private jets and mansions in exotic locations come to mind, but we also know that’s a formula for going broke! Such things are fun to dream about, but it takes careful planning and money management to make those things reality without causing lasting harm to our finances.
Beware of people with their hands out
A less obvious hazard is the outpouring of people — friends, relatives and businesses — who will come out of the woodwork, looking for a piece of your windfall. It’s not at all uncommon, upon receiving a large inheritance or life insurance death benefit, to start getting calls asking you to make decisions about how to use that money.
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Particularly common is the call from an investment brokerage saying, “You just received a large sum of money, and you should invest it with us!” This is a less noticeable hazard than a call from the Bentley dealership offering you a test drive: On the surface, it seems a very wise financial move to invest your money rather than spend it.
However, it’s actually a huge red flag. Sales calls like that come from people who have no idea what your financial situation is and have no insight into your short-and-long-term goals. They aren’t thinking about what you wish to accomplish — they’re only thinking about getting that money under their investment management. Regardless of circumstance, if someone telling you what you should do with your money hasn’t bothered to learn anything about you, run as fast as you can in the other direction.
Wait for at least a month before making decisions
This underscores the importance of making sure your financial adviser has your best interests at heart. Fiduciary advisers are obligated to give advice based on what is in your best interest. When a client suddenly becomes flush with a large amount of money, I advise them to note how much they’re getting, deposit it somewhere safe and then … do nothing for at least a month. Don’t invest it, give it to someone else to manage or make big luxury purchases.
In his book Thinking, Fast and Slow, author Daniel Kahneman points out that people tend to overestimate the good while underestimating the bad. Applied to investing, this means we are prone to seeing investments as less risky, and more potentially lucrative, than they are. Under such assumptions, deciding too quickly what to do with your windfall could see it evaporate in a whirlwind of poorly chosen investments.
That money isn’t going anywhere. Instead of investing or spending it, start the process of identifying what you want that money to accomplish for you. Do you need a down payment for your first house, a college fund for your children or perhaps to shore up your retirement accounts? Carefully consider your goals, then write them down and consider them again.
A financial adviser should have your best interests in mind
A good financial planner will take you through that process to determine the best strategy for your specific financial situation and goals. That’s why it’s important to work with a financial adviser who has your best interests in mind when deciding how to handle a sudden cash windfall.
Watch for warning signs that the person advising you may be thinking about their best interests rather than yours, and if you can, work with an adviser who is a fiduciary, so you know they’re putting your outcome above theirs.
Related Content
- I’ve Inherited a Lot of Money. Now What?
- Three Essential Strategies for Managing Your Inheritance
- Advisory Annuities Let You Eliminate the Middlemen
- One Way to Secure Your Child’s Inheritance in an Uncertain Tax Future
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As Principal and Director of Financial Planning, Sam Gaeta helps clients identify financial goals and make plan recommendations using the five domains of financial planning — Cash Flow, Investments, Insurance, Taxes and Estate Planning. He is responsible for prioritizing clients' financial objectives and effectively implementing their investment plans and actively monitors the ever-changing nature of clients' financial and investment plans.
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