What to do with a big windfall

Winning Lotto, receiving an unexpected inheritance or insurance payout, or some other windfall could be a life-changing event, allowing you to entrench your financial security and achieve long-term goals. 

However, it’s crucial to approach newfound wealth with careful planning and consideration. 

Here’s a guide on how to navigate the exciting yet challenging journey of managing a big windfall.

• Inheritance: Receiving an inheritance can be both emotionally and financially impactful. It’s important to respect the legacy of the person who left you the funds by using them wisely. 

• Capital gain: Selling a property, especially in a booming market, can result in a substantial capital gain. This influx of cash requires thoughtful management to maximise its benefits. 

• Insurance payouts: These can come from various types of insurance, including life, health, or property. They are often intended to help you recover from a significant loss, so prudent use is essential. 

• Lotto wins: First up, the odds are stacked against you in games of chance, such as Lotto, Keno, and pokies. Always gamble responsibly. In the unlikely event that you do have a big win, it may provide an enormous financial boost. However, this sudden wealth can be overwhelming without proper planning. 

When you first receive a windfall, it’s tempting to make quick decisions or splurge on luxury items. 

Taking the time to step back and plan is crucial. One safe option for parking your money while you decide is a term deposit.

A term deposit is a fixed-term investment where your money is locked away for a set period, typically ranging from a few months to several years. Here’s why it can be advantageous: 

• Safety and security: Term deposits with a reputable bank are considered low-risk investments since they offer a guaranteed return. 

• Fixed interest rate: You’ll know exactly how much interest you’ll earn, providing financial certainty. 

• Encourages discipline: By locking your money away, you avoid the temptation to spend it impulsively. 

• Short-term solution: It buys you time to consult with financial advisors and plan your long-term strategy. 

If your windfall is substantial, professional advice from a registered financial planner is essential. A financial advisor can help you navigate tax implications, investment opportunities, and wealth management strategies tailored to your unique circumstances. 

Take a comprehensive look at your financial situation before making significant decisions. Consider the following: 

• Debts and loans: Paying off high-interest debts, such as credit cards or personal loans, can provide immediate financial relief and improve your overall financial health. 

• Mortgages: Reducing or paying off your mortgage can significantly decrease your monthly expenses and increase your financial security. 

• Retirement plans: Contributing to your superannuation can enhance your retirement savings, providing long-term benefits. 

If you’re receiving a pension, a large windfall can affect your eligibility and the amount you receive. Australia’s pension system includes means testing, which considers your income and assets. 

Consult with a financial advisor or Centrelink to understand how your windfall might affect your pension and explore strategies to minimise any negative impact. 

By taking a measured approach, using safe investment options like term deposits, seeking professional advice, and considering your overall financial situation, you can make the most of this fortunate event. 

Proper planning will ensure that your windfall enhances your financial wellbeing and helps you achieve your long-term goals.