Making the Most of Your Windfall: A Guide to Smart Financial Choices

Imagine you have had a cash windfall, won a lump sum of money, received an inheritance or finally have access to your retirement savings.

What happens next?

In an ideal scenario, you would have had time to contemplate retirement planning and how you intend to navigate it. However, for many of us, life is busy, making it challenging to fully consider our next chapter.

It can feel overwhelming. Many of us have probably fantasised about how we'd spend a large sum of money, but imagining it is one thing and actually managing real money is another challenge altogether.

So it's important to think about your financial plan. 

First, take a breath 

Before doing anything, the first step should always be to take a moment to understand the full extent of this new financial situation you're in. It's advisable to resist the urge to make any hasty decisions, as the sudden increase in wealth can lead to impulsive spending.

Deal with your financial priorities

In most cases there may be personal debt to consider, the easiest approach is to pay off any high-interest debt, personal loans, credit card debt and so on. 

Then you can consider the mortgage, but you will want to understand any costs of repaying, also whether it may be worth continuing with the mortgage payment for now and assessing all the options going forward.

It’s also essential to consider an emergency fund so you have a safety net for any unforeseen circumstances, and you don’t have to dip into your long-term investments or take on more debt.

Consider investing

Investing is another critical aspect to consider.

Investing large sums of money carries inherent risks, and whether this aligns with your risk tolerance determines its potential outcome as either advantageous or detrimental.

It might be worth considering having a diversified portfolio. This means investing in a wide range of different asset classes. Making the strategic decision to invest in different types of assets, can help lower your level of risk and maximise returns over time.

Seeking professional advice on your investment decision from a financial advisor who understands your personal goals, financial goals and risk tolerance is highly recommended. They can assist in creating a tailored investment strategy that aligns with your long-term objectives and can also help with the steps above.

Plan for the future 

Include thinking about the future in your financial planning. 

Setting up retirement accounts or education funds for children (or grandchildren) can ensure that the financial windfall has a lasting impact.

Additionally, consider contributing to charitable causes that are meaningful to you, this can provide personal fulfilment and in some cases tax benefits.

In conclusion 

As you can see, a windfall of money requires a thought-out financial plan and disciplined decision-making.

By taking strategic steps and seeking professional guidance that offers personalised financial advice, one can effectively manage and make informed decisions about their newfound wealth to secure a prosperous financial future.

How we can help

We at Collinson Wealth Partners would be happy to share our knowledge and experience in this area, help you step through the considerations and come up with a plan you can implement to make the most of your options.

The information contained in this publication is general in nature and is not intended to be personalised financial advice. Before making any financial decisions, you should consult a professional financial adviser.