large sum of money

Handling a Sudden Large Sum of Money

You’ve heard the saying, “A penny saved is a penny earned”? On the other side, “a dollar saved is a dollar lost.” You’ve also heard that money is like water — it always goes downhill. These aphorisms have a grain of truth, but this doesn’t mean you should never save money. However, saving is a habit worth developing since it will make you more productive in the long run. Similarly, it will help you live within your means, even if you’re not making a thousand dollars.  Now, you’ve come into a sudden large sum of money. It may be an inheritance, sweepstakes win, or a legal settlement. As you’re likely thrilled about the money, you probably have some concerns about what to do next.

Here are some tips to help you handle this newfound wealth appropriately and responsibly.

large sum of money

How to Handle a Sudden Large Sum of Money

Don’t Make Any Sudden Moves

As this is often a once-in-a-lifetime event, it’s essential to tread carefully. And the first rule of any sudden windfall is: don’t make any sudden moves. 

Whether you come into money due to an inheritance, a business success, the sale of a property or winning the lottery, you need to treat any unexpected infusion of cash as carefully as you would if you were managing your own money.

Of course, if you’re like most people, your initial reaction after receiving a large amount of cash will be excitement and anxiety to spend it. However, the best thing you can do is hold off making any significant decisions until that feeling has passed. 

The next step should be to plan how you will handle all that hefty amount. You can start by making sure it’s in a safe place while still earning some interest. Then, take stock of your current financial situation — what are your assets and liabilities? What are your goals for the future?

Take Stock and Calm Down

It is natural to feel euphoric when you suddenly come into a large sum of money. This is especially true if you never imagined having such funds available. Some people will find it difficult to believe that they are not dreaming. 

To avoid blowing all your money on a whim, take stock of the situation and ensure everything is in order — if it turns out that the money belongs to you, congratulations! 

This may be one of the most exciting times in your life, so now is not the time to get carried away. To keep yourself from making impulsive decisions, try relaxing for a while before doing anything else. 

Ultimately after taking your time, you will be able to make informed decisions.

paying bills

Pay Off All Your Debt

One of the best decisions you can make after earning a considerable amount is to clear all your debts. This especially applies to high-interest debt, credit cards, or high-interest personal loans, including car and student loans.

Once you’ve paid off high-interest debt and created some breathing room for the next step, you can tackle smaller debts one at a time. Start with the easiest to pay — think of them as “painless” payments. Start there if you’re going through a divorce and have some high-interest credit card balances. 

Next, move on to those with smaller balances and more manageable interest rates — think of them as “punctual” payments. Finally, work your way down the list of debts with larger amounts — those are “heavy” payments.

Ultimately, there are different strategies you can use to pay off debt; some experts recommend getting rid of the smallest balances first, while others advise tackling the highest-interest debts first. 

Whichever method works best for you is fine, but make it your top financial priority and eliminate debt. You’ll feel much better about spending your new riches on travel, education, and investments rather than ongoing interest payments when you’re debt-free.

Don’t Quit Your Day Job

One thing you don’t want to do when you receive a sudden large sum of money is making sudden moves. This means you probably shouldn’t quit your job or make extravagant purchases. It’s a good idea to “sleep on it.” 

Think about whether you want to close the accounts the money is in, where you want to keep it and how much of it you might need in the future.

Don’t Rush Into Investing

It’s also wise not to rush into investing without doing some research first. Plenty of scams prey on people who have received large sums of money. Don’t fall for any get-rich-quick schemes that promise “guaranteed” high returns. 

You could get burned by losing your money. Instead, take your time and learn about different investment options that make sense for your financial situation, and then decide where to put your money.

Create an Emergency Fund

An emergency fund isn’t a luxury or an afterthought; it’s necessary. No one can predict the future, and it’s a statistical certainty that you’ll have unexpected expenses, whether a hefty medical bill or something simple like a flat tire. So having some cash on hand makes those situations less stressful.

The key takeaway here is to have enough money in your emergency fund to cover any expense that could come up without dipping into retirement savings. For instance, some people set aside $1,000 as a bare-bones emergency fund — enough to keep you out of credit card debt in most cases — while others aim for three months to six months’ worth of living expenses. 

That might sound like a lot of money, but if you withdraw from your retirement account early because of an emergency, the IRS will hit you with penalties that are 10% or more of what you take out.


If you’re ever lucky enough to win the lottery (or get a posthumous copyright royalty check from your great-grandfather), keep these tips in mind as you plan for your future. If you’re smart about it, you can continue to impact the world using your newly-gained large sum of money instead of leaving a legacy of swiftly-squandered money.

Learn from the past. Acknowledge the present. And plan for the future with expert financial advice from Consumer Protection Group. We’re here to help you move forward, one step at a time.


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