If a windfall is going to improve the rest of your life, you need to think carefully about what you want to achieve. You need to prioritise what’s really important and be realistic from the outset, so you can make it count. That way, you can achieve the things you really want with the cash.
How To Use A Windfall To Change Your Life
If you do come into cash, you’ll want to make the most of it. Here are some tips for making the most of that windfall:
1) Don’t Rush Into Anything
Your dreams may change when they actually become a possibility, so take your time to think it through.
2) Prioritise What You Want The Money To Do For You
There may be specific things you want to buy, like a property. Alternatively, you might prefer to change your life, perhaps by cutting back your working hours, or changing careers. Then again, you might want to help family and friends. You can’t necessarily afford to do everything, so do what’s most important to you.
3) Pay Off Debt
Getting rid of debt will make you better off for every month for the rest of your life. Research from Hargreaves Lansdown shows that 20% of people who have received a significant inheritance paid off the mortgage and 10% paid off other debts.
4) Don’t Just Leave It All In The Bank
According to Hargreaves Lansdown, 43% of people who receive a significant inheritance put it into a savings account. It might feel like the most sensible thing, but if you want to make it count, it’s not the way to go.
Savings aren’t getting close to keeping pace with inflation, so over time the spending power of your windfall will gradually be eaten away.
You need your emergency savings safety net in an easy access account and cash you plan to spend over the next five years in savings accounts fixed for the most sensible periods. However, for the rest of your money, over the long term, you need to at least consider stock market-based investments. Research shows that 16% of people have done this with their inheritance.
5) Get Some Help
If you get a windfall it may well be one of the times in life when it’s worth paying for financial advice. You may not be able to achieve your wildest dreams with a windfall, but this should give you the best possible chance of making a real difference to your quality of life.
Make It Count
Sarah Coles, senior personal finance analyst, from Hargreaves Lansdown, says: “Most of us already know how we’d like to spend £1 million. In reality, however, while it’s an incredibly nice problem to have, if we actually won the money, it would prove far more difficult to work out the best way to use it.
“And while it’s incredibly unlikely you’ll have £1 million fall into your lap, it’s worth considering the best thing to do with any windfall – from an inheritance to a bonus payment.”
