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What to Do With a Windfall of Money

Here’s a question we all wish we had: what should I do with an unexpected lump sum of money? If you’re in this boat, you’re not the only one who’s wondering what to do with a windfall.

Recently, one of our customers at YNAB wrote to our support team with this question: She’d received a financial windfall and wanted to know what to do with it.

“We’ve always been paycheck to paycheck before,” she wrote, “so this is just completely out of our comfort zone. I have no idea what to do with all this money.

Now, if you just want to know how to enter your windfall into our budgeting software and budget it, that’s easy: categorize it as Inflow: Ready to Assign and budget away!

How do you decide what to do with a windfall?
How do you decide what to do with a windfall?

But, of course, that’s not what this woman was asking.

What to Do With a Windfall

We’ve all heard about people—lottery winners, most famously—who receive a large amount of money and end up in a much worse off financial situation than when they started. Not only do they blow through all the money and then some, but they often lose family and friends in the process.

So here’s the question I heard: “I want this money to make me happier, not less happy! How do I do that?”

First: Do Nothing

We’re budgeters, not financial advisors, but nearly every financial professional agrees on what to do first when you come into a large sum: absolutely nothing. Park the money in a high yield savings account and let it sit there for at least a few months without touching it. A New York Times article called this marination period the “decision-free zone.”

Why do this? Because new money comes with a false sense of urgency. I need to do something right now! Invest it, redo my kitchen, lend some to my brother…

Any or all of these things might be worthwhile. But it’s impossible to make a smart decision about financial goals while you’re lost in the fog of that new-money feeling.

The other feeling that comes with new money is: This is enough money to do everything I want.

It’s impossible to make a smart decision when you’re lost in the fog of that new-money feeling

It never is, of course. The kitchen renovation doubled in cost (darn you, granite countertops! Darn you, custom cabinets!), you lent some to your brother, cousin, and neighbor while you were at it, and there was a car here or there that got added to the equation.

Okay, so I shouldn’t do anything. What about after I’ve waited?

What to Do With a Windfall…After You’ve Waited

Telling the customer to do nothing—advice she’d probably already heard—didn’t feel very helpful, though. What happens after the money cools off?

I started listing off things people might do—things I might do—with the money in this situation, and found that they fell pretty neatly into two categories: exciting and boring.

Here are some exciting things to do with a windfall:

  • Buy a boat or a new car
  • Make a down payment on a new, bigger house
  • Embark on a major home renovation
  • Take a lavish around-the-world trip

Say a friend asks you, “So what did you do with that inheritance from your grandma?” These are all very interesting answers. They invite followup questions. What kind of kitchen counters are you going for? Did you get the red or black Maserati? How many hulls does your boat have? (I don’t know a whole lot about boats).

Here are some boring things to do with a windfall:

  • Give generously to your favorite charities
  • Pay off student loans, credit card debt, or get off the credit card float
  • Fatten up your non-monthly expenses: set money aside for car repair, home repair, pet care, a new phone, a new laptop, and any other category to make you feel like you’re ready for anything
  • Do an insurance checkup and increase your disability, medical, home, car, or life insurance.
  • Save for retirement
  • Save for your kids’ college education
  • Bulk up your emergency fund so you have more money to live on in the event of job loss


I don’t know about you, but if I told my friends that I maxed out my Roth IRA and increased my emergency fund, they’d be happy for me and then change the subject. There’s nothing exciting about any of this stuff. You don’t have anything concrete to show for it whatsoever.

Boring Money = Happy Life

“Yeah, of course this boring stuff is more responsible,” you’re probably saying, “but will it actually make me happy?

Yes. Yes, it will.

There’s a lot of peace and security attached to this boring stuff. These things are about meeting your personal finance goals, avoiding unpleasant surprises, and preventing financial misery. Being financially prepared for when bad things happen may sound abstract and dull, but it brings a special kind of long term happiness.

Guilt-free fun is built on the foundation of a boring budget.

We hear this from customers all the time: “We got some bad financial news…but thanks to our budget, we’re going to be okay!” They don’t feel defeated. They feel triumphant, because this is the kind of thing that has knocked them down in the past, and this time they’re still standing!

Boring money moves—whether you’re budgeting a windfall, a paycheck, or a $25 check from Grandma—will help you get there.

You Can Still Spend on Fun Things

Of course, this isn’t an argument for being a miser and never doing any of the things on the “exciting” list.

But guilt-free fun is built on the foundation of a boring budget. Lock in the boring stuff and you can afford a boat without worrying about whether it’s going to sink your finances, four hulls and all.

So next time you’re trying to figure out what to do with a windfall, ask yourself, “What’s the most boring thing I could do with this money?” It’s a silly question that can do seriously great things for your life.

If you’ve received a windfall and want to start building a solid financial footing, check out our award-winning budgeting software YNAB. We help people break the paycheck-to-paycheck cycle, pay off debt, and gain total control of their finances.

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