What To Do With An Inheritance or Windfall?

Receiving a lump sum - whether from an inheritance, property sale, business exit, or bonus - can be both a blessing and a challenge. It’s natural to feel a mix of gratitude, responsibility, uncertainty, and even guilt (unfortunately, this is more common than you might think).

So, what should you do when a financial windfall lands in your lap? Whether it’s tens of thousands or life-changing millions, this article is designed to help you approach the situation with clarity, confidence, and purpose.

Step One: Do Nothing

Stop. Take a breath. Give yourself some time before you make any decisions - remember a fool and his money are easily parted and it’s especially easy to be foolish when you’re emotional. Personally, I’ve always said to myself that when I win the lottery (yes, ‘when’), I’ll quietly head off to the mountains and have a good think before spending any of the money. This is also a great idea if you come into an - arguably more likely - inheritance.

Step Two: Take Stock

Step back and take stock of your current financial position. Ask yourself lots of questions. Here’s a non-exhaustive list to help you get started:

What does my current lifestyle cost me?
Is there anything I’d like to change about how I currently live?
How much income do I need each month to feel secure and live a comfortable life?
What debts do I have? Are any high interest?
How would being mortgage free make me feel?
Inversely, how would taking on a larger mortgage feel?
What do I already have saved and invested?
When would I like to stop working?
Do I enjoy my work?
What would I do with my time if money wasn’t an issue?

From here, you can begin to explore how best to use the inheritance/windfall in a way that’s in line with your own needs, wants and aspirations.

Step Three: Address The Practical Things First

Yes, this step is about being sensible; but don’t worry, Step Four is about enjoying yourself! Here’re some of the sensible things to address first with your newfound wealth:

Pay off high-interest debt (an easy win)

Give yourself the gift of entering the next phase of your life unencumbered by high-interest debt. Start by clearing any credit cards, overdrafts, or other high-interest loans. These can be a major drag on your financial situation and wellbeing. Paying them off could save your future-self a fortune in interest.
Build or Boost Your Emergency Fund

Ensure you have - at a bare minimum - at least 3–6 months’ worth of essential living costs set aside in cash. This acts as your financial safety net and reduces the risk of needing to dip into long-term investments in a crisis.
Reduce or Clear Your Mortgage

Depending on your interest rate and wider financial plan, using part of your inheritance/windfall to reduce mortgage debt may be sensible - especially if becoming debt-free aligns with your long-term goals. (There is no right or wrong answer when it comes to clearing a mortgage; as always, it comes down to your own preferences and circumstances. For many years, the ‘spreadsheet answer’ has often been to retain a mortgage; however, that fails to account for the peace of mind some people achieve by being debt free and owning their own home outright).
Invest Sensibly

Once your short-term needs and security are covered, investing with a long-term mindset can help preserve and grow your wealth over time. The right investment approach depends on your goals, planned spends, timeframe, thoughts and feelings about risk and your need to take risk; however, in general, the earlier you invest, the greater the benefit of compounding. Click here to read my beginners guide on investing or here to watch our investing documentary on Youtube.

Step Four: Improve Your Life

So, you’ve done all the right things. You slowed down, took stock and covered off all the practical steps. You can now go into this next step unencumbered by any nagging thoughts, knowing you’ve taken care of the essentials in a sensible and practical manner - which will, hopefully, provide you with some peace of mind. Now it’s time to get to the more exciting aspect of utilising an inheritance or windfall, and that is using it to improve your life in meaningful ways. This isn’t about spending for the sake of it. It’s about using your newfound wealth intentionally to enhance the quality of your life and the lives of those you love. A question for you:

What does your ideal day look like and how can this money be used to help you enjoy more of them?

How you go about improving your life is an incredibly personal venture and will vary dramatically from person to person; however, here’re some ideas to help you brainstorm:

Improve your living situation

Maybe you’ve always dreamed of a home with more space to entertain, a garden for your children/grandchildren to run freely in, or a view that inspires you every morning. Perhaps you'd like to relocate to be closer to family, or move somewhere with a stronger sense of community or slower pace of life. Your environment shapes your experience; so, investing in it can dramatically elevate your everyday wellbeing. Read how James Curry, of rockwealth Lake District, positively changed his life by following his and his wife’s dream of moving from Cheltenham to the Lake District.
Spend it on experiences (buying memories)

Use some of the money to create lasting memories - whether that’s holidays with your family, a dream trip you’ve always talked about, or just more spontaneous weekends away. Financial planning isn’t just about planning for 30 years from now. It’s also about living well today as our tomorrows are not guaranteed.
Spend it on the people you love

A financial windfall can be a powerful way to support the people you care about. That might mean helping your children onto the property ladder, contributing to school or university costs, or enabling your partner to take a career break or start a new venture. The joy of giving - while you're here to see the impact - is something no spreadsheet can quantify. The key with this one is to ensure your own financial security is secured first before spending money on others.
Explore new possibilities

Could this be the moment to transition into part-time work? Launch a passion project? Start that business you’ve always thought about? Take a year out to travel or study? Or perhaps replace stress with more time, more flexibility, more freedom?

Quick Fire: What Not To Do With An Inheritance

Rush into major financial decisions without a plan.
Lend large sums to friends or family without advice.
Speculate on risky investments or “too good to be true” schemes.
Let the money sit idle for years through indecision and, therefore, have its purchasing power eroded by inflation.

Instead, take your time. Speak to a financial planner. Build a strategy. Invest with purpose.

A Note On Guilt And Other Emotions

Money is rarely just money - especially when it comes from someone you loved. It’s entirely natural that receiving an inheritance can bring up complicated emotions.

Don’t be guilty, be grateful

You didn’t ask for this money. It was left to you intentionally. Your loved one wanted you to benefit from it. Spending it thoughtfully and joyfully doesn’t dishonour their memory, it honours it. Would you want your children to feel guilty if you left them a financial legacy? Almost certainly not. So why hold yourself to a different standard?

Money doesn’t equal self-worth

Money has a strange way of acting like a mirror. It can reflect back insecurities, feelings of unworthiness, or fears of judgment from others. You’ll need to be aware of this to avoid depriving yourself and your family of using the money in a meaningful way. Remember, money is just a manmade invention to help ease the transfer of value from one party to another. It has no intrinsic value beyond this use. Any other value you perceive money to have is one you’ve chosen - either consciously or subconsciously - to place upon it. Money cannot judge you or find you wanting. If you think that it is, just know it’s only reflecting back your own feelings. So, ask yourself, are these feelings a help or a hindrance to your ideal future? If they’re a hindrance, then work on taking steps to break your current thinking and aim to gain a new, healthier perspective and relationship with money. You can still deem money to be important without attaching feelings of self-worth or guilt to it.

Final Thoughts: Make It Count

Whether it’s a modest sum or a life-changing amount, the true value of a financial windfall is not in the number - it’s in what it allows you to do. At rockwealth, we help successful professionals, business owners, and families structure their (sometimes unexpected) wealth to help aid their ideal lives - whether that means funding your dream lifestyle, supporting your children, retiring early, or giving back to causes you care about, the key is to plan intentionally. You don’t have to do it alone. We’re here to help.

Want to Know More?

If you’re wondering how to make the most of your windfall or inheritance, we’d love to help you think it through.

Or reach out to us directly for a conversation.

Thanks for reading,

Tom Redmayne
Chartered Financial Planner