Can You Handle a Windfall?

Yacht Marina; Dockyard Creek, Grand Harbour, Malta

Earned or inherited?

“Die and endow a college or a cat.”
–Alexander Pope

I have clients who have received a substantial windfall and they bring me on to help them navigate the blessing that a windfall means and avoid turning it into a curse.

When we read stories of the people who win the lottery only to wind up bankrupt and despondent just a few years later, we think “that could never happen to me!”

Yet, time and again, it happens.

Even though most windfalls do not come from winning the lottery, the psychological reaction to those gains is very similar.

Let’s look at three reactions to windfalls and how to deal with them.

Three Common Reactions to Windfalls and How to Respond to Them


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It’s helpful to remember that when you receive a windfall, no matter the source, it is a stressful situation.

You might think of stress in the negative way – the boss looking over your shoulder, screaming children, or will the Falcons FINALLY win the Super Bowl this year – but stress, or more specifically eustress is the body’s physiological reaction to a change in conditions, whether those conditions are good or bad.

Sometimes the conditions are bad – you receive an inheritance from a beloved relative who just passed away. Sometimes, they’re good – you won the lottery or sold your company. Regardless, the stress causes our bodies to be flooded with hormones like adrenaline and cortisol, which is a good reaction if we’re trying to run away from a woolly mammoth, but not so good if we’re going to sit around and dwell on the situation.

Therefore, we need to come up with a reasoned and intentional plan for how to deal with the windfall and then start implementing the plan so that we can flush those hormones out of our bodies.

Reaction 1: I don’t deserve this money.

This is a fairly common self-defeating inner script that people have, regardless of whether or not they receive a windfall. For whatever reason in their past, they have come to believe that they do not deserve good things.

When someone lives under this mental script, he will act in ways that will defeat his goals. Whether it’s giving up the first time he faces difficulties in life or giving away money that he cannot afford to give, a person who believes he doesn’t deserve money will find a way, usually subconsciously, to ensure that he doesn’t either get or keep money for long.

The most common reaction to a windfall for someone who doesn’t feel like he deserves the money is to give it away. When “friends” and family come out of the woodwork with either their money problems or their great investment ideas, a person who doesn’t believe that he deserves the windfall will be much more likely to avoid exercising critical judgment on those requests for his money, slowly draining the windfall away until, one day, it is gone.

How to fight this self-sabotaging behavior?

According to Sherri Zampelli, the author of By Sheri O. Zampelli Reach Your True Potential: How to Overcome Self-Defeating Behavior, the first step involves identifying the problem itself. Some of the common traits of self-defeating behavior include:

  • Claiming nobody else is in your situation
  • Telling yourself that everything has to be perfect
  • Living in fear
  • Focusing on negatives

Having awareness isn’t enough. According to Zampelli, someone who experiences self-defeating attitudes can:

This article covers using neuro-linguistic programming (NLP) to help you overcome your limiting beliefs.

Reaction 2: Whoo! I DESERVE this money!

This is a common reaction in two groups of people. The first is professional athletes who have worked hard to reach the highest levels of their sport, usually without pay until reaching the pros, and now they get a large signing bonus and paychecks that they could never have previously envisioned. They want the high life, and they want it now. Furthermore, they think that they’ll play forever and don’t think of injuries or slumps.

The second group is the entrepreneur who thinks (almost always incorrectly) that he has the Midas touch and that every startup he joins will turn into an enormously valuable company that will get acquired for substantial valuations. Therefore, he wants to reap the rewards of his hard work and success up to this point and do a complete 180 from the ramen noodle and rice cake lifestyle of the beginning startup years.

How to fight this self-sabotaging behavior?

This reaction is borne from almost the opposite extreme as the person who believes that he does not deserve his windfall, because this person does believe he deserves the windfall. While acknowledging that you deserve the rewards of hard work is good for your character, too much of it leads to believing in the immortality of the wallet.

  • Think of and prepare for the downside. What if you blow your knee out in training camp and can’t play again? What if the market doesn’t believe that the next company produces the best thing since sliced bread? What if the lottery balls don’t come up 1-2-3-4-5-6 for the rest of your life? By forcing yourself to mentally play through the worst case scenarios and figuring out how you’ll deal with them, you will cause yourself to acknowledge that things may not always go exactly how you plan for them to, and you need to be prepared.
  • Take 10% and party like a rock star! Hey, you do deserve the windfall, and you earned it. You should reap some of the benefits and get it out of your system so that the desires aren’t a constant drain on your assets for the rest of your life. Celebrate and use the rest of the money to ensure that you don’t have to win a second time.
  • If you have to, put the money in a spendthrift trust. If you find that you simply cannot overcome temptation with all of that money sitting there, then put it into a spendthrift trust so that someone else makes the decisions on how your money is spent. You’d rather have someone else doling out money to you a bit at a time for the rest of your life than to blow through it like a drunken sailor on shore leave.

Third generation rich often have this reaction as well – the cause of the phrase “shirtsleeves to shirtsleeves.”

Reaction #3: I’m afraid I’ll blow what someone else worked so hard to earn

This is usually the reaction of someone who inherits a substantial amount of money. They saw the previous generation working hard, sacrificing, and making wise decisions. Then, after the older generation passes, they pass on the wealth to the kids. The kids, having seen the parents scrimp, save, and work their fingers to the bone, feel a deep burden to be wise stewards of the money that they have received. They don’t want to blow it or make poor decisions with it, so they make an almost equally unwise decision – they do nothing with it at all.

How to fight this self-sabotaging behavior?

Yes, this is self-sabotaging behavior, because, eventually, inflation will destroy the value of the windfall. It might not happen in your lifetime, but with enough time and mattress-stuffing, it will happen.

  • Make sure you continue working on things that give you a sense of achievement and contributing. Part of the fear of doing something unwise with the money is that you don’t want to be perceived – either by yourself or by others – as being wasteful and benefitting from the hard work of others. One way to counter that perception is to work hard yourself and continue to be a positively contributing member of society.
  • Think of what the person who gave you the money would want you to do. This isn’t just an exercise in trying to act like the other person, but, rather, to think about the intention behind giving you the money in the first place. Unless it was explicitly stated, you probably cannot say with absolute certainty what the other person wanted you to do with the money (which is why, if you plan on passing along a large sum to an inheritor, you want to talk about it before they receive it). However, you can think about what they would have intended for you to do with the money and act accordingly.
  • Find a trusted advisor to guide you through your money decisions. This isn’t the same as handing your money over, either to a manager, or to a spendthrift trust, but, rather, working with someone who can help you understand how to make the money work for you in ways that will help you achieve your goals while taking appropriate but measured risks. Doing this will make you feel better that you are making wise choices with what to do with the money you have received.

A windfall can be a blessing. Without a plan, it can be stressful, and it can turn into a curse. Through careful and intentional action, you can overcome the typical reactions to receiving a windfall and ensure that it remains a blessing for you and your family.

Have you ever received a large sum? What was your reaction? Did these three scenarios cover it, or did you experience something else? Let’s talk about it in the comments below!


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About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

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