Coming into a large sum of money unexpectedly—whether from a lottery win, inheritance, property sale, or a significant pay rise—can be life-changing. Recently, a $100 million winner in a NSW Oz Lotto draw made headlines, highlighting the excitement and challenges of managing such a windfall. Without a clear plan, mismanagement is a real risk – too many people who find themselves with a significant and unexpected injection of cash make impulsive decisions that leave them in a worse financial position than before – but this need not be the case. Here’s how to make smart, balanced choices to secure your financial future while still enjoying the benefits of your newfound wealth.
Take a Step Back and Make a Plan
Before making any major decisions, take the time to assess your current financial situation and future goals. Ask yourself key questions:
- What are your immediate financial needs?
- What long-term security do you want to create?
- Do you have philanthropic ambitions or lifestyle goals?
- How will this windfall impact your current and future obligations?
- What financial habits have served you well, and which need improvement?
Write down a prioritised list of needs, wants, and goals. Categorise them into short-term, medium-term, and long-term priorities. Consider breaking down your financial planning into these key areas:
Short-Term:
- Paying off outstanding debts or liabilities
- Creating an emergency savings buffer
- Taking time to understand all your options before making big purchases
Medium-Term:
- Investing in assets that will provide future financial security
- Establishing a strategy for tax minimisation and wealth protection
- Assessing whether lifestyle changes, such as early retirement or reduced working hours, align with your personal and financial goals
Long-Term:
- Creating a legacy through estate planning
- Exploring philanthropic opportunities, such as establishing a charitable trust
- Maintaining financial independence while still enjoying the benefits of your windfall
Resist the temptation to spend impulsively on luxury items that offer short-term gratification but little long-term value. Taking a thoughtful approach to planning ensures that your financial windfall is used effectively to secure your future while still allowing you to enjoy the rewards.
Tax Planning
Taxation on windfalls varies depending on the source of the funds. While Australian lottery winnings are tax-free, earnings from investments, property, or inheritance may be subject to taxation. Consulting a tax professional can help structure your wealth efficiently through options such as:
- Trusts and asset protection structures
- Superannuation contributions
- Strategic gifting and charitable donations
Poor tax planning can lead to unnecessary financial losses, so it’s crucial to engage a tax professional early.
Invest your Windfall for the Future
One of the best ways to make your windfall last is to invest wisely. Whether it’s in shares, property, managed funds, or business ventures, investments can provide long-term financial security. Key considerations include:
- Diversification: Spreading investments across different asset classes reduces risk.
- Risk Tolerance: Understanding your comfort level with market fluctuations.
- Income Generation: Investing in assets that provide a steady income stream.
Your financial adviser can help design an investment strategy that aligns with your personal risk profile and long-term financial goals.
Enjoy Your Windfall Responsibly
A windfall isn’t just about securing your future—it’s also an opportunity to enjoy life and give back. Consider allocating a portion of your funds for:
- Experiences and lifestyle improvements (travel, education, home upgrades)
- Helping loved ones (gifting, supporting children’s education, mortgage assistance)
- Philanthropy (donating to charities, setting up a foundation)
Striking a balance between enjoyment and long-term security is key to making the most of your windfall.
Seek Professional Financial Advice
This is the biggest and most important step you can make – even if you have good money management skills, receiving a windfall introduces complex financial considerations. While well-intentioned, advice from friends and family can sometimes lead to financial mistakes. A professional adviser tailors advice to your unique circumstances, ensuring you make the best possible financial decisions.
A qualified financial adviser like the team at Priority can help you structure your wealth for long-term growth, minimise risk and optimise tax, balance wealth preservation with lifestyle enjoyment, and ensure your financial plan serves your goals.
Take the Next Step
Receiving a financial windfall is an exciting opportunity, so making the right choices is crucial. At Priority Advisory Group, our Personal & Family Wealth team can help you navigate this financial milestone with confidence. Contact us today to start making the most of your wealth, on 1300 349 188 or via our website at priorityag.com.au/contact/.