Anatomy of a Windfall

In the introduction of The Old Money Book, I talk about the scenario of two people who receive a financial windfall. One person handles the inheritance poorly. The other person handles the inheritance well.

It may surprise you to know that many people, not just the wealthy, are going to receive an inheritance or some other form of a financial windfall during their lifetime. The sum may not be a million dollars, but it might be $50,000 or $100,000.

Regardless of the amount, how you handle this blessing is critical. It can make the difference between financial independence and squandered opportunity. It can provide the chance for education and travel (handling it responsibly) or condemn someone to regret and misery (handling it poorly). In the most modest of circumstances, it can mean you’re debt free…or owing the tax authorities.

So let’s break down what happens and how many people react when they receive a financial windfall.

If you inherit money from a deceased relative, you’ll probably have a mixed bag of emotions. You’ll feel sadness for the loss of the person. You’ll feel joyful that you’ve received money. You could feel guilty for receiving it if you don’t feel like you’ve ‘earned it’. You could feel like you’ve ‘earned every penny of it’ if you had a turbulent relationship with the deceased. You may feel relief if the money can alleviate some financial pressure. You may feel intoxicated or disoriented if it’s a large sum…and you’ve been living paycheck to paycheck.

A longer term psychological shift may creep in. You may feel like you no longer have anything in common with your friends who are now not as rich as you are. You may not feel like you have anything in common with people who have money…like you do now. You may not know how to dress, where to shop, or how to behave with your New Money. You may purchase gaudy jewelry, cars, or clothes that match up to what you think rich people wear and drive. You may try to be someone else…or simply not the best version of yourself. If you don’t have to work, you may struggle to find your purpose in life or a vocation that provides fulfillment.

Once the euphoria wears off, daily life may seem like a grind. The stuff you bought didn’t make you happy for very long. The money you inherited didn’t solve all your problems and perhaps added a couple more. Tax liabilities and family expectations may have caused a financial hangover. Investment decisions may cause anxiety. Did your old friends change? Or maybe it was you who changed. And can you really trust your new ‘friends’…?

I’ve experienced some of these. I’ve witnessed all of these…and more.

So, I’m going to give you a short list of how to handle a financial windfall with a minimum of discomfort and regret, and a maximum of enjoyment and benefit. If you’re a long time reader of this blog or my books, you may notice a few subtle adjustments I’ve made as time has passed, but the fundamentals remain the same.

First, when you actually receive the cash (I’m assuming it’s cash), give thanks. You’re lucky. Then, put 99% of the money into your savings account. Take 1% of the inheritance and blow it. Go to Las Vegas, rent a suite, gargle champagne, gamble.  Buy something you’ve always wanted, like that name brand watch or designer handbag.

Anything legal, as long as it doesn’t cost you more than 1% of the inheritance. That is, to purchase and to own. If you inherit twenty million bucks and have $200,000 as your 1%, the sports car you can buy can cost under $200,000 to purchase, but it will cost more to own, maintain, insure, and put gas in. So you’re over the limit. Best to keep your 1% retail rampage to jewelry, clothes, furniture, electronics, or travel. I have tried to caution people about conspicuous consumption, but I now find it’s better to let them experience buyer’s remorse first hand, but on a smaller scale.

Second, don’t tell your friends you’ve inherited money. If you do tell them, admit to only 10% of what you’ve actually inherited. If you’ve inherited a million, tell them you’ve inherited $100,000. It’s not the whole truth, but it’s ten percent of the truth. And it will save you a lot of heartache and disappointment to keep it to yourself or downplay what’s happened.

Third, go see a certified public accountant in order to assess your tax liabilities. Don’t try to understand tax laws by reading things on the internet. Get professional help immediately.

Fourth, you’ll need an investment advisor who has a list of high net worth individuals as clients and a minimum of ten years experience with a single wealth management firm. If advisors move around too much, it’s a bad sign. What you want to do here is simple: get a large portion of your inheritance out of reach (your reach and greedy relatives’ reach) and into income producing or long term conservative investments. Keep some of your stash in cash, but having your money working for you means it’s not sitting around waiting to be spent.

Note: you’re not going to open a nightclub, invest in a film, or open your own clothing boutique. What you can do is use some free time you now have to write up a business plan for your startup and pitch that to professional investors. When they blow holes in your dream–or respond enthusiastically with some good suggestions–you’ll be much better off than heading into an endeavor unprepared…and risking your own money right out of the gate.

Fifth, look at what this windfall can do for you personally, not just in terms of what you can buy with it. Education is at the top of the list, for you or your children. Travel is second. Charity is third. These are non-material investments that generate long term quality of life. Something to think about.

Sixth, dress low-key. In How To Be A Rich Man…or Woman! I advise readers to adopt a style and stick with it. There’s Old Money Style, which you can find at J Press, Lands End, LL Bean, or The Andover Shop, and with the more traditional offerings of Ralph Lauren. You could also opt for the London Banker look, with conservative suits and outrageously loud shirts and ties from Turnbull and Asser. You could opt for the French Rich look, leaning heavily into fitted, minimalist black ensembles–merino wool sweaters, pantsuits, jeans–and top of the line white shirts. (Visit my friends at Charvet if you really want to peel through that 1% in an afternoon. Waha.)

Finally, most importantly, get back to business and get back to work. Having a purpose in life and a sense of belonging are the two basic ingredients to being happy. These will bring you fulfillment. Money will only give you options.

I’d be very interested to hear some of your experiences with financial windfalls.


  • BGT








10 thoughts on “Anatomy of a Windfall

  1. Hi Byron. My experience wasn’t a windfall per se but I had the good fortune to fall into a job (due to years of building up a professional reputation and industry connections) that pays 2.5x what I was making before. First thing I did was to build up 100k in cash-like (short term bond) savings. I did have investments too, but there is a nice warm feeling that comes from knowing you can take a year or two to find a job if you ever need to, without tapping into them. It completely removes any shred of fear of being fired. Not only does this make me more effective at my job (because I am willing to take professional risks, take on stretch projects etc), it makes work a lot more fun! Second thing is I started training myself to make micro-decisions based on what is optimal for my family, with cost as only a secondary consideration. Traveling to visit family we will take the flights that allow us a full night’s sleep even if they are not the cheapest. Small things like that give you a feeling of well-being that a fancy car or oversized house just couldn’t.

    1. Roger, this is similar to an experience my family had in the last few years. My husband and a few of his colleagues were chosen for a work team to train and begin working on a new development in his field – he caught on to it very well and after about two years was able to find a related position paying twice what he was previously earning. We are experiencing something similar in terms of “micro decisions” – the big stuff isn’t THAT different but in a lot of small day to day ways we are able to consider quality over cost, which is likely to save us money over the long term anyway. Vimes Boot Theory and all that.

      I also received a “mini-windfall” from extended family when I was in my early 20s and I regret most of how I spent it – an expensive hobby I was involved with at the time, travel related to that hobby, and paying the way for “friends” and my (now thankfully EX-)fiance who collectively had their lives even less together than I did. The one thing I don’t regret is taking a few graduate school courses as a non-degree student. I ended up getting a graduate degree in a very different field, one which led directly to the career I have today, and it was my success in the non-degree classes that gave me the confidence to apply to an actual degree program.

  2. “..can mean YOUR debt free..” “blow WHOLES in your dream” – got to say that I like
    the second one best.

    1. Good catch, Mary. Quick point: if you know anything about me and this blog, you’d know that AI is completely out of the question. The intelligence here is authentic. And it’s all mine. As are the typos. BGT

  3. I have a similar situation to Roger’s. Our windfalls are unexpected gifts from my mother-in-law, who occasionally drops money on her children. These gifts have not come without problems—they have caused a lot of strife among his siblings because they are always doled out unevenly with no explanation—but over time, my husband and I have used what we’ve been given to pay off student loans, and to pad our emergency fund with a year’s worth of expenses, as well as maxing out our retirement savings. Our lifestyle has not really changed, but like Roger, the most important thing that this money has bought us has been a lack of stress, and a deep sense of security. When I had my first car accident last week, a fender bender that damaged both cars (and was my fault) I never even had to worry for a second about the cost. That was pretty amazing.

  4. Very sound and practical advise. One disagreement is that unless the word were already out or the fact were obvious, as in a parent dying, I’d prefer to keep any windfall a secret. Knowing something others do not adds sweetness to the jam. JDV

  5. Good advice. Importantly, keep your mouth closed. Someone once told me that if other people think or know you have money, they have plans for it. Those plans do not necessarily include you.

  6. When I inherited a few years ago, it was a total wake-up call for me. It wasn’t that I was making bad decisions beforehand — I just suddenly realized I had become a steward for a chunk of money I didn’t make. It changed my entire way of thinking. Inheriting was actually the catalyst for searching out “old money” resources like your books and blog; I specifically did not want to go about it the wrong way, but I knew I was going to need guidance since I wasn’t raised with all of those values.

    Most of the money was pre-tax, so I didn’t get the option to spend a lot of it without taking the penalty for it. I put it in an investment account and also opened another investment account for a portion of the post-tax money. Some of it I kept in cash so I could invest in higher-quality goods (clothes, shoes, one good vintage watch, etc.), to travel with, and for emergencies. Also we bought an affordable older house to live in, because in our college town buying real estate is much more cost-effective than renting. I am still working and saving money; my goal is to retire younger than I had initially planned.

    The most profound changes were experiential. We kept our old friends but also made new ones. Also I decided to check out some of the stereotypical old money travel destinations, although I have tried to do it as frugally as possible. Admittedly this was for novelty’s sake as that way of life is so different from how I was raised. I feel like, even though I didn’t inherit a significant amount of money, a slew of new experiences was suddenly available to me. It can and does change a lot. I’m glad to have gained more perspective from those new experiences.

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