“Impulsive decisions are soon regretted, so take your time with financial decisions.”
– Kate Phillips, Total Wealth Coaching

It’s the problem everyone wants to have: not knowing what to do with a large sum of money. Expected or unexpected, you could come into a lump sum of money by an inheritance, business deal, or the sale of a property. When it happens, it’s extremely important to have a plan that details what to do with a lot of money. 

No matter how much of a cash windfall you come into, you could risk squandering it all if you’re not intentional with how you use it. Connect with an expert to learn how to secure long-term growth and build a legacy with your cash windfall. Simply click “Schedule a free consultation” below.  Otherwise, read more to learn 11 ideas for what to do with a large sum of money.

Table Of Contents:

• Principles for What to Do With a Lot of Money
• 1 – Free your income
• 2 – Create cash flow
• 3 – Put a down payment on a property
• 4 – Save for long-term growth
• 5 – Increase your net worth
• 6 – Start a business
• 7 – Take care of business
• 8 – Make a difference 
• 9 – Fulfill a lifelong dream
• 10 – Learn something new
• 11 – Keep it
• Get the Most Out of Your Cash Windfall

4 Principles for What to Do With a Lot of Money 

Be intentional.

Even if the cash windfall brings more money than you ever thought you would have, if not managed intentionally and with care, you’ll risk looking back one day (perhaps sooner than you think) with regret. Just google “lottery winners who lost it all” for examples of what not to do. Better yet, read our eleven ideas below on what to do with a large sum of money, which will help you put your cash to better use.

Use your head and your heart. 

You want to make financially savvy decisions, so it’s important to remember there’s more to money than simple math. Good decision-making weighs both emotional and logical factors. However you decide to handle your money, make sure both your head and your heart are on board.

Don’t be in a rush.

If you’ve lived without the money until now, spending several weeks, a few months, or even longer to decide what to do with it could serve you well.

Spend wisely.

While that may sound subjective, think of it this way: Spend your money in such a way that you’ll have few, if any, regrets. You could fritter the money away on impulsive consumer purchases and eat out every night for the next few months, but you might feel like you’ve got nothing to show for it down the road. Instead, with the same dollars, you could create a lasting income stream, honor your deepest values, and create memories to last a lifetime.

There’s a simple key to spending wisely: Think long term. If you decide to spend the entire amount in the next six months, will you look back 20 years from now and feel you put the money to the best use? If the answer is no, take your time, come up with a plan, and spend wisely.

What To Do With a Large Sum of Money – 11 Ideas

1. Free your income.

If you’re using your current income to pay off high-interest debt such as credit cards or other debt with double-digit interest rates, using some of your cash to decrease or eliminate that debt makes a lot of sense.

What could you be doing with your monthly cash flow if you didn’t have credit card payments? By paying them down, you’ll reduce your burden of monthly payments and minimize the associated opportunity costs. This will help free you up for more lucrative opportunities.

2. Create cash flow.

Unless you already have more income than you know what to do with, creating cash flow is an excellent idea for what to do with a lot of money. By putting your dollars to work for you, you’ll have more wealth in the future and more choices for how to spend and invest it.

What’s the best financial strategy for creating cash flow? Private lending and rental real estate are a few examples of investments that have monthly cash flow opportunities.

What if you have just $5,000, and you’d still like a little cash flow? We recommend peer lending, which allows you to lend as little as $25.00 to someone who is looking for a loan. Websites such as Lending Club and Prosper make it easy for both lenders and borrowers to do business, removing banks as middlemen and increasing returns for those lending while decreasing interest rates for the borrower.

3. Put a down payment on a property.

We encourage our clients to pursue homeownership and quit throwing money down the rent drain. Therefore, one of the best things to do with your money is to put a  down payment on a property. If possible, put down 20% of your mortgage, and you’ll be way ahead in the long run. If you already own a home, this could be a fantastic opportunity to secure a rental property.

A healthy down payment can help you:

• Eliminate mortgage insurance: This is insurance for the mortgage company should you ever default on your mortgage. For you, it’s just money you’ll never see again.
• Expand your asset base: A down payment allows you to use a mortgage as leverage to purchase a larger asset. You can control a $500,000 asset with a $100,000 down payment.
• Strengthen your offer: Sellers and brokers tend not to take minimum-down offers seriously if there are stronger offers on the table due to concerns the mortgage could fall through. Furthermore, the current housing market is extremely competitive almost everywhere, with some properties being sold within hours of being listed—sight unseen. Decent properties will probably have multiple bids, and a larger down payment can give you a competitive edge during the offer process.

4. Save for long-term growth.

If you aren’t reliant on immediate cash flow and you’re looking to grow your legacy, we recommend considering high cash value life insurance. The cash value component of your insurance allows you to save at competitive rates with the potential to earn dividends.

The hidden power of cash value insurance is leverage. The money is liquid through something called a life insurance policy loan. Your insurance company will lend you money with your policy as collateral. If you’re wondering why you’d want to take a loan when you can just get the real thing, consider the power of compounding.

When you liquidate a savings account, you start from the bottom again. That money cannot earn interest because you’ve used it. When you take a policy loan, your money remains where it is, earning interest and dividends. That means you can use your money AND benefit from compounding.

5. Increase your net worth.

Amazingly, life insurance isn’t just good for long-term, liquid growth. It also increases your net worth.

Life insurance is the best financial vehicle for instantly increasing the worth of your estate. We recommend whole life insurance, so your increase in net worth is guaranteed, permanent, and easily transferable with no (or minimal) taxation.

We often receive questions from people who would like to purchase life insurance with a windfall. While it’s possible to do that, life insurance is better designed for investing through ongoing payments rather than large lump sums. There are single premium policies available, however, they have limited flexibility and minimal tax benefits due to modified endowment contracts (MEC).

We believe a better strategy for optimizing your net worth is to invest for cash flow, turn a lump sum into an income stream, then fund a long-term whole life policy with that income stream.

6. Start a business.

One of the best things to do with your money is to create long-term prosperity by taking control over your income. One way to control your income is to own your own business. As Kate Phillips argues in “Why Entrepreneurs Rule the World,” conventional employment is actually riskier than owning a business because often your entire income can be eliminated with the decision of one or a few people.

Yet when you’re a business owner, you can have many clients and multiple streams of income. Even if you love your job and want to keep it for now, you can create wonderful tax write-offs by having a legitimate business on the side.

7. Take care of business.

Already have a business? You can be your own investor and increase your profitability and stability in many ways. Here are some ideas to help expand your business:

• Invest in a coach, mentor, or business consultant
• Expand your marketing efforts
• Improve your website
• Increase your inventory
• Hire new talent
• Upgrade your technology
• Purchase new equipment
• Pay taxes or set aside funds for future taxes

When deciding what to do with a large sum of money, consider taking care of your business, and your business will take care of you.

8. Make a difference.

What are you truly passionate about? Maybe it’s supporting your faith, helping fight world hunger, or caring for animals that were mistreated. A cash windfall is a fantastic opportunity to put your dollars where your values are.

The simplest way to do this is to make a donation. Even more impactful ways to make a difference include making a sustainable donation (i.e., creating cash flow through an income-producing asset and donating the income stream) and/or creating a legacy by including one or more charities as a beneficiary of your life insurance policy.

9. Fulfill a lifelong dream.

Assuming there are no strings attached to the windfall, you can use it for anything you want! Is there something you’ve always wanted to do, yet you’ve never had the financial capability to do it?

Perhaps you studied abroad in college, and you’d love to return for a month to visit the friends you made. Maybe you’ve always wanted to take a sabbatical to write a book, dive the Great Barrier Reef, attend spring training, or take your kids on a trek into the Grand Canyon.

One word of advice: According to research on money and happiness, you’ll likely be more satisfied with experiences rather than purchases. We tend to adapt to material purchases, which typically provide temporary satisfaction, while experiences can meet greater psychological desires and provide more lasting satisfaction, according to research from Dr. Thomas Gilovich of Cornell University.

10. Learn something new.

Spending money can help you buy things. Money can also allow you to do things—even become who you’ve always wanted to be by expanding your skills, knowledge, and training.

Want to be adventurous? Learn to skydive or fly a plane. Want to be more creative? Take a painting class, cooking class, or music lessons. Opportunities to learn are everywhere through local classes, mentorship programs, online courses, certification programs, and simply learning by doing.

A substantial cash windfall could even be an opportunity to go back to school and obtain a degree. Perhaps you work in construction, and you’d rather be the architect who designs the buildings. Maybe you’ve become exceptionally talented at helping people solve personal problems as a hairdresser, and you’d rather get paid as a psychologist now.

11. Keep it!

When considering what to do with a large sum of money, remember: There’s no rule that dictates the cash windfall must be spent on anything. If you’ve been meaning to get around to saving up an emergency fund or an opportunity fund, this windfall could be your shortcut!

While we generally recommend dividend paying whole life insurance as an ideal place to store cash, even before you build your cash-value account, you should have some savings to get you through everyday emergencies in a bank account, credit union, and/or in cash (stored safely in an easily accessible place).

As I explain in “Busting the Financial Planning Lies”, without savings, it can be very challenging to get ahead. When the car breaks down, the roof leaks, the dog needs a vet, or you have a surprise opportunity to take a vacation with a friend, many people are tempted to use their credit cards and move backward unless they have well-planned savings accounts.

Saving is the foundation upon which financial prosperity is built. So if you haven’t had a financial buffer or opportunity fund, it’s possible the best way to spend your sudden cash is not to.

Get the Most Out of Your Cash Windfall?

Are you still wondering what to do with a large sum of money and would like to talk further? If so, our team is here to help. Contact us today, and we’ll help get your dollars working harder for you. We use advanced analytics tools such as the Whole Life Calculator to help you get the most out of your insurance policy.