For many people, a financial windfall isn’t necessarily a life-altering moment. Often, it’s quieter than hitting the jackpot or winning the lottery (which, in many cases, can actually make beneficiaries more prone to bankruptcy). It might come in the form of compensation for a workplace injury or a sudden inheritance; sometimes, it might just be a sharp increase in earnings.
Many financial planners warn that recipients of a windfall are in a precarious position, often prone to mismanaging their finances or feeling crippled by their sudden wealth. But the money need not change your life for the worse—or sustain you for years to come. We spoke to three people about what coming into some money meant for them and their families and how it impacted their financial lives.
The salary jump: “The more you make, the more you spend”
Neil’s* cash infusion came in the form of a salary jump, when he left a job in which he was earning around $70,000 to one in which his pay quickly climbed to nearly $400,000, in part through sales commission. He had a child around the same time as the income change, so Neil found that his family’s lifestyle quickly expanded. “No one tells you that your expenses also increase accordingly,” he says. “The more you make, the more you spend.”
Between his new salary and addition to the family, Neil and his wife—who also works full-time—opted to move out of New York City and into a New Jersey suburb. That meant trading in their apartment for a mortgage and property taxes, a second car, and a nanny that set them back more than $600 each week.
“Being a first time homeowner is great, but we moved from a 1,000-square-foot apartment into a 3,200-square-foot house with a pool and a half acre of land,” he says. Putting aside upkeep of their house, even a small repair can run upwards of $1,000, according to Neil. “No matter how much money I make, it’s not enough,” he says. I’m still suffocating—just suffocating at a higher level now.”
Growing up, Neil says his parents—who were immigrants from the former Soviet Union—tried to make sure their children didn’t want for anything. “We never had the most or a lot,” he says, “but we always had enough.” They also instilled in him early on that it was always possible to make more money.
“People can look at money in two different ways,” he says. “It’s either: ‘I don’t have enough,’ or ‘I guess I just need to make more.'” Neil has always taken the latter approach. He admits that’s part of the reason he stretched himself when the money started coming in—borrowing from a sibling and dipping into his 401(k) to foot the down payment on his house. He also racked up a sizable amount of credit card debt. “That’s my biggest stress point and regret,” he says. “At my first sight of the money, I really overextended. But I did it knowing that I’ll pay it off. I just wish I wasn’t doing it with $1,000 worth of interest each month.”
The unexpected inheritance: “I’m not interested in the short-term”
As a finance professor, Alexander Lowry was well-equipped to spend and invest responsibly when inheritance money landed in his lap. Lowry—who describes his salary as “solidly middle class”—says the money was equivalent to about a third of his annual income. “It was truly a blessing—not something that we were expecting,” he says.
Lowry knew he wouldn’t be the beneficiary of that kind of money again and wanted to be thoughtful about how he apportioned it. “As a professor of finance, I’m looking at the long-term investments,” he says. “Other people might be like, ‘Oh, I should go buy a car with this money.’ That’s not our thought process.” Lowry and his wife decided to split the money four ways with an eye toward practicality, using it to bolster a college fund for their toddler daughter, the family’s emergency fund, and mortgage payments. The last portion helped cover home renovations that Lowry knew were important to his wife.
“I’m not interested in the short-term,” he says. “I’m interested in the long-term. Even a home renovation—you can look and say [kitchens and bathrooms] are the two things that do the best payoff. And obviously, there’s the happiness factor from my wife. So those were all still practical to some extent.”
Lowry adds that he made a conscious choice not to explicitly store away money for retirement “I think you can approach it either way,” he says. “We’re also talking about market timing. I think we’re headed to a very bad place in the market. So I think I’m better off paying off what I know is a huge interest on the mortgage.”
As for whether the extra financial cushion has altered his lifestyle or spending? Lowry says not so much. “You should know what your priorities are, and if you don’t have those, you should build that plan,” he says. “So for us, I think that’s what we’re doing, and that might not be crazy fun, but it is in the sense of we already know where we want to go. We’re just getting there faster.”
A lump sum payout: “When you invest in yourself, it comes back”
After falling down a flight of stairs at work two years ago, Danielle Turcotte ended up out of a job. The workers’ compensation benefits for her injury only went so far. “I wasn’t making very much money—not even $50,000 a year—and then I got hurt,” she says. “They only give you your income for a certain amount of time. So I went over a year without any money coming in.”
Turcotte claims the money she had saved—less than $1,000–was effectively wiped out within a week or two after her pay stopped. (She is married, but says her husband’s salary was modest.) “I was panicking and in a full-blown depression,” she says. When she finally received compensation for her injury, it was akin to a windfall: The lump sum payment amounted to nearly her entire annual salary.
Turcotte still had some medical bills and debts to pay off, but she chose to invest a large chunk of the money into her new business—to hire a business team and rent office space. She struggled with the decision to put more money towards her business than, say, her student loan debt. “It was a difficult decision to make,” she says. “But everything was coming together. I didn’t want to be down the road a year from now and regret that I didn’t do this now. When you invest in yourself, it comes back, and it comes back multiple times. That was my whole energy and mindset going into it.”
Putting the money towards her business was also Turcotte’s way of retaining control over her life and livelihood after her disability. (She is no longer able to drive.) “I like being self-sufficient,” she says. “I’ve always been fiercely independent. So losing my independence by not being able to drive—and losing my income—made me feel like I had to do something that’s going to sustain me and my life.”
The influx of cash has also allowed her to give more to charities and the people in her life—Turcotte used the money to help her grandparents move into a new home, for example. It’s something she has always tried to do, even when money was tight. “This is my attitude about money,” she says. “It doesn’t make you bad or good. I believe it makes you more of what you already are.”
*Neil asked to be identified by only his first name to protect anonymity.