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What to Do With a Large Sum of Money – Smart Financial Decision

Nobody wants to be in the position of not knowing what to do with a large sum of money. You could receive a lump sum of money through an inheritance, a business transaction, or the sale of a property, whether expected or unexpected. When this occurs, it is critical to have a plan in place that outlines what to do with a large sum of money.

No matter how much money you get, you run the risk of squandering it if you’re not careful with how you spend it. Connect with an expert to learn how to use your cash windfall to secure long-term growth and leave a legacy. Simply click the “Schedule a free consultation” button to the right. Otherwise, keep reading to discover ideas for what to do with a large sum of money.

What to Do with Large Sum of Money?

1. Release Your Earnings

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

What could you do with your monthly cash flow if you didn’t have to pay credit card bills? You will reduce your monthly payment burden and associated opportunity costs by paying them down. This will allow you to pursue more lucrative opportunities.


2. Establish a Csh Flow.

Unless you already have more money than you know what to do with, creating cash flow is an excellent way to spend it. By putting your money to work for you, you will have more wealth and more options for how to spend and invest it in the future.

What is the most effective financial strategy for generating cash flow? Private lending and rental real estate are two examples of investments that provide monthly cash flow.

3. Make a Down Payment on a Home.

We encourage our clients to pursue homeownership rather than wasting money on rent. As a result, making a down payment on a home is one of the best things you can do with your money. If you can put down 20% on your mortgage, you’ll come out ahead in the long run. If you already own a home, this could be a great time to secure a rental property.

4. Put Money aside for Long-Term Growth.


If you don’t need immediate cash and want to leave a legacy, we recommend looking into high cash value life insurance. Your insurance’s cash value component allows you to save at competitive rates while also earning dividends.

Leverage is the hidden power of cash value insurance. The funds are made available through a life insurance policy loan. Your insurance company will lend you money as collateral for your policy. Consider the power of compounding if you’re wondering why you’d want to take a loan when you can just get the real thing.

When you liquidate a savings account, you have to start over. Because you used it, it can no longer earn interest. When you take out a policy loan, your money stays put and earns interest and dividends. That is, you can use your money while also benefiting from compounding.


What is Considered a Large Sum of Money

Most Americans believe that to be considered “rich,” an annual income of around $100,000 is required. This is according to a data company that polled more than 1,000 Americans about how much money they needed to make each year to qualify as wealthy.

“People are split on whether a person earning $90,000 per year is ‘neither rich nor poor’ (46 percent) or ‘rich’ (44 percent),” according to data farm. “At $100,000, public opinion has shifted much more strongly toward ‘rich,’ with only one-third (34%) believing someone earning this much is ‘neither rich nor poor.”

 How to Protect Large Sums of Money

stack of books on table

1. Make the Best Use of Your Money

You could receive a large payout, an inheritance, compensation, or land royalties. Make the most of your money now so that it can benefit you and your family later.

2. Clear Your Debts.

Determine which debts to pay off first if you have a lot of them. Some will cost you more in the long run than others. Speak with a free financial counselor about what you owe and which debts should be paid first. If you are unsure whether you owe a debt, get all of the details before paying it.

3. Open a High-Yield Savings Account.

If you deposit funds into a high-interest savings account and leave them there for six months or a year, they will earn interest. Interest is money added to the money you put in.

4. Distribute Your Sending Over Time.

It can be tempting to spend a large sum of money all at once if you come into a large sum of money. Spread out your spending to give yourself a little extra money every two weeks to spend on things you need. A financial counsellor or a financial capability worker can assist you in determining how to proceed.

5. Invest Your Funds

Investing is when you put money into a managed fund, shares, or property in the hopes that it will grow. Some investments may involve risks and scams, which may result in the loss of your money.

Make sure you understand the risks before investing your money.

6. Be Wary of Con Artists.

Someone who knows you’ve made some money may try to con you. If someone approaches you with an offer to spend your money, make sure they aren’t trying to con you. If an offer appears to be too good to be true, it most likely is.

People may call, email, or visit your local community center to ask you to invest in a business. Don’t give them any details. Instead: 

  • Take a step back.
  •  Put the phone down.
  • Delete and block any emails or messages sent by the individual.
  •  Stop putting up with them.

7. Dealing with Financial Pressure from Family Members

If your family knows you’ve received a large sum of money, they might expect you to give it to them or buy them something. Dealing with financial pressure from family members can be difficult, but you must first look after yourself.

Where to put large sum of money

Whether you received an inheritance, received a bonus at work, or sold your house for a profit, having extra money allows you to grow your savings and possibly meet a goal, such as saving for a down payment on a new car. But deciding where to keep your money isn’t always simple.

With that in mind, consider the following options.

1. High-yield Savings Account

A high-yield savings account is an appealing option for those who want to grow their savings while still having easy access to the money in case of an emergency.

To put the earnings into context, traditional savings account yields are typically very low, as low as 0.01 percent APY. However, the best high-yield savings accounts pay out more than 1% APY.

While maintaining safety and liquidity, you can open a savings account to build an emergency fund or save for a vacation or home repair.

Savings account restrictions may be an issue if you need to access funds from time to time. Depending on the bank’s policies, there may be a monthly limit of six withdrawals or transfers.

Another thing to keep in mind is that while a high-yield savings account may offer a sign-up bonus or an interest rate bonus, you’ll most likely need to keep a sizable minimum balance in the account to earn the higher rate.

2. A Deposit Certificate (CD)

The main distinction between a savings account and a certificate of deposit is that a CD locks your money away for a set period of time. You will be charged a penalty if you withdraw the money too soon. When interest rates are low, CDs can be disadvantageous. However, because they allow you to lock in a fixed rate, they also protect savers from falling interest rates.

Though longer-term CDs offer higher interest rates, you cannot access the funds without paying a penalty in most cases.

Opening several CDs that mature at different times is one way to increase your earnings. This is known as CD laddering. Laddering provides more flexibility and lower risk than a single large CD with a single maturity date. You can take advantage of higher interest rates without taking on too much risk by having several short- and long-term CDs. You will also have the flexibility to take advantage of higher rates in the future.

3. Investment Account

Consider a money market account if you want a safe place to park extra cash that offers a higher yield than a traditional checking or savings account. Money market accounts are similar to savings accounts, but they typically pay higher interest and may have a monthly limit on the number of checks and debit card transactions.

Money market accounts provide convenient access to your funds and are secure if your banking institution is federally insured. The Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF) insures most banks and credit unions, providing individual account holders with protection for up to $250,000 in deposits at a single institution.

If you don’t want to tie up your money in a CD for an extended period of time, a money market account can be a good alternative. A minimum deposit is usually required to open a money market account or to obtain the best annual percentage yield (APY). Also, be sure to inquire about any potential fees, such as monthly account fees and penalties.

How to Invest Large Sums of Money

There are a few smart ways to manage a large amount of cash, whether it comes from a 401(k) or IRA rollover, a tax refund, inheritance, or even lottery winnings. These strategies hold true regardless of what the stock market or economy is doing at the time. Here’s what you should do before and after you get your lump sum.

1. Select an Advisor

Unless you have prior investing experience, you should consult with a financial advisor before deciding what to do with your money. Because stockbrokers, bankers, and insurance companies typically work on commission, a fee-only adviser with a Certified Financial Planner (CFP) designation is a wise choice in most cases. When they are paid to sell you one investment over another, they may not be acting entirely in your best interests.

2. Prior to Receiving Your Lump Sum

Depending on how much money you are due to receive, and assuming you have some time before receiving your cash or check, you should start looking for a place to keep it. It is critical not to rush the decision. To invest your money, carefully research savings vehicles or security types.

Your cash windfall may have multiple applications. For example, you could use some to pay off debt, some to give away, some to take a well-deserved vacation, and the rest to invest for retirement. Any money you don’t use within a few weeks can start earning interest.

3. Consider Short-Term Liquid Alternatives

For short-term cash needs, you will most likely invest in a money market fund. Money market funds are liquid, interest-earning savings vehicles that allow you to deposit and withdraw funds at any time (or at least a limited number of times per month) without penalty or fees.

Money market funds are typically available for purchase at mutual fund companies, brokerage firms, and banks. Cash Reserves Vanguard Federal Money Market Fund (VMMXX) and Fidelity Government Cash Reserves (FDRXX) are two of the larger, well-known financial institutions with some of the highest yields.

4. Determine Your Gals.

Before you invest beyond the money market fund, you should have a vision or structure for your money, or what will eventually be your investment portfolio. You don’t want to keep your money in a liquid savings vehicle like that for too long, or you’ll miss out on making your money work harder for you. However, before you can make that decision, you must first determine what you hope to earn and why. That vision is referred to as your “investment objective” by a financial planner.


Making wise financial decisions in your twenties has long-term benefits that can help you achieve financial success in the future. If you follow the six tips listed above, you can improve your credit score, become debt-free, and save money for retirement and other major life events.




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