You never really know what’s coming around the next bend, it’s not out of the question to come into a fortuitous sum of money.

Although coming into a lump of cash can be life-changing, it can also be quite stressful. But with a little preparation and planning, not only can you get rid of the extra stress, but you can also substantially grow your windfall. However, without a defined course of action, you could also easily spend it faster than you’d planned.

Get Rid of High Interest Credit Cards

Before spending any of your windfall, take a critical look at your personal finances. Do you have any high-interest credit card debt? If so, consider using your new-found money to pay down the balance, or to pay off the debt entirely. If you have multiple cards, start by paying off the card with the highest interest rate, and then work on tackling the card with the next highest interest rate. Do this until you’ve paid off all your credit card debt. Moving forward, control your spending so that credit card debt doesn’t creep up on you again.

Create a Savings & Spending Plan

Be slow and smart spending your money. As you think through possible spending and saving options, put your money somewhere safe and secure like a low-interest account. Although it won’t be making you a lot of money, it will be safe and available when you’re ready to start spending it. Here are a few savvy ways to think about “spending” your money.

Emergency Savings Fund

It’s good practice to keep and maintain an emergency savings fund. The recommended amount to keep in your account is three to six months of your daily living expenses. If you don’t have an emergency fund, or you haven’t quite reached six months of savings, this would be a good place to use some of your windfall. 

Build your Retirement Savings

A farsighted way to use your windfall is to add to your retirement savings. Once    you’re in your retirement and no longer working, the money you’ve invested has the power to provide you with big benefits. And the longer your money is invested, the more it can potentially earn through a process called compounding, which means to earn returns on top of returns. Consider opening either a traditional IRA or a Roth IRA.

A traditional IRA allows your money to grow tax-deferred, which means that you only pay taxes on investment gain when you make withdrawals. Withdrawals from a traditional IRA, a 403(b) or 457 plan will be taxed as ordinary income. If you take early withdrawals from your IRA or 403(b) plan, they’ll be subject to a 10% tax penalty. The 10% tax penalty does not apply to 457 plans.

A Roth IRA is a special account made from post-tax income, which means there is no up-front tax deduction for money you put in. And because the money you stockpile in a Roth IRA is all yours, if you follow the rules, you can draw out money as often as you like, tax-free and without penalties. If you think your tax rate will be higher in retirement than your current rate, a Roth IRA makes the most sense. Anyone can contribute to a Roth IRA as long as you have earned income from a job.

Although receiving a large chunk of cash feels a little like receiving “free” money, remember that it really isn’t free and that when spent (or saved) wisely, will provide ongoing income long into your retirement.