Occasionally the stars align, the calendar cooperates, or something untoward happens, and we find ourselves in possession of some unexpected dollars, be it from an inheritance, an insurance settlement, a tax refund, or even just those three-paycheck months. Most of us live our financial lives structured around a scheduled payment like a paycheck or a retirement benefit so it’s good to take some time and develop a plan for this “Sudden Money” to make sure we are making the most of what the cash flow gods have given us.

Right off the bat, take a breath, a good deep one. This is particularly important if this windfall is attached to some emotional strings as is often the case with an inheritance, insurance payout, or generous gift. There is no need to jump right into doing something with these dollars. In fact, we often recommend taking several months or even a year before doing anything, particularly if this new money is the result of a death or traumatic event. Set up a completely separate savings account (or two if your windfall is more than $250,000) and park the dollars there while you take the time to build a plan.

It may seem unusual to talk about the emotional strings of money but it’s pretty common for an inheritance or an insurance payout to mess with our heads. Sometimes there’s guilt. Sometimes receiving the money reminds us of some feelings we’ve chosen to avoid dealing with and then, surprise, there they are, clawing their way through to the surface. On the flip side, some people feel a little irrational or giddy when the check arrives. For whatever reason, we often look at “found money” differently than a paycheck when money is just money and all money should have a plan. It’s important to separate the emotional from the financial so if you need a little professional support to work through things, this is definitely the time.

Building your plan should break things into three timed parts – Now, Near Future, and Much Later.

Now: Ask yourself – will there be any tax implications to receiving these dollars? An insurance settlement generally doesn’t have any taxes but an inheritance can so you need to know what that’s going to look like before you spend those new dollars or park them someplace where it will be difficult (or expensive) to tap them for the bill next Spring. If you sold that family home, there could be capital gains. Receiving a gift of stock or mutual fund shares isn’t taxable but liquidating that into usable cash is taxable.

Now: Your instinct may be to pay off that home equity line of credit or credit card(s) but you should take a moment to ask yourself how you got in that situation to begin with. If you don’t take the time to figure out if you have a loose relationship with your cash flow, then there’s a pretty good chance you’ll pay off the debt and be in the same boat a year or two from now and the cash flow gods don’t usually visit more than once or twice in a lifetime so what’s your plan? Before paying off debt, what does your cash reserve look like? Do you have your healthcare deductible set aside to deal with an unexpected illness? What’s the elimination period for your disability insurance (if you even have disability insurance)? Take another deep cleansing breath…

Now: Unfortunately, it is all too common for the world to arrive on your doorstep once the news that you’ve received some cash gets out (or even the rumor that some cash has come your way…). Now is the time to build your response muscle memory so you know what you are going to say when the request for a little financial help comes your way. You could say “I haven’t decided how I am going to use this.” Many people find blaming their financial advisor very useful – “My financial advisor says I have to deal with some things before I can make any other decisions” is a solid answer (it’s OK, we have pretty strong shoulders).

Near Future: When was the last time you updated your financial plan? To completely geek out, your financial plan can act as the lynchpin for all your other goals. Revisit that financial plan and build yourself a Roadmap for the coming months or next couple of years. As an example, you could take that inheritance, invest it to generate a payment that pays your home equity line of credit which gives you the cash flow to increase your 401k contribution, thereby lowering your tax bill to generate a refund for next Spring to pay down that lingering student loan – Voila! Like a Jackson Pollack exhibition – strange but beautiful….

Near Future: A strong strategy is to slowly build on the pieces you already have in place. Contributing to your company retirement plan? Hike that by a percentage point or two. Saving into an account earmarked for your kids (or grandkids) education? Increase your monthly savings a bit. Paying down the primary mortgage on your home? Increase your monthly payment. Slowly building on your existing situations helps you feel like you are using the dollars without making big (potentially irreversible decisions) while still giving you time to build a plan for those dollars.

Much Later: As part of that Roadmap, think about some things you’d like to do in the future. Would you like to take the whole extended family on a trip? What might that look like and how far out do you need to plan to make it workable for everyone? Would you like to buy a vacation home? What impact will that have on your everyday cash flow? Maybe you’d like to make some gifts to charity or family members. Do you need to update your estate plan to do that? Making sure that you’ve thoroughly thought through (for those of you who appreciate alliteration…) the implications of your choice(s) can go a long way in avoiding decision remorse.

If or whenever you might receive some unexpected dollars, honor the source, build your plan, then execute that plan carefully. This is often a once or twice in a lifetime event and, done well, can make a pretty significant difference to your life and the lives around you.