What would you do if you won the lottery?

After giving money to family, I would splash cash on a Parisian apartment, a villa perched on the cliffs along Italy’s Amalfi Coast and a beachside pad on Victoria’s Bellarine Peninsula.

Oh, and owning a house in tropical Port Douglas would be handy too, as well as employing a personal chef.

But back to reality.

The likelihood of a lottery win is extremely slim but some of us do come into money unexpectedly, whether it be under happy circumstances or through an inheritance.

So, if you receive a windfall and want to use it to secure your financial future, what is the smartest way forward?

Financial planner Gianna Thomson says no matter the sum or the circumstances, you should take time to decide your next steps so that you don’t make an emotional decision you later regret.

“We hear a lot of times about lotto winners receiving all this money, then they become broke very quickly,” she said.

“It can be quite emotional. When you receive this money you can get excited and make some very emotional decisions about it.

”Take your time and work out what’s important for you, where you want to be financially over the next five to 10 years, and use the money to help support those goals.”

If you receive $5000 to $20,000

Pay off any outstanding bills and credit card debt first.

Wiping those expenses will give you a clean slate to start considering other options, such as contributing to superannuation or going on holiday.

After dealing with outstanding credit card debt, Ms Thomson said you could consider allocating 10 to 20 per cent of your windfall to discretionary spending, such as a holiday or a car.

You could also use some of the cash to top up your emergency fund – or to start one – and make a lump-sum contribution to superannuation before the end of June to lower your tax bill.

“If they’ve got taxable income this financial year, it could be a way to boost up their super in a tax-effective way by making a tax-deductible contribution,” Ms Thomson said.

If you receive $20,000 to $100,000

Under this scenario it really depends how you feel about debt and risk and again, splitting it up could be a good way to go.

You could contribute to your superannuation, start or expand an investment portfolio, pay down your mortgage, or spend it on a holiday or a car.

If you are weighing up whether to pay down your mortgage or top up your super, your attitude to debt will largely guide your decision.

“Some people hate debt and they want to get rid of debt straight away, whereas some people are happy to boost their super … you do it to achieve tax savings and potentially to achieve a higher return,” Ms Thomson said.

She said a tax-effective way to invest is to use a gearing strategy, where, for example, you pay $100,000 off a $500,000 mortgage on day one, then draw $100,000 out again on day two.

“It’s a way of converting part of your debt into tax-deductible debt while boosting your investment portfolio,” she said.

If you receive more than $100,000

If you want to bust your debt you could make a sizeable dent in, or even pay off, your mortgage, or pump some money into super or other investments.

At this point you could think about asset protection by establishing a family trust, which can also help lower your tax bill.

“It’s probably about time to review the estate plans, because you’d have more money to think about what legacy you’d like to leave behind,” Ms Thomson said.

She said if your windfall is from an inheritance, you might use some of it to honour the memory of the person who has gifted it to you.

Ms Thomson played piano growing up and, to honour her mother’s memory, she is planning on buying a piano, which she will then teach her son how to play.

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