What to Do With a Windfall: Bonus, Exit, or Big Client Payoff
Avoid lifestyle creep — and put that lump sum to work with tax efficiency.
There are only three types of windfalls that attract entrepreneurs: employment income (such as bonuses, severance, and RSU releases), business income (including large client payments or contingency fees), and capital (such as an equity exit or secondary sale). The tax code treats each one differently. Your job is to match the character of the cash with the correct sequence of moves—so you keep more, compound faster, and don’t accidentally trigger penalties or phase-outs you didn’t know existed.
Below is a 2025-calibrated playbook with concrete numbers, realistic timelines, and example math for each windfall type.
The 10–30–90 Rule (and Why It Works)
First 10 days: ring-fence and slow down. Park the funds in a separate high-yield account or a T-bill ladder; avoid making big purchases and refrain from transferring funds beyond the tax set-aside. The point isn’t yield—it’s behavioral quarantine and clean tracking.
By day 30: secure the tax base. You’ll either adjust withholding (W-2 bonus), make a federal/state estimated tax transfer (self-employed income), or escrow for capital gains/NIIT (equity exits). For 2025, avoiding the underpayment penalty usually means prepaying 90% of this year’s tax or 100% of last year’s (110% if prior-year AGI > $150k)—and the IRS penalty rate runs 7% annualized (daily compounding) this quarter, which makes procrastination expensive. (IRS)
By day 90: implement the opportunity stack. That’s where retirement space, health accounts, charitable tools, and entity-level planning protect the windfall and redirect cash flow into compounding.
2025 Quick Reference for Windfall Planning
