In 2006, my grandfather died suddenly. After several years of living hand-to-mouth—staying just ahead of my credit card bills and student loans—I was shocked and surprised to find myself with a couple hundred thousand dollars from his estate.

In my desperate hours before I had a bank account with a comma, I fantasized about the amazing things I would do if I won a $10,000 sweepstakes or found a duffel bag full of cash: pay off bills, take a small vacation, make three student loan payments, get a new computer… that was how the list usually began. Now, unexpectedly, I had more than 20 times the amount of those far-fetched fantasies.

“Don’t go crazy,” I kept repeating to myself. “This will never happen again, and you have to protect this money.” I vowed to be responsible, and for the most part I did a pretty good job of it. Here are some tips on what to do (and what to avoid), from my personal experience.

Paying off bills

Getting yourself out of debt may clear your mind and lift a nagging burden, but be advised that all types of debt are not equal. If you're troubled by debt and want to rid yourself of bills or collection calls, always begin with the highest interest account. Paying off an $8000 revolving credit card bill at 18% annual percentage interest has the same net effect on your monthly disposable income as investing $24,000 at an enviable 6% return. You must, however, have the discipline to avoid running up more credit card debt as soon as you settle up.

As annoying as Federal student loan payments are, student loans are one of the best kinds of debt to have, because the interest rate is lower and the interest payments reduce your taxes at the end of the year.

In my case, I paid off approximately $12,000 in credit card debt and used the money I was spending in carrying interest on those cards to pay more on monthly student loan payments. I erased my remaining student loans in about half the time, and received credit on my taxes for the interest—while getting interest on money invested instead of paying off my student loans immediately.

Investing

When I first received the windfall, I was ill-informed about investing. I did what seemed to be the right thing to do according to my limited knowledge: I shopped for the best rate on a 6-month bank CD until I could learn more about my options for a higher yield. It worked out for me, because short term CD rates were still nearly 3%. These days, you would be very lucky to find a shorter term CD offering even 1%.

Through education and some trial and error, I developed an investment strategy that worked for me with the lowest risk I was willing to accept. Between all cash investments, I am averaging between 3 to 4% per year, or about 1.5% above the rate of inflation.

Where I Went Wrong

Right about now, you might be thinking that I’m a pretty shrewd guy. But I did make a few mistakes I wish I had not made.

As with investing, I was a novice at real estate. A year after my windfall, with my credit vastly improved, I qualified for a loan. Being conservative and trying to keep my expenses down, I made the mistake of paying too much on the down payment for a house. Instead of paying 20% down, I paid nearly 50% on the down payment to keep my mortgage payments low. Even carefully budgeting for the new house (or so I thought), after a few repairs and minor home improvements I found that I’d cut into my cash reserve more than I planned.

Financially, there really wasn’t a sound reason to pay more than 20% down. Now I find myself with fewer options because I spent the extra $39,000 up front on the house to reduce my mortgage payments by only $195 a month. I suppose part of me thought I’d fritter away the reserve money if I had it available. Barely a week goes by that I regret the lost flexibility in case of a job loss or other emergency.

Another place where I let my discipline slip was on credit cards. My memories of debt dread started to fade after a couple of years, and one morning I woke up and found I had accumulated a total of $6,000 in debt. I’ve since re-committed myself to staying out of credit card debt, but the lapse was alarming.

Instead of “Don’t go crazy,” my mantra today would be “Go slow, and reserve your options.”