Friday, November 12

What to do with an unexpected windfall of money

Life might throw you some good fortune sometimes, this can come in the form of inheritance or a lottery win. It can change your life for the better and help your family out, but the real question is what you do with all this money. You can save it, spend it or invest it; you can maybe put it towards your children’s college fund or spend big on something you’ve always wanted.

Some people are living from pay check to pay check, dealing with the changing economy, paying taxes for a yearly salary that’s insignificant. Imagine receiving all the money in one go you might feel overwhelmed and unable to understand how you should be spending the money. How nice would it be to be able to keep your children from taking out loans or helping friends in need, these are usually seen as the best investments.

There are many ways you can invest your money but first you need to understand how to invest money to earn more money. There are different investments tools such as the investment profiler, that evaluates your investment risks, based on factors such as age, investment style and other factors. They can show you how your investment will change over the years.

Here are some ideas of what to do with your unexpected windfall:

  1. The most responsible thing to do is to always have an emergency fund, which can cover your bills for 6 months in case you are ever in need. For example, if you receive a million Naira, keep at least 100,000 Naira aside and put it in low risk investment like money market fund.
  1. When you receive a windfall, it is important that you invest by splitting the rest of the balance into stock and bond mutual funds. The earning potential is a little less, but you are managing your risks by protecting yourself against losses.
  1. Pay off any debt that you are due which will show you the true amount of money you will have at your disposal, pay off loans and mortgages. Mostly paying off your debts will help you for the psychological weight it carries over you. Don’t underestimate the feeling of relief once you no longer must pay off creditors.
  1. When you receive a windfall, it is important to get professional advice, especially if you are living pay check to pay check. A professional can advise you on budgeting and how to stick to it. A financial advisor will help you refine your investment strategy and capitalise more on your windfall. They will show you your financial picture and help you towards a healthier financial life.

It might be easy to spend your windfall and buy what your heart desires, but it is important to think about how the windfall can help you build a strong financial future.