6 Smart Ways to Manage a Windfall

Posted in Investment By Chanel Rick - Apr 14,2022
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Post a tedious workday, the whimsical urge to buy a lottery ticket may seem overwhelming. After all, there’s still a fraction of a chance that you could win a handsome prize. But, in the events you win, what’s next? Your following actions will be the deciding factor between making this experience a bittersweet nightmare or a long-awaited respite. 

Without an arsenal of financial strategies, an intimidating windfall could potentially displace your finances, especially if it’s a lump sum payout. Most people ignore the severity of the situation, planning globe-trotting adventures or unwisely investing in financial products. However, these moves could dwindle your wealth in a blink of an eye. 

Sudden Financial Windfalls

This newly acquired windfall could be from a generous inheritance or winning a lottery. Regardless, a lack of fiscal knowledge could potentially lead to heavy consequences. 

Learn to mitigate the impact of your uninformed actions by avoiding the following mistakes. 

1.    Money-hungry advances from family & friends

Expect distant relatives and long-lost friends to start approaching you with business proposals or money lending requests. While your generosity suggests otherwise, experts advise against engaging in such familial traps. 

2.    Quitting Your Job 

Before putting in your papers, gauge the risk of your windfall-based investments experiencing a downturn. Instead of making any spur of the moment decisions, consider taking a break from work or exploring opportunities for entrepreneurship. 

3.    Careless Spending Habits  

Overindulging in reckless spending habits is a sure shot way to reduce your wealth in no time. Hold off on thoughts like purchasing the latest iPhone or renovating your home’s interior décor. 

4.    Keeping It All in Cash  

Any delays in investing your wealth could increase the chances of spending it on other expenses. Furthermore, keeping your wealth in cash makes it harder to track and record your expenses. 

Managing Windfall: 6 Things You Need to Do 

1. Seek Professional Help 

Windfalls accompany a host of logistical inconveniences like taxes and legal prerequisites. Wade past these pitfalls by employing the expertise of financial advisors and estate planners. They will cleverly devise new and improved investment strategies, which seamlessly pair up with your other financial endeavours. 

2. Revise Your Financial Goals  

A sudden increase in wealth could potentially disrupt your current financial goals – in a good way! Re-arrange your finances with this new development and evaluate your upcoming short and long term goals. With each fulfilled goal, change the order of priorities of your plans. 

3. Pay Off All Your Debt  

A windfall could be a miraculous solution for any debt-related crisis. Large lump sums received could be re-directed towards repayment of loans, outstanding credit card dues, etc. In turn, it will free up additional cash flow and reduce any debt stressors. 

4. Fortify Your Emergency Fund 

After resolving debt repayment, shift your focus to creating or increasing your emergency fund. It could single-handedly rescue you during unpredictable situations like job loss, pandemics or hospitalisations. Ensure that your emergency fund consists of at least 6 months’ worth of income to handle daily expenses. 

5. Increase Your Retirement Fund 

If you haven’t saved for retirement yet, use this windfall as an opportunity to make up for lost time. Start securing your future by investing in retirement schemes that accrue the benefits of compounding interest. With the aid of financial advisors, opt for the right investment strategies that match your risk appetite and retirement goals. 

6. Invest in Real Estate  

Consider shrewd investment moves like purchasing real estate. Buy your first house by paying a substantial down payment, or if you already own a home, contemplate investing in a rental property for additional income. 

Lastly, remember to save a portion of your wealth for personal pursuits and fulfil some of your lifelong dreams! 

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