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Picture this. By the grace of the almighty, you have just won yourself pots of money, by way of inheriting an ancestral property, winning a lottery, receiving a large bonus or an award from an employer or an unexpected gift from a relative, out of the blue. So yes, its pouring money…What do you do next? Splurge? Go on your dream vacation? Buy a luxurious apartment or a penthouse? Get the latest gadget?
While this money has nothing to do with your regular income and when you do receive surplus money as windfall gains, it may start worrying you, especially if the gains are beyond what you thought. Well, windfalls maybe tricky to deal with but hold on…be smart at such times.
Firstly, part of these funds should be placed in an emergency or contingency fund, preferably in a bank fixed deposit. As financial experts advise, is to always advisable to park at least six months of your living expenses, including your equated monthly installments, in a bank FD.
Next, start paying off your loans, such as a personal loan or an outstanding on a credit card. Remember, banks do charge huge interest rates on personal loans and credit card overdues. So pay off your debts. If you have an auto loan running, it is better to pay it off completely, as assets like vehicles and consumer durables depreciate far lower than the loan outstanding, on them, at any point in time.
At the same time, start prepayments, either partially or fully, on your housing loan so that you can reduce the burden of your home loan. You could also consider making a donation to a charitable trust for the cause of education or child welfare but make sure the trusts you are donating to are reliable and have flawless record. You will be entitled to a tax deduction from the taxable income by making such donations.
While you could look at pampering yourself with a nice vacation or buying the latest gadget, depending on the size of your windfall, you could use a part of it for yourself and save the rest for retirement or education of children. If you are looking at buying a farm house, expensive paintings or antiques, take help of an expert who knows its worth and can examine them. These are some tips on how you can make the most of your windfall gains; take a call, depending on what your needs and wants are.
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