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Got a windfall? Here’s how to make the most of it
By James Yeo
Got a windfall and you’re suddenly flooded with more money than you know how to manage?
Don’t worry, you are probably not alone. While many of us dream of winning the lottery, not many are ready to handle what comes next.
In fact, your lucky day could turn into your unlucky day if you’re not careful. You can even check out this article where lottery winners blew it all and even got worse than before.
Thus, it is important to know how to make the best out of your windfall. Here are five things you should do:
1) Take it slow and let it sink in
Suddenly coming into money can be overwhelming; therefore, take it one step at a time.
Let the whirlwind of emotions settle down first and allow it sink in slowly. Meanwhile, put a plan in place and take some time to decide what you should do first.
In addition to that, keep a low profile. For example, you could get a lot of unwanted attention after winning a lottery, with increased demands from friends and family members who expect you to share your winnings if they’ve caught on to the news.
This can take a toll on you and your relationships, and you might not be able to manage. Therefore, keep a low profile and limit your social engagements, at least initially, so as to allow you to plan wisely.
2) Deposit it in a bank and live within your means
Good money management is a must, especially when you have a lot of money, so safekeep your money in the right place – in a bank.
Next, hire a good financial consultant/adviser and a good lawyer who can guide you on how best to manage and optimise your wealth, keeping in mind your long-term goals.
3) Don’t go for sudden lifestyle changes
People tend to make sudden lifestyle changes when they get a huge amount of money, such as buying their dream car, quitting their day job, etc.
Do not do this!
Instead, as previously mentioned, craft out a budget with the help of an adviser and plan your moves one step at a time. In short, never rush into making decisions that can hurt you in the future.
You certainly want to avoid making mistakes when there is so much money at stake.
4) Settle your obligations first
On the other hand, it is advisable to settle any past debt obligations, such as personal loans or credit card payments. The interest payments you make on your debt can add up to your financial burden.
Therefore, it is wise to settle all debt before spending the money on what you like.
Once you pay off your loans, the next logical step is to create an emergency fund. This will allow you to deal with unexpected financial catastrophes before you even spend your remaining monies lavishly.
5) Invest the left-over winnings
Last but not least, invest your money to take advantage of compound interest.
Here’s a simple analogy – if you were to compound $100,000 on an interest rate of 8% over 20 years, you will end up with $466,095. That, to me, is considered another windfall based on your previous windfall (isn’t that amazing?).
So how do I obtain an annualised return of 8%? There are many ways to achieve it and one way is to simply invest in the STI ETF (information can be found here).
To sum up, we hope that by following these tips, you will be able to enjoy your lottery windfall and make the best out of it.
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