A windfall of 50 lakhs!! Dream come true right? A once-in-a-lifetime incident that might change not only yours but the generations to come after you as well!
Now stop for a moment here. Take a deep breath and just think about it…even if not a lottery, a sudden inheritance, a bonus, or even an insurance settlement perhaps? Whatever the reason, what exactly would you do if you really had a windfall of Rs. 50 lakhs? What would be your immediate next steps? Can’t really chalk it out, can you?
This article is all about that. The necessary financial education to prepare you for a financial windfall, so that you are equipped to take the right financial decisions that you suddenly might have to, so that it benefits you in the best possible way!
Step 1: Be cautious!
Right after you receive a large sum of money, hold yourself. Take a deep breath and just be for the time being before you figure things out. Most people lose all the money they get in a matter of a few years whereas if they would have planned and taken the right decisions, they could have lived comfortably ever after! So be cautious, you might feel the urge to leave your job, invest, travel the world, spend it on something that you have always dreamt of, or even give away to some people, but do not do anything right away. Take time to plan it all out so that the money lasts and benefits you in the optimum way!
Step 2: Temporary Parking
After you get a sudden windfall of Rs.50 lakhs, your 2nd step should be to temporarily park your money somewhere. This gives you time to explore and weigh out all your options. There is no such risk in putting a large lump sum amount in a comparatively liquid account like a Savings Account. Just temporarily park it somewhere till you chalk out a plan.
Step 3: The Support Network
Your crucial third step should be to assemble a support team of financial professionals including an accountant, a lawyer, an insurance person, etc so as to take expert advice on tax, property planning, insurance, and related issues. This will help you create a proper financial plan. Though a windfall seems like a too good to be true happy event, but in reality it can be quite a stressful one and you need all the expertise in order to reduce your stress.
Step 4: Beware of over spending or over generosity
Perhaps the most important thing to keep in mind in case of a windfall! Avoid spending or giving away impulsively…because that’s exactly what you will feel like doing with Rs. 50 lakhs in your hands! A windfall is such an event that can convert the most financially conservative person to an impulsive shopper! Also, giving away to family and friends, or big donations to charity are all very common urges in windfall cases! Just remember that if your long term aim is to create lasting wealth, step on the brakes right now!
Step 5: Chalk Out your financial Needs and goals
The 5th step is definitely to evaluate your short term financial needs vs short term financial goals. Ask yourself these 8 questions such as these in order to draft a financial plan:
- Do you have debts you need to pay off?
- Do you have money for emergency situations?
- Do you need to give a second look at your retirement savings?
- Are you planning to buy a home?
- Do you want to pay for your children’s education?
- Do you want to continue with your job or quit and go into business?
- Do you want to loan or give some money to a loved one?
- What are your long term goals with your wealth?
Once you have gone through all the above 5 steps and have come to a rough draft of your financial plan where you have set aside for your short term financial needs as well taken decisions regarding your long terms financial goals, it is time for you to have a little fun! Yes, do not deprive yourself, go ahead and splurge a bit on yourself and what you love most! As long as you can control the urge to over-spend, your windfall will provide you with comfort and luxury for the rest of your life!