What To Do With Unexpected Money

At some point in our lives or the other, we have imagined what it would feel like if we woke up to sudden money. Here are tips to guide you, should it ever happen.

What will you do if you suddenly won 10 Billion Naira?

At some point in our lives or the other, we have imagined what it would feel like if we woke up to sudden money. Maybe we suddenly found out we were heirs to a throne, got willed a huge sum, struck a huge business deal, or simply won the lottery.

Top items on the list would probably be to change your car, move into a bigger apartment, and basically change overall quality of life. But the reality is that no matter how huge any sum of money seems, it has a definite expiration date which is most times shorter than we think – unless there is a clear spending, budgeting and investment plan in place.

Research has it that approximately 70% of people who receive a huge sum of money unexpectedly will squander it in only a few years. In order to not blow your luck if ever it happens, here are some tips on what you should do with it.

Plan

There are a billion things you can do with 10 Billion Naira but the first thing you must do is plan. While it might be tempting to go on an initial splurge to celebrate your new found wealth, you need to rid yourself of the temptation to do that first.

Plan, accommodating all the lifestyle changes you want, the debt you need to repay, the investments you need to make and so on.

Cancel out your debt

Really, even if it skips your mind to pay the people you owe, it wouldn’t skip theirs and as soon as they hear about your big break, they would soon be knocking at your front door. The first set of funds should go to eliminating your debt.

This is an investment on its own because after paying the debt, the returns for which you originally took the risk of taking a debt for, would now be all yours. It means when you get your return on investment, you would now have it 100% to yourself.

Meet your core needs and wants

It still isn’t time for a lifestyle change, but you must feel the first wave of comfort your new found wealth brings. Are there things that have been pending, bills you need to pay, courses you need to pay for, foodstuff you need to stock the house with, repairing the generator/ buying fuel, etc.

As many as those core needs and wants are, you need to take care of them just so you can be a little more comfortable.

Save

The reason you’re saving here is because you’re going to spend most of the money anyway. You’re going to pay the car dealer, the house owner, many luxury stores, and so on. You would be doing yourself a serious disservice if you have to pay them and forget to pay yourself.

This is the fund you leave dormant, at least for now. A savings account might not be so good, but treasury bills and other money market instruments would be able to keep your funds intact while retaining whatever value the money is worth by keeping the funds growing above the rising inflation rate.

Create multiple sources of income/ invest

The only way to stop the money from completely dissipating is to multiply it. The only way to ensure that you retain this new and comfortable quality of living, is to ensure that you never drop below this point.

Invest in a good portfolio of stocks for the long term, start the business you’ve been planning to start (after carefully determining its viability), be an angel investor for a project you have always believed in and so on.

It is also important not to get lost here as you can still lose your money if you don’t tread with caution. You are still required to assess your risk tolerance and that of the places you’re investing into, before you commit.

Create an emergency fund

Create an emergency fund that is separate from your savings and separate from your investments. This can include funds for specific contingencies or purposes. Think your children’s education fund, a health fund, and so on. This is what cushions the blow if something goes wrong.

Have a little fun

With these things in place, you have money to have a little fun. No need to explain here because you already know what fun means for you.

Do some good

Help your community, help your friends, help your family members. While it is natural for everybody to flood you with their problems during your peak season like this, there are a few people that you just would need to assist.

Choose which causes you want to fight for and see how much goodwill you get from those small acts of service.

Hold your money

Finally, don’t get lost in the habit of spending. Sometimes, it is just good to see how much you have and watch it increase. It’s all yours, so why rush it?

Written by Lawretta Egba.