Have you made a profit when you downsized your home, or inherited some money? You might have some of that windfall earmarked for necessary house repairs or a desperately needed new washing machine, but what will you do with the rest?
Instead of seeing it all dribble away on dining out or new clothes, it’s time to make a plan. Here are some suggestions:
Clear any debt
Stop paying high interest on credit cards, store cards or personal loans by paying off those debts. Getting rid of them will save you a lot in the long run.
Set up an emergency fund
Anything can happen – sudden illness, accident, act-of-god emergency – and you’ll be glad you have some dosh put away in a term deposit or savings account. Make it enough to cover several months’ living expenses, just for your peace of mind.
Take what you have left to an expert
It can be terrifying how quickly and easily you can spend a great deal of money, so get some advice before you do anything else. A financial advisor can look at your financial situation and help you decide on your next best step – investments, an estate plan and any tax issues, or even that big-ticket item you’d like to aim for.
Make some choices
It’s decision time. You might still have a mortgage – do you pay it off or go on an overseas trip? Do you invest your money or put it in a trust for your family? Maybe you’d like to help out a charity, make your hobby into a business, or simply live in a little more luxury. Now you’ve cleared your debt, new clothes and dining out more often may be just what you need. It’s your money – you get to decide.
Update your will
A windfall may change the terms of your will. Updating your will is something you should do every few years anyway, and income from investments or a freehold home could change how you bequeath your assets – and to whom. If you have an estate plan, that will need revision too. If you don’t, you might consider establishing one if your new-found riches make your financial picture more complex.
The future the way you want it
You might be able to realise some long-held dreams with a windfall, but not if you carelessly fritter it away on luxuries before you’ve made a proper plan. Be mindful of your financial situation and clear any high-interest debt. Then, if you aren’t sure what to do next, consult an expert who will advise you on the best actions for your situation. That might be making your home freehold, setting up investments or establishing a trust.
Once you’ve allocated your funds to your satisfaction, it’s time to get your will and estate plan up to date, and in line with your new financial picture.