Well none of us get a windfall everyday…but what should we do if we get one?
There is no clear answer to a question like ‘what to do with a windfall’ – because there is no one answer which will fit all of us.
Let us say a person gets a windfall – let us say Rs. 10 lakhs – and all the persons who receive it have a net worth of Rs. 2-3 crores.
Thus this ‘windfall’ is ONLY about 3-5% of their net-worth. In such a case the chances are the receiver is not so excited, but surely very happy.
First you should put it in a liquid fund. This is because you should not do anything on the day you are excited. Just relax.
Then you have the following options:
1. If you have debt – and that too personal loan, car loan, vacation loan, and a housing loan, you should down pay your loans. And how you repay will be according to the sequence of their COST, not SIZE. Many people I know repay based on size. I had a Rs. 88 lakhs home loan, I got a Rs. 8 lakh windfall, so I repaid Rs. 8 Lakhs….this is WRONG. Repay the MOST expensive loan first….Simple? Well do it.
2. Assuming you have no debt and you are doing SIP in a sensibly well thought out schemes – just divide the whole amount into all the schemes. Equally or on a weighted basis as your plan.
3. Just put it in a pension plan and lock it up: This is also a sensible thing to do – making your older age a little more comfortable.
4. Put it in a plan for your kids education – thus allowing them to participate in your windfall gain!
These are the investment plans that one can think of……of course the best thing to do is like this:
Spend 1/3rd on something you / your loved one always wanted – could be a vacation or a thing.
Spend 1/3rd on replacing some asset which you had been postponing
Invest 1/3rd the way I have enumerated above.
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