You are going about your usual day when you receive an unexpected notification. You pull out your phone and bring it close to your face, scarcely able to believe what you see. Your employer has announced a substantial bonus due to major company success, and you have just been credited with Ksh 100 million. This staggering sum is far beyond anything you have ever earned or even imagined. In an instant, your life takes a dramatic turn, opening up a world of possibilities and challenges. All of a sudden, your life seems to have taken a very different trajectory.
You look around your workplace and it does not look like such an appealing place anymore. You want to get out and start that firm you have always dreamed of owning. But first of all, you need to move out of that crappy apartment you have been living in. Maybe get yourself a cozy crib, and build your parents a house in the process. Those two humans deserve a good place to live after all they have put up with you.
But maybe you should start by taking a vacation. You know, “Kuambia Moyo Pole.” Maybe I should call Alex and the gang, they know some pretty hangouts. Suddenly, your brain blanks out. So many thoughts. So many plans. But the main question remains, ‘Is this the best way to spend my newfound wealth?’
This is such a complicated question to answer. But lucky for you, you have come to the Financial experts who will help ensure that your money is put to good use. But first things first.
What is a Financial Windfall?
A financial windfall refers to unexpected, significant money. Financial windfall can come from various sources:
- Inheritance
- Winning lottery (Wale wa Sportpesa)
- Legal settlement
- The sudden gain in investment
Since this is the kind of money that you had not planned for, it can leave you confused as to how best to spend it. The reason why most lottery winners go broke after a short period is that seeing such a huge amount of money can leave you feeling like you can carelessly spend the money without exhausting it.
When a financial windfall comes, you may feel overwhelmed by all the projects that you should do. Most people will choose to spend such money on various (well-meant) long projects such as:
- Building a house. Either for yourself or your parents
- Go on a vacation in a place further than the next town or country
- Bankrolling a community project
- Pouring it all in a business (well-thought-out or not)
While these projects are not necessarily bad, they end up draining every penny you have. Undertaking a long project can be one of the best things you can do for yourself, your family, and even your community. However, this needs to be approached with caution, ensuring that it does not drain you and leave an angry, broke person who now hates people.
Is a financial windfall then just a curse in a fancy name? Not at all. A financial windfall can grant you financial freedom when used well.
How to Handle a Financial Windfall
Top up your emergency fund
First things first, you need to put some money aside for the rainy day. Topping up your emergency fund will help ensure that even if something happens to your unexpected wealth and even to your normal job, you can still handle your bills for at least six months or so.
Invest in a skill
Investing in things and experiences is cool and all. But what is even better? Learning a new skill. Getting a new skill will help ensure that this skill can feed you in the future. Or it will make you more attractive to your employers or their competitors who will pay you what you have always dreamed of. Is there a skill that you have been hoping to learn? Now is the time to invest in training and certification.
Pay debts
I know. I know. Paying off debts does not look like such an interesting thing to do with your new money. However, paying off a debt will save you in more ways than one. If the loan is quite big, you do not need to settle it all at once. You should only choose to settle the entire debt at once if after doing this, you are still left with more than 50% of the windfall. However, paying a huge part of it will help ensure that your monthly interest is reduced by a lot.
Invest
One of the best ways to make your unexpected riches work for you in making investments. This will help ensure that even if you exhaust that money, you can earn dividends from a part of it for a long time. You can choose to invest in Saccos, MMFs, bonds, and stock to ern interest and dividends among others. Diversify your investments to ensure that if one goes down, you do not lose all your money.
Corporate Social Responsibility (CSR) Project
After doing the above, you can now choose a project that is quite dear to you and invest in it. You can now build your parents their dream house or bankroll a community project. However, do not get carried away. Ensure that you can easily complete the project that you choose to undertake. Depending on the money you still have left, you can carry out more than one project. However, do one project at a time to ensure that you can handle any unforeseeable risks if and when they arise without having to abandon the other project.
Have some fun
As financial consultants, we have nothing against having some fun and enjoying unexpected profits. All we want is to ensure that you can enjoy this money for years to come. However, there is nothing wrong with setting aside some small money (emphasis on small) to spoil yourself. Go for that vacation. Join your friends for that hike. You can do this guilt-free, knowing that you have already done the right thing with the rest of your money and that you have secured your financial freedom.
Final Thought
Financial windfalls can change the entire trajectory of your life. They can help you lead a life that you never thought possible. However, this can only happen if you make the right financial decisions when you get that unexpected money. If you find yourself in such a position and you do not know what do to with that money, come to us. We will turn that unexpected money into sure wealth that you can enjoy now and for years to come.
