Received a large sum of money? Lucky you! By taking practical steps, you can ensure your newfound wealth goes much further…
Research has shown that on average, people who receive an inheritance spend about half of it.1 So how can you be that amazing and eminently sensible one who makes sure your windfall doesn’t just vanish but helps you build a secure financial future? Here are six smart ways.
1. Set money aside
To avoid the temptation of spending it impulsively, rashly and super quickly, you could put the money away temporarily in a deposit account or short-term investment. Leaving the sum aside for one or two months may give you more time to plan, have a think about what you’d like or to engage a professional financial adviser for guidance on using the money wisely.
2. Settle debts
Using a windfall to clear debts can put you on a better financial footing. Consider working with your financial adviser to create a budget that considers all your debt obligations, income and windfall. This can also be a good chance to discuss the opportunity to invest and grow your money.
3. Grow the emergency fund
Building up your emergency fund – or creating one if you haven’t got one – can be another way to make good use of the funds. By increasing the emergency stash to cover expenses for six months, you may be better positioned to handle unexpected events such as a job loss, illness or accidents. Working out where best to put that can also be done with the assistance of an adviser.
4. Beef up retirement savings
Making extra contributions to your superannuation may help you optimise your windfall. Whether you make non-concessional contributions or, if you are employed, arrange to have a portion of your pre-tax salary paid to your super, increasing your retirement savings can help you secure your financial future. And don’t get me started on how compound interest can help you out here over all those years to retirement too!
5. Fund your goals
Take the opportunity to build savings for some of your personal goals, such as higher education or travelling to places on your bucket list. Maybe consider doing this only after you’ve paid off debt and built up that emergency stash!
6. Give to others
Receiving a large windfall can be a chance to help others in need. If you decide to give some money away to those less fortunate, consider donating it to an organisation that’s entitled to receive tax-deductible gifts, so you can claim a tax deduction. Being philanthropic feels good too! Websites now also have to tell you how much of the money actually gets to where it’s needed and what is spent on administrative purposes.
Chances are, your future self will be pretty chuffed with you doing such great ‘adulting!’