It is not of­ten we re­ceive wind­falls or sums of mon­ey that come from one-off cir­cum­stances. Any lump sum in­come is al­ways wel­comed. Mon­ey out­side our or­di­nary earn­ings can how­ev­er be a tricky and eas­i­ly mis­used bless­ing. Lump sums (like the ea­ger­ly await­ed Christ­mas bonus) al­ways seem big un­til you start spend­ing them. The con­fi­dence and the urge to spend in­crease from the time we know we have some com­ing our way. Of course it's won­der­ful to en­joy the fruits of your hard work, but in or­der to re­al­ly reap the ben­e­fits of any mon­ey even a small bit of plan­ning can go a long way.

Whether it's back pay, an in­her­i­tance, win­nings, earn­ings from in­vest­ments, VSEP or re­tire­ment mon­ey, these wind­falls, for the most part, come along just once in a life­time. Can this mon­ey bring a quick fix or can it im­prove the qual­i­ty of life for you and yours over the long term? Of course the us­es we have and find for new mon­ey de­pend on the cir­cum­stances of our life at the time when these strokes of good for­tune meet us. We may fi­nal­ly have the abil­i­ty to liq­ui­date bills and debts that have been hang­ing over our heads for years–home im­prove­ments, a new car, ed­u­ca­tion.

How much is it?

The size of the wind­fall is def­i­nite­ly the biggest fac­tor in defin­ing what you can do. Larg­er, more sig­nif­i­cant sums call for a high­er de­gree of plan­ning and pri­ori­ti­sa­tion than small­er amounts.

Think be­fore you spend. Re­sist the de­sire to start spend­ing im­me­di­ate­ly. Re­mem­ber this mon­ey can have a pro­found im­pact on your fu­ture and it can be ei­ther pos­i­tive or neg­a­tive. It is rec­om­mend­ed that you put your mon­ey aside in a bank ac­count for a "cool­ing off pe­ri­od". This will buy you time to re­spon­si­bly bud­get for the whole amount. Don't be em­bar­rassed to seek the pro­fes­sion­al ad­vice of a fi­nan­cial ad­vi­sor or plan­ner. You can hire the ser­vices of these pro­fes­sion­als, or your bankers can pro­vide enough free guid­ance to get you on track.

Sav­ings and In­vest­ment Ve­hi­cles

When bud­get­ing for your wind­fall you need to put aside some of it for sav­ings and in­vest­ment. While the lump sum may come at a time when you have very clear and present needs, al­ways put some­thing aside. Con­sid­er any or a com­bi­na­tion of some of the fol­low­ing ve­hi­cles:

1. Sav­ings ac­counts

2. (Fixed) De­posits ac­count

3. Trea­sury Bills

4 . Mon­ey Mar­ket funds

5. Cred­it Union shares in­vest­ment

6. Stocks and shares

7. Bonds (in an ac­tive­ly trad­ed mar­ket)

8. Eq­ui­ty-based mu­tu­al funds

9 In­come-gen­er­at­ing re­al es­tate

No two in­di­vid­u­als are sub­ject to iden­ti­cal cir­cum­stances and ac­cord­ing­ly, how they use re­sources will dif­fer. Your age, for in­stance, may dic­tate your needs and spend­ing pri­or­i­ties to a great ex­tent. At 25, what we spend on or plan for is quite dif­fer­ent from what you may pri­ori­tise at 50. The ul­ti­mate ob­jec­tive is to use your lump sum to cre­ate and add an­oth­er com­po­nent to your list or port­fo­lio of as­sets which, through time, will con­tribute to your fi­nan­cial in­de­pen­dence.

(Na­tion­al Fi­nan­cial

Lit­er­a­cy Pro­gramme)