MANILA, Philippines - Everybody dreams of winning the lotto and going on a buying spree with the prize money.
Being able to splurge on stuff that you could only have in your dreams, or living a life of luxury and abundance is something that everyone fantasizes about. But what if your dream suddenly becomes a reality and you find yourself as the recipient of a sudden windfall?
Although most of us associate windfalls with lotteries and other games of chance, the truth is that there are many sources of windfalls that can come your way. This could be in the form of an inheritance, an unforeseen bonus, a reward, refunds, the sale of assets, dividends, and raffle winnings, among others.
Not all windfalls will be in the multi-million peso range, but you may actually find yourself with an unexpected sum that you don’t know what to do with – say, a full month's salary.
Suddenly, you may find yourself wanting to splurge on yourself and others. In cases when news of your windfall leaks out, you may even find that people are suddenly knocking asking for “balato” or a donation for some favorite charity, and that relatives or friends who have not called you for years may suddenly show up with a sob story. The thought of leaving your job suddenly beckons. All sorts of investment ideas pop in your head.
What, then, should you do if you suddenly have a cash windfall?
The first thing you have to do is relax, and accept that a windfall puts you in a stressful situation. Try not to commit to anything and though emotions may be running high, don’t splurge everything or start giving away money like there’s no tomorrow. Instead, retreat and give yourself time to think things over.
Here are some points to consider should you have a sudden windfall.
Come up with a wish list and arrange in the order of priority.
You may list down everything that you want to acquire in this list –the medical treatment your mother has been postponing, the car you have always wanted, , the little sari-sari store you wanted to put up, the trip you’ve long wanted to take with your family, even the smart phone that your brother wants. Then, list down what you really have to get now, and which ones can come later. Depending on the size of the windfall, you will have a good idea which ones you can spend on first.
Look for safe investments while going through decision process.
Don’t rush yourself into making sudden decisions, but you can ensure the safety of your principal or even earn from it by putting it in safe investment instruments during this period. You can eventually draw from this once you've made a plan on how to spend your money.
Don’t quit your job or make permanent decisions.
A windfall may seem huge but don’t immediately abandon your career or quit your job. Try to take a long-term view. Your windfall may seem big now, but your needs will grow over time, and you may discover that you can’t live off that amount to last your entire lifetime. At one point, when the euphoria has subsided, you may discover that you want to focus on developing your career, which is why you wouldn’t want to quit your job without giving it much thought.
Put your financial house in order.
Do you have unpaid debts or other obligations to settle? Use the windfall to put your finances in order. Then, you can think about building an emergency fund which should cover your needs for the next six months to a year. You can also begin to build your nest egg or a retirement account.
Invest in your career.
Use the proceeds to finance a master’s degree or training in a field that you’d like to grow in and explore. Now that you have the funds, you may even be able to take a year off from work to study or undertake initiatives that will, in the long run, enhance your professional and personal life.
Don’t forget taxes and other legal requirements.
Make sure you are familiar with taxes you may have to pay and other legal requirements that you have to fulfill in connection with your windfall. For instance, you may be getting a huge inheritance, but taxes can eat up a big portion of that. If you win a car in a raffle, there may be taxes to pay.
Get professional financial advise.
This may be a good time to seek the guidance of a financial planner. He can help you plan how to use your money to meet your life goals.
And while you need to consider all these wise spending advice, yes you can still splurge a little. After you’ve covered the basics, go and enjoy your new found wealth – in moderation.
Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.
Visit www.citibank.com.ph for more information.