How to manage windfall successfully

If you have ever followed the story of someone who had won a lottery, chances are high that after few months or years, he may be in more financial distress than he was, before hitting the jackpot. The fact that windfall is a double-edged sword makes it difficult to manage them. It might give you a false sense of financial invincibility, which may prompt you to take a financially irresponsible decision. A commonly heard statistic is that more than 75 per cent of windfalls is squandered. Therefore, it is important for you to have a foolproof programme that helps your windfall to last longer than you.
A lottery is just one way of getting windfall gains. Inheritance, divorce settlement, lawsuit settlement, widowhood, an insurance settlement, real estate sale etc are the other common ways in which you can get windfalls.

Since most of the windfall gains are squandered, it is important to plan and follow these steps.
·         First invest the money in a liquid fund for at least six months. This will help you to control your emotions. The sense of being ‘Richie Rich’ subsides within a few months. This is important as it will help you to come up with a sound plan for putting the money to work.
·         Resist yourself from any temptation such as buying a luxury home, an expensive flashy car or quitting your job.
·         Pay off any high-interest rate paying debts. The first cheque that you should write out of the windfall gains is to pay off your high-interest debt. It will help you to save money in the long run.
·         After paying off debt, get a reasonable estimate of what you can buy. Many people waste windfalls simply because they overestimate what the money is capable of buying. By the time they realize their mistake, the money is gone, and many are saddled with more debts than ever. Therefore, calculate the size of your windfall after taxes and paying off debts. Next, you can use this fund either to increase your annual income or invest it in a fund, depending upon your risk appetite. Check its worth after 5, 10 or 20 years. This will help you to get a complete picture of your financial position.
·         Hire a professional. Unless you are well-educated in matters of financial, estate, and tax planning, this is no time to go alone. Acquiring a windfall can be wonderful, but it comes with its own set of problems. Enlisting the help of the right financial professionals is usually a very worthwhile investment that saves time, money and headaches.