What to do with a windfall gain!

Sometimes life plays us a good hand - a stroke of luck..some money comes our way that we were not expecting- a financial windfall.

These windfalls dont happen very often and one would be lucky to get anything like this in ones lifetime. .. its a lottery without buying a ticket every month.

When such windfalls happen it should be utilized in the right manner to ensure prosperity for yourself over the time to come.

In the time of the property boom a lot of farmers made many crores when they sold off their land - i remember a hard working taxi driver who i used to use to go to the airport  who got 6cr as a part of his share of sale of land. He was going  to start something else. At that time i recall wondering wow... with all of my education and effort i could never reach that stage .

Recently there was an article of a person winning the lottery in the UAE for 1.6mn$.

It is reported that 95% of people who get these windfalls lose it very quickly because they dont invest in the right things.

Investment in the right thing means investing in assets that generate income ( referring back to rich dad poor dad definition).

So here is a list of things one can do if there is a windfall gain in order of priority


1. Pay off any credit card debt.  With such high rates of 30%+ this should be top priority.
2. Buy and invest in life insurance and health insurance for the family.
3. Create your emergency reserve. Keep half of the reserve in bank deposits which can be broken in times of need ( or open an account where you can have high saving deposit rate like kotak or yes banks) and the other half in liquid funds.
4. Pre pay any housing loan. With high interest rates and the markets not going anywhere it is the right time to pay back and save on interest rates. Also with  the deduction on interest now at a max of 2l per annum this will serve you well later. ( ensure all loans are paid off before you are 50)
5. Invest for your goals . Do a stp into mutual funds basis your risk appetite. These can be equity or debt.


Of course  it is not all about investing.  Use some of the money  upto a max of 10% to relax and enjoy.


Simple rules .. important rules... applicable to all .. you and me..

Its simplefinancialsense!!