Keeping the brakes while blowing a windfall

If you have never earned a million naira in one lump and someone walked up to you and asked, “What would you do if I give you ten million naira now? What would be your response? I can imagine what thoughts will be swimming through your mind; buy a house, buy a car, pay off all debts, finance your Masters program, and so on.

You are likely to go all day dreaming a thousand and one ways that money can improve the quality of life you lead now or the one you have always dreamed of leading. You will imagine how people will react when they see the new “you”. It is natural; we always want to be seen to making progress.

Let us take it a step further and say, you actually received a dream inheritance. Perhaps, a close relative passed away and your name was mentioned in one significant part of the will. Or – my favourite, you landed a dream job with mind-blowing packages. Or you won the Lagos lottery. You have hit jackpot!

In most cases, people will blow the money even before they see it. Some individuals will go as far as collecting items on loans, hoping to pay back when the money finally gets to them. We get you; a windfall is usually unexpected and therefore, things unplanned for follow them.

While we admit the temptation can be overpowering, it is wisdom to apply the brakes. Stop; take a deep breath and think. Take a re-evaluation of your life before you consider spending any dime from the windfall. In the process of re-evaluation, put the money into a low-risk interest-yielding account and allow it to sit for a little. Your money will work best if you strategically plan how to use it.

The next is to seek professional financial advice. Yes, you may have to pay for the service to get the best results, but in the long-term, you are better. Should you prefer not to see someone in person, there are vast materials online and in print to help you make the most of your new wealth.

Many experts will start you off with paying the debts. This is because you cannot claim wealth when you have debt hanging around your neck. It could be education, house, car, credit cards or even business loans. Start by paying down the highest interest rate first. Walk your way down to the last on the list and make your life a little easier.

To avoid going back into long-term debt, create an emergency fund. Ensure you put away at least three to six months worth of living expenses, depending on the reality of your income. Your emergency fund should be tied to specific goals, like your old age, your house and so on. If you already have an emergency fund, use the opportunity presented by the windfall to take the fund to your desired goal.

A qualified financial adviser can also help you set a budget and do long-term planning. He or she takes you through the process step by step.

Another major advantage of an expert help is the practical knowledge you receive regarding where and how to invest the remaining part of your windfall. You are likely to be introduced to some fantastic high-yielding low-risk financial investments in bonds or the stock market. Do not just decide on your own and start buying stocks, bonds or mutual funds without a plan.

Figure out what investment will be most beneficial to you, and get help with estate planning and with the vehicles that can help you protect your wealth.

Finally, once you have your plans in place and working, give yourself a treat. You can go out, do some shopping. It is okay. We get you.