Several households plan on sustaining on their regular income that usually comes in a regular way – either monthly (mostly) or weekly. However, one may experience occasional windfall of money when they receive a significant amount of money which is not expectant. Some common examples of lumpsum amount may include bonuses at work, court settlements, sale of investments, inheritance, or tax refunds. If you receive a lumpsum amount, use it wisely to achieve your personal and financial goals. This article will include ways about how you can use your lumpsum of money.
Pay down debt
One of the best ways of utilizing your lumpsum amount is paying off your high-interest loans and debts such as personal loans, credit card debts, home loan, etc. These loans and debts can cause a huge dents in your savings as their interest rates can go as high as 10 to 15% per annum. Hence, clearing off your debt is one of the best long term investments you can make. If you are unable to pay off the entire loan in one go, consider paying as much as you can so that it reduces the out go on interest rates to a great extent.
Build your emergency fund
Financial advisors often stress out the importance of owning a emergency fund. An emergency fund helps an individual to deal with a financial crisis in a better way. It is advised to keep at least three to six months’ of your living expenses as emergency fund. So, in the future, if you have any unplanned expenses such as demise of a close family member, or job loss, or home repair, medical bills, or car repairs, you have the right resources to cater to these big-ticket expenses. Experts advise investors to invest their emergency corpus in investment options that are highly liquid.
Save and invest
If you have achieved the above two parameters and are in a good financial place currently, you might consider saving a portion of your lumpsum amount and investing in high interest-bearing instruments such as mutual funds. Mutual fund investments help an investor to grow their wealth over time. Invest in mutual funds only after carefully evaluating your personal goals, investment horizon, and risk profile. You may also consider upping your game and ensuring adequate retirement planning. There are several types of mutual funds for retirement available to an investor. Choose the one that best suits your portfolio and make a lumpsum investment. You can further systematically transfer your funds in a Systematic Investment Plan (SIP). You can use a mutual fund lumpsum calculator to evaluate the future value of your lumpsum mutual fund.
All work and no play makes Jack a dull boy. You must be well-versed with this adage saying. This holds true over here as well. It is always a good idea to spoil yourself. You may consider taking a vacation, going on a shopping spree, or simply even a weekend trip. Do, whatever makes you happy.