You may sometimes receive a sudden windfall in terms of finances. These could be from sale of business, inheritance received from parents, sale of property, your company going public, money received from litigation, alimony or just a huge lottery. 

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Some quick suggestions on what you should do:

1) First invest the money in some short-term safe liquid funds for a while till you are clear what you would like to do with it.

2) Then find a good financial planner or wealth manager who can help you with your finances. Identifying an honest advisor who will put your interest before his/her own is an exercise in itself. 

3) Check if you have to pay taxes on the windfall received. In case of sale of property or businesses, discuss with your chartered accountant and advisor to plan how you can do tax planning. In case of planned windfalls, better tax planning can be structured in advance, especially in case of business/stake sale. Set aside the tax to be paid in a separate fund, so that it earns some money till it needs to be paid in the financial year applicable.

4) List down your goals. Write down what you want your money to do for your and the needs for which you wish to keep money ready. A advisor can help you draw up a comprehensive financial strategy. This plan should be revisited once a year to update the goals, as they are dynamic and to factor any changes in your financial situation.

5) Apart from planning for contingencies and covering all life and non-life risks, the plan should help you understand how each goal can be met with your windfall. Costly loans like credit cards or personal loans should be closed immediately. However, continuing with your home loan is a wise decision. After providing for all goals, think through and plan carefully how the balance surplus can be invested towards wealth enhancement and transferred to the next generation.

6) Based on the actual goal need, the risk appetite and timelines of the goals, a proper asset allocation can be drawn up. Before the windfall, you might have planned for an aggressive growth-based asset allocation of your assets.The windfall may make you structure your assets to preserve the money and make you conservative. This may mean increasing your exposure to more debt-based investments versus equity. 

Once you have planned your goals with the windfall, you can plan how to spend time doing what you wished to do. I met a gentleman who after selling his business decided to spend Rs 1 crore a year visiting his family and friends across the globe and satisfy his passion to see the world. He decided that if any money remained at the end of the year from this amount, he would donate it to his favourite causes and charities. So, windfall gains can help in designing and reaching unaccomplished goals for you as well as others who may be less fortunate.

By: Chitra Iyer
(The writer is CEO of My Financial Advisor)

Source: DNA Money