Coming into money does actually happen. You might not win millions on the lottery (the odds against it are astronomical) but you might find yourself with a cash lump sum if a wealthy relative remembers you in their will.
It is only likely to happen once or twice in a lifetime. So, if you are lucky, you need to make your cash windfall work hard for you.
At Continuum, we can help integrate a surprise cash bonus into your long-term financial planning.
Make a plan
Suddenly finding you have an unexpected inheritance can be hard to deal with. But before you buy that Bentley and book the cruise, stop and think. You will probably never get another chance to improve your entire financial future, and you need to plan how to make your windfall work for you.
With a direction in mind, you can plan more effectively – and get the help of an expert financial adviser. They may recommend a number of priorities, depending on your current situation.
Pay off debts
You may not want to pay off all your debts with your windfall. There are more exciting ways of using it – but if you can it’s important to deal with any high interest debt.
Paying off costly credit cards is a must. Making an extra mortgage payment or two will mean you end up paying less interest in the long run. But a mortgage can be a very good deal, and if the interest rate is very low you might be better off investing the money for capital growth instead.
Put aside an emergency fund
It can be important to have access to cash in an emergency. You need a rainy day fund in an easy access savings account to cover emergencies or unexpected costs.
The exact amount you should have depends on your needs and financial responsibilities. Our online Cash Calculator will review and compare the best interest rate returns for your savings.
Look at your insurance provision too. Your Continuum adviser will be able to help find you the best place for your emergency cash and the insurance policies you need.
Making your windfall grow
With your financial safety net ready, you should be ready to think about investing.
In the current market environment bank savings rates are lower than inflation this means that with rates as they currently stand, money left in the bank will steadily lose value over time.
The stock market offers the best chance of protecting your wealth from inflation, albeit with some level of risk.
So you might want to start by using your tax-efficient ISA allowance. This will allow you to put the maximum £20,000 inside this year’s ISA allowance for the tax year 2019/20.
Invest at the beginning of each tax year (6 April) to get the maximum benefit. You can continue to add to your ISA each year, using your new allowance.
You might also look at pensions. Pensions also offer valuable tax benefits and have tax relief added in by the Government. If you are in danger of paying tax on your windfall pensions are a brilliant way to help avoid it, but you would not be able to access your pot until you turn 55. Discussing your pension arrangements with a Continuum adviser is a good idea, whether or not you have been hit by a windfall.
Above all, getting that expert help is essential.
Getting the help you need
If you are lucky enough to have a windfall, a call to Continuum for the help you need might be the best first move you can make. We can help you safeguard and grow your new found wealth. And if you have not been lucky just yet? We can still help, with strategies to make the most of your available resources, and to build your wealth through regular investment.
Windfall or not, for a better financial future, call us today.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
The Financial Conduct Authority does not regulate deposit accounts.
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