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So you've come into a sudden windfall—perhaps you had the
winning Lotto or Playwin ticket or received a large income
tax refund or you have received a large inheritance. While
it's very tempting to indulge in spending it, there are a
number of more profitable options which you should adopt
to judiciously use this onetime cash blessing.
Before you make any spending or investing decisions, chalk
out your financial priorities. Are you saving towards any
particular financial goals based on a financial plan? What
is the timeframe of those goals? Here are a few ways for
making the best use of your windfall—both long-term and
short-term. Be sure to pay down any high-interest debt
first—such as credit cards loans, personal loans etc.
If you want to reduce your home loan or auto loan, look
into the prepayment options offered by your lender. Most
lenders will allow you to prepay a certain percentage of
the outstanding principal once a year, or might charge
some small penalty. Once you've taken care of your near
term needs with your sudden cash, you can pay attention to
your long-term financial plan and invest the rest in
accordance to your plan. You can use your windfall to
build a portfolio of investments. Through asset
allocation, you can increase your potential to maximize
returns while maintaining an optimal level of risk.
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