HOW TO USE A LUMPSUM AMOUNT
Did you receive a sudden influx of cashflow? This sudden influx of money could be in the form of bonus, inheritance, court settlement, sale of property, tax refund, or a generous gift from a closed one. The feeling of eternal bliss is suddenly overcome by a feeling of helplessness and anxiety. Why? Most investors are unsure about how to use this lumpsum amount. Are you one of those investors? Don’t worry, there are several investors who are in the same boat as you. This article will be your saviour by guiding you four different ways how you can efficiently use your lumpsum amount.
How to use a lumpsum amount?
Following are some ways in which an investor can use their lumpsum amount:
Pay off your debt, especially high-interest debt
The first thing you should aim to achieve with your lumpsum amount is clearing off your existing debt. You can start with high-yielding interest loans such as personal loans, credit card debt, unsecured loans, etc. These debts have the potential to eat away a huge chunk of your income. Interest rates on these loans can be as high as 10 to 15% per annum.
Replenish your emergency fund
Next, you can use your lumpsum amount to replenish your emergency fund. An emergency fund acts as a lifesaver during contingencies such as job loss, sudden demise of a close family member, medical bills, home repair, etc. Experts advise investing at least three to six months of your living expenses in emergency funds. You can invest your emergency funds in investment options with high liquidity such as liquid funds, money market instruments, etc.
Invest for a better future
If you wish to create a secured financial future for self and your dependents, you must save and invest a as much as possible. Investing in mutual funds is a good option for investors new to the investing world. Investing your money helps to achieve your financial goals and is one of the key ingredients in wealth creation. A lumpsum mutual fund has the potential to generate significant returns on your investments. You can use a lumpsum calculator to apprehend the returns on your mutual fund investments. What’s more, investing and building wealth makes an investor financially independent, which further gives the confidence to handle things in a better way.
You can also use a part of the lumpsum amount to treat yourself. Because, let’s face it what’s the importance of money and building wealth if you cannot enjoy it from time to time. You can use this amount to treat yourself to a luxurious spa, or buy a new piece of clothing or furniture, or take yourself on a much-needed vacation, or indulge in a hobby. The best investment is the one that is made on you.
Have you already made plans on how to use your lumpsum amount? We really hope you did. Remember, becoming financially independent is one of the best things that can happen to you. Although, on your journey towards being financially independent, do not forget to spoil yourself from time to time. Happy investing!