By Babajide Komolafe

To maximise a financial windfall to create wealth, you must recognise it and understand its purpose. And as established in the first part, a financial windfall is an opportunity to create wealth and increase your regular income, rather than an opportunity to increase current consumption and lifestyle.

Having this understanding is critical to how you handle a financial windfall. This is because once you have a windfall your thoughts will be focussed on how to use it to create wealth, how to increase regular income in a sustainable way.

When you have a financial windfall, the first thing is not to tell anybody. Why? When people know you have a windfall, they will expect to see the impact on your lifestyle. This puts you under pressure to spend the windfall on current consumption to prove that you have one. Also telling others would likely attract requests for financial assistance from relatives and friends. People will expect you to give more, support more and you become the target or first port of call for everyone who is in need of financial assistance. Consequently, and unconsciously, you may end up spending a significant amount of the windfall on meeting these requests. So, as much as possible, don’t tell anyone that you have a windfall.

The second thing is that, as much as possible, don’t spend a dime from the windfall. Save everything immediately. This is especially so, if your current regular income sufficiently covers your current living expenses, and there is no critical personal or family need (school fees, house rents, health challenges) that require urgent attention. Even if there is any such need, you should set a limit on the amount of the windfall you will spend for such a purpose. It could be 10% or 20% depending on the size of the windfall and the need that requires attention.

However, and even if there is such a critical need, immediately the windfall comes, save all of it first. Not in a bank account, but in an investment account, especially a mutual fund investment account. This is to ensure the windfall begins to generate income immediately.

Given the current level of interest rate in the economy, the average return on money market mutual funds is 17%. This means, if you save N1 million in such a fund, it will generate a daily income of N465.75. The monthly income will be N14,166 and in a year, it will generate income of N170,000.