Smart Tips To Turn a Lump Sum Into a Lifelong Advantage
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Smart and handy tips to ensure that your lump sum or windfall in the form of inheritance, refunds, stock option money and others provide you with a lifelong financial edge.
Edited highlights
0:28 We will tell you how to make large sum of money or a lump sum, last a life time and help you meet your needs
1:17 It is not uncommon to find people squandering lump sums
1:42 This discussion is not about severance pay or premature retirement money since they require you to replace a regular income
2:15 This discussion is not about severance pay or premature retirement money since they require you to replace a regular income
2:21 It could be a liquid account or a separate savings account
2:31 To make the lump sum last you for long, you will need a financial plan
2:55 Figure how much you need to pay taxes for your lump sum or windfall
3:13 Next, find out whether there are tax saving investments or tax deductions available to you
3:29 For instance, you have capital gains tax saving bonds like REC Bonds that provide tax deduction under Section 54EC
4:17 Examine if you can claim more deduction from sections already providing tax deductions such as Section 80C
4:33 Net of taxes, find out the part of the lump sum or windfall available to you
5:15 Earmark 25% of the lump sum, net of taxes, for expenses that you need to incur
5:43 After meeting all the urgent expenses, you could consider buying things that you want
6:06 Retire, repay, partly or full prepay any costly loan
6:35 Remember, returns from investments, especially market-linked investments, can be uncertain, loan EMIs aren't
7:01 Prepaying loans frees you to aggressively invest for future needs
7:37 After loan prepayments, invest in higher risk, higher reward, investments like equity funds
8:19 You can choose from SIPs and STPs of mutual funds
8:31 Over 8-10 years or more, you investments made from lump sum grows
8:41 You can also have mutual funds portfolios for child's higher education and your retirement
8:56 25% of lump sum money, net of taxes, needs to be invested in growth investments
9:26 If some money is still left, you can bolster your liquidity position by investing in liquid funds
9:49 If you have a good liquidity position, consider investments in PPF since they provide tax deductions for contribution, interest and maturity proceeds
10:15 Consider earmarking 10% of the lump sum, net of taxes, to bolster your liquidity position
