HOW TO INVEST A WINDFALL
MANY PEOPLE REGARD THEIR
additional income as money that falls outside of their traditional income, and can be spent freely. But, says Jacques van Heerden, head: retail bank, transactional and investments at Standard Bank, investing your bonus wisely not only reduces stress, but it can pay handsome dividends if used to pay off your debt.
BELOW ARE A FEW EXAMPLES OF HOW TO MAXIMISE YOUR WINDFALLS:
Settle retail accounts. Accounts are a major drain on personal finances. Buying a new outfit or jewellery may bring joy, but having to pay for it every month can soon take the shine off the bling.
Investing to beat inflation. You could consider i nvesting your windfall to grow your wealth, or you could consider putting it into a long-term investment portfolio, such as a unit trust, which is an ideal way to grow your money and build wealth.
For example, if you buy a unit trust worth R10 000 and earn a 9% annual return over three years, you will have grown your money by R2 950. By i nvesting t he original R10 000 for five years, you will earn R5 386. And if you continue to hold your investment for 1 0 years, without adding a cent, you would earn interest of R13 674.
I nvest i n a retirement plan i f you don’t already have one. It will give you peace of mind knowing that you can retire comfortably in the future. If you get an annual i ncrease along with your extra income, use the increase to add to this investment every month.
You may t hi nk t hat s avi ng about R500 a month may not be worth i t , but i f you i nvest R500 a month for five years at a return of 9% and an escalation of 5% per annum, you will have saved R41 200. In addition, your R1 0 000 wi l l have grown t o R15 386.
I nvesting i n your education. Whatever i ndustry or ser vi ce you’re in, changes and developments are happening at a significant speed; if you don’t continually educate yourself, you may be left behind. Don’t wait for your employer to offer training, go out and do it on your own account and reap the financial rewards that come with it.