Tuesday, 22 February 2011

How to handle unexpected Income

You may think that what the unexpected income is. You can get unexpected income from different sources. I am not telling about winning from lottery only. That also may be an unexpected income. There are many ways you can get unexpected income. This unexpected income may be one time income or may be a regular income such as promotion, or salary hike. First let us think about the lump sum receipts of unexpected income such as lottery or good harvest from agriculture etc.

Settle your Loan.

In the investment point of view finish your loan is the first priority, when you receive lump sum money. When you pay off your loan priority should be given to the loan with high interest and then come down to lower interest loan.

Make onetime investment

After setting off your loan you can turn to investment side. You can invest your money in any type of investment as per the amount of money you have and the requirement of your money in future. If you want money in near future, just turn to short term investments such as fixed deposits, open ended mutual funds etc., and if you need money only after a long time you can turn to investment in house property, investment in other real estate, long term mutual funds etc.

Invest for children and family

You have to consider your children and care should be taken for their higher education, marriage etc. When you invest, keep in mind these financial needs and act accordingly.

But the things can be change when you get an unexpected regular income such as promotion, salary hike or getting a better job etc., In such cases you have the chance of getting more regular income and you should act accordingly, Here also for the investment view point you may act as follows:-

Increase your EMI

If you have an existing loan, increase the amount of EMI (Equated Monthly Installments) and try to set off the loan early and can save a good portion of interest you have to pay from your regular source of income.

Make regular investments

You can invest your additional income in any good investment methods as per your investment strategy and risk tolerance. You can start an RD (recurring deposit) in any banks or post offices or can deposit in mutual funds through monthly SIP (Systematic Investment Plan) and can also invest in SIS (Systematic investment of shares) etc. Take advantage from the compound interest or compound income system (a powerful money multiplying system) which helps to grow your money with a magnificent speed. Regular investment in PPF also appreciated.

More investment for your children

You can invest for your children and you can increase these investments if you already have such investments. For this purpose also you can go for SIP or ULIP or any other type of investments. Keep in mind that a regular monthly investment of Rs. 2000 will grow around 1250000 in 15 years with 15% interest. Plan your children’s future and invest accordingly.

The above mentioned instructions are only in investment point of view. You may have so many other requirments, when you get some more money. Fix priorities and plan accordingly. If you act wisely, you can make a wonderful financial future with your own money, even if it is very less or not. So invest wisely and secure your future. Start any type of investment (small or big) as early as possible and create an investment habit.

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