A Windfall can be defined as an unexpected receipt of money that you have received without budgeting them previously.
The key word here is unexpected because it appears there is no plan what to do with the money and many makes the mistake of wasting them for granted. Consider this for an example:
A tourist had $100 dollars which he treats as an expense for his casino entertainment. He played the Roulette game and placed all his bets on the number "0", having dreamt of the number the previous night. Unexpectedly, the ball drops on the very same number he put his money on and the payout is 42/1, which means he won a total of $4,200 including his original stake. Now, this is a windfall.
Thinking that this windfall is not his money to begin with, he continues playing and ends up losing a couple rounds until he was left with $200. He thought to himself: "Not too bad, I made a 100% return today" and decided to leave the casino.
How many times have we heard of such stories regarding winning a windfall only to end up losing everything because things were unplanned.
For those who have won a windfall, perhaps there are better ways to utilise them:
1.) Pay off debts (student loans, credit cards, mortgage, etc)
Debts carry interests and there are no better ways than to pay off your high interest debts in order to avoid paying for such charges. A windfall can help you clear all those debts at one go, saving you thousands of interest charges you would have incurred otherwise.
2.) Contribute to Emergency Fund
For those who have not build their emergency fund, this could be time to do so. Having at least 3 to 6 months of living expenses help to buffer for any unexpected costs arising from unemployment or illness.
3.) Top up contributions to Social Security (CPF)
If you have not been keeping up with the rising minimum sum lately, maybe you could set a sum to top up contributions to your CPF. Do note that there is a cap on how much you can voluntarily contribute and claim a deduction on your tax account.
4.) Increase your Investment
Depending on the amount you have won, you could either use the money to invest in real estate or buy stocks that would improve your returns over time depending on your strategy.
5.) Treat your family to dinner or travel
Who says the money you've won can't be spend on treats and luxuries. On the contrary, take this chance to treat your family to a nice dinner or bring them to a nice getaway for some quality family time, without having to worry about the expenses.
Some of the money could also be used for donation to the poor and needy who needs this money much more than you do. To encourage greater charitable giving in Singapore, you would also be able to claim a deduction up to 2.5 times on your tax account.
7.) Track your health insurance
Living in a country where medical is so costly, run through the insurance you need and engage a professional to advise on your insurance related matters. For those with health related matters, you could use this chance to do a health medical checkup.
8.) Spend on hobbies
Have an interest in a photography class? Or keen to learn on the much awaited korean language? Maybe this could be a time to engage in some your hobbies that you have been wanting to do.
In conclusion, a windfall is ultimately your own money to begin with. Even though they came to you unexpected, do not spend them recklessly as if they are not your money. Proper planning could change your life and do justice to what it belongs.