An unexpected lump sum can be a pleasant surprise by all accounts, but how can you make the most of it? According to a recent survey of those who had received a windfall as a result of being missold Payment Protection Insurance, an unexpected lump sum was more likely to trigger a spending splurge than a savings account deposit.
According to the survey by VoucherCodesPro.co.uk, the average missold PPI payout is around £2,810 which takes the average person just 3 weeks to spend.
Holidays were the most popular purchase following a payout, with 24% saying they’d used their PPI payout for travel. A new car was in a close second with 22% admitting to using their payout for a new vehicle. Meanwhile just 12% said that they had put something into a savings account as a result of a payout. Around £13.3 billion has been paid out in total. Just 12% put some of their sudden windfall into savings.
Getting the most out of a lump sum
When you suddenly find yourself with a lump sum you didn’t know you’d have, what’s the best thing to do with it? Here are 4 tips that could help you get the most out of your windfall:
1. Check in on your plan. Checking in on your current plan should be the first thing that you do when anything unexpected happens in your financial world. How would a lump sum towards your pension change when you could retire? Would it be better to put your windfall towards a savings pot for a deposit? If you don't already have a plan in place, you might want to check out our guide to financial planning, or get started building your plan with Money Hub now.
2. Put it towards a goal. Do you want to be debt-free? Want to take the trip of a lifetime around the world? Whatever your goals are, a sudden windfall could help boost your progress and have a long term impact. Goals come in all shapes and sizes, and if you haven't done so already now could be the time to start prioritizing them. For example if if you have expensive debt, you might want to consider paying it off before you put your money into a low interest savings account, it all depends on your circumstances.
3. Set some aside for a treat. Rather than blowing the whole lot on a shopping spree, or, at the other end of the scale locking it away so you never see a penny, you might want to consider setting aside a small portion to treat yourself in the short term and still have enough to put towards your goals or long term plans.
4. Informed investing, smart saving. If you decide to save or invest your sudden windfall make sure you do it smartly. If you've never invested before, or you're not sure how to get started, why not check out our guide to investing for beginners? For savings and more you might want to check out our guide to ISA tax savings, or we've also put together an array of tax saving tips too.
If you do decide to save or invest, make sure that you get the best rate or deal for your circumstances, and shop around regularly too.
Whatever you decide to use your unexpected windfall for, reviewing your circumstances and remembering to plan, plan, plan could help you get more out of the sum.
What would you do with a unexpected lump sum? Why not leave us a comment below?