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How to handle that cash you didn't expect


At some point in your life, you will get a windfall. If you have already got one, another might be coming your way soon.  A windfall is when you get unexpected income from somewhere. Sometimes you plan for end year bonus, which is usually half of your gross pay but your employer surprises you by giving you three times your gross because the company did very well.

What will you do with this extra money that you had not planned for?

One lady approached me for advice on how to invest her windfall after keeping the money in a fixed account for two years while thinking of what to do with it. Over that period, she quickly dismissed every idea she thought of. You may be lucky to get someone to advise you genuinely. Most people, without admitting that they too have no idea, will suggest that you buy a matatu, the most popular advice.

While this business works for others, especially those who have been in the industry longer, a rookie is likely to have her fingers burnt before even making the first loan repayment. And talking to the operators in this sector, I found out that only those with more than one vehicle – and hardened muscles to punch the crew into line – make some profits. If you are new and with only one vehicle, you are likely to spend all your proceeds in repairing your prized white elephant. Thus I do not encourage people to invest in this business.

What you can do with a windfall:

· Hit the stock market and invest in blue chip companies long term. This means you are investing your money and earning dividends once every year. The good thing with such companies is that their shares keep appreciating and even if they depreciate (fall in price), they will pick and trade at good prices. There are people who invest in such companies and 'forget' about it only to be shocked years later when they receive a statement informing them about how the shares have multiplied and how much they are worth. You can easily become a millionaire in ten or 20 years if you invest wisely in this long-term plan.

· Money market – there are companies (banks and insurance outfits) that take your money and trade with it over time. You will get yearly dividends of about eight per cent but the initial capital invested keeps increasing as the profits made is ploughed back to boost your capital and is reinvested. This is an investment for those who fear taking risks. When you want your money back, they will give you the full amount and any interest that is due to you.

· Retirement schemes. When you invest in such schemes such as RBA, it does not mean you are about to retire; but that you are meticulous and plan ahead. The good thing is that your money keeps growing and when you finally retire, you will find that the nest you started building so early in life is as solid as a rock.

· Real estate. Depending on how much the windfall is, you can start building rental premises gradually. No one starts at the top. You can do timber or mabati structures as a start. With the rental income, you can slowly but gradually have permanent apartments and assurance of income as long as the houses remain standing.

· Buy a piece of land. You are better off investing in land and selling it off later when you need the money than having your money in a fixed account with miserable interest rates. But you can still do the fixed account business when you have few options; if you take this route ensure you bargain and push for a better interest rate.

· Go into farming. Lease land or develop any dormant land that you bought sometime back.

· Buy a car or go for that long overdue holiday. After all it is a windfall and getting your heart's desire is one way of fulfilling your life. Remember, however, that a car becomes a liability the moment you buy – it feeds off you (fuel, repair, servicing) but it also gives you comfort.

5. Do you still watch cartoons?

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