So Sushil Kumar has just won himself Rs. 5 crores - and obviously the first question in his mind should be:
How should I invest this huge amount?
Well let us assume that he gets Rs. 3.5 crores after all taxes are deducted.
The following steps are very important:
1. Invest the whole amount in a liquid fund in a good mutual fund — THE ENTIRE AMOUNT: He might take some time to overcome the great feeling and he should start deciding on what to do with the money only after the euphoria has died down. Till then the money NEED not remain idle.
2. He will obviously want to build a house for himself and his family. Assuming he will want to build a big house for 2 of his brothers, parents and himself - he should set aside Rs. 30 lakhs for a 3000 sq ft house Rs 1000 per square foot cost of construction. Allow for cost over runs, money paid to goons, furnishing, etc - another Rs. 25 lakhs. Total: Rs 55 lakhs.
3. He should use say Rs. 100,000 to pay off all his family debt (assuming he and his family has debt, it cannot be more than Rs. 100,000)
4. Assuming that there are 6 children in the family, he should put aside Rs. 25,00,000 in a balanced fund like HDFC Prudence - assuming that each kid will require it ONLY least after 8-10 years.
5. I hate saying this, but because he may not have access to good advice, he should buy a single premium pension plan for himself - and put aside Rs. 50,00,000. No doubt that he may trust only LIC (the assumption that it is government guaranteed helps) - and this amount of money will be beyond anybody's reach.
6. He should open a public provident fund for all the 14-15 members and put away Rs.70,000 in each account. I would never suggest this for a person who has access to an adviser on a regular basis.
7. He should put away Rs. 1 crore in a bank fixed deposit - maybe in 4 banks (Rs. 25 Lakhs each) as a 10 year deposit and all paying even after inflation is taken into account.
8. He should go and blow Rs. 10,00,000 on his family, friends and others in his village.
9. He should put Rs. 50 lakhs in a MIP with about 20% in equities and 80% in debt.
10. The balance should be left in the Liquid account - Rs. 50,00,000 from which he should withdraw from time to time.
What he should not do:
1. Give away a lumpsum to his brothers to do 'business'. It is not easy Mr. Sushil Kumar! AND THEY WILL NOT EVEN FEEL GUILTY - they will look at it as 'easy money' - so it is all right to lose!
2. Listen to too many advisers. He looks very simple at heart - and will be quickly cheated of his money. Money is money - it is for God to decide whether Sushil Kumar deserves it or not!
3. Give 'loans', 'gifts', etc to friends hoping it will come back. People who do not return the money will JUSTIFY saying 'he got it through luck...it is ok if I do not pay him' Awful logic, but it works. Sad, but true.
4. Not be in a hurry to invest - let the money lie in a FD or as a Liquid fund balance.
5. Make attempts to meet a politician. Remember even if Nitish Kumar is the CM, the state is still Bihar.
PS: I have no clue how Sushil Kumar will save it from the biggest goondas of Bihar. God bless Sushil Kumar and may the Lord protect his money!
The author P V Subramanyam is a Chartered Accountant by qualification and a financial trainer by profession. Writing being a passion he also regularly pens his thought in his blog Subramoney.com
