Money,for all the opportunities and greater choices it affords,can be a major source of stress and anxiety if you’re not used to having it. Many people get anxious because of the sheer number of decisions to make.
The common questions that go through your mind:do I keep working? Should I buy a new home?
Maybe loosen the purse strings and treat the extended family to a big overseas dream holiday before I get serious with my money?
Perhaps uproot the kids and send them to private school? But gee,that red Ferrari looks tempting.
There is also an identity crisis factor at play because you go from being an ordinary person to being wealthy overnight and this may come with unwanted fame or limelight,either with the broader public or even just within your own social circle.
The million-dollar question
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Wealth is not a bottomless pit,so if you want to make it last you have to find a sustainable way to manage your new-found wealth.
There’s no one answer of what to do with a windfall,as best use of the money will vary widely depending on your personal circumstances.
You’ll need time and space to work out what is most important to you and how to achieve these important goals,so I always suggest keeping your windfall discrete and seeking professional advice immediately.
Putting in place a solid financial plan can ensure the funds are sustainable and that you don’t make poor investment or spending decisions.
Your professional advisers should consist of a financial adviser,a tax adviser and even a legal adviser depending on your personal situation and financial goals and objectives.
Friends and family are the ones closest to you,but unfortunately,they can also become the biggest threat to good management of a windfall. You may feel guilty or obliged to help them. Money can make some people greedy or irrational.
Within your circle of friends and family,there is always bound to be someone who has financial problems and may ask you for assistance. Don’t make quick decisions – take as much time as you need to work out what’s most important to you.
Impulse purchases sound like fun,but in talking to people who have come into a windfall and lost it,most rue these decisions as reckless and wasteful. It may sound boring,but planning carefully is the key.
Finally,work with the experts to consider the tax consequences of your windfall and whether you may have to pay taxes.
Grace Bacon is the Director of RSM Financial Services Australia (AFSL 238 282),advising clients on wealth management,retirement planning and succession planning.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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