Planning Preserves Windfall From Inheritance Or Lottery
by Joe Bowen
December 15th, 2010 02:08 PM
In February I wrote about a man who inherited money and came to me for advice. In his situation I recommended paying down his mortgage instead of investing the money. I did this for many financial reasons and one moral reason -- it was the right thing to do.
Since then I have had many calls from folks who want leave money or expect to inherit money. I even had a call from a man who said he fully expects to win a lottery and would like some advance advice on how to handle the money when it happens. Of course winning a lottery is very unlikely for anyone, but inheriting money is very likely for almost everyone. The real trick here is how one handles a sudden influx of money when one isn’t experienced is such affairs.
An ounce of prevention
The worst mistake a person can make with a windfall is to wait until it happens before planning the treatment of the funds. The pie in the sky lottery dreamer is actually being pretty smart. When we think of winning the lottery most of us think of what we could buy. Expenses that top the list include houses, cars, boats and vacations. Many think that they will never have to work again but few concentrate on how the money will afford them such a luxury.
The next mistake occurs immediately after receiving the funds. The shopping spree. The first thing most people do (even though most say they wouldn’t) is buy, buy, buy. After luxury items are purchased it’s on to the new lifestyle. Some feel that if they can write the cheque it is in the budget. Suddenly a $20,000 per month lifestyle is developed. It is easy to move up the ladder of lifestyle but ever more difficult to move down.
Protected by preparation
When the large sums are quickly eroded to smaller sums, panic can set in. This is when I often receive a call. But by this time it is usually too late to benefit from the opportunity that’s been lost. The lucky few are those who inherit money from someone who prepared them for the funds. Better yet, the people leaving the funds set up the estate in such a way as to protect the next generation.
If someone comes to me expecting to receive a windfall I often give one small piece of advice before anything else. We plan a small, controlled spending spree. This is the “get it out of your system” money. We allocate a few dollars to this and plan for longevity with the balance. Of course there are debts to pay and possibly gifts to consider but the focus is really on the long term.
Whether you are leaving money or receiving money, be sure to plan ahead and get the right advice from a qualified professional.
This article was prepared by Joe Bowen who is a registered Mutual Fund Representative with Dundee Private Investors Inc. (“Dundee Private Investors”), a Dundee Wealth Management company. This is not an official publication of Dundee Private Investors and the views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of, Dundee Private Investors.
Listen to Joe on CFUN AM1410 Sundays 5 to 5:30 p.m. www.joebowen.ca 604-603-2336
Copyright North Shore Magazine Issue Jun - Jul 08
Since then I have had many calls from folks who want leave money or expect to inherit money. I even had a call from a man who said he fully expects to win a lottery and would like some advance advice on how to handle the money when it happens. Of course winning a lottery is very unlikely for anyone, but inheriting money is very likely for almost everyone. The real trick here is how one handles a sudden influx of money when one isn’t experienced is such affairs.
An ounce of prevention
The worst mistake a person can make with a windfall is to wait until it happens before planning the treatment of the funds. The pie in the sky lottery dreamer is actually being pretty smart. When we think of winning the lottery most of us think of what we could buy. Expenses that top the list include houses, cars, boats and vacations. Many think that they will never have to work again but few concentrate on how the money will afford them such a luxury.
The next mistake occurs immediately after receiving the funds. The shopping spree. The first thing most people do (even though most say they wouldn’t) is buy, buy, buy. After luxury items are purchased it’s on to the new lifestyle. Some feel that if they can write the cheque it is in the budget. Suddenly a $20,000 per month lifestyle is developed. It is easy to move up the ladder of lifestyle but ever more difficult to move down.
Protected by preparation
When the large sums are quickly eroded to smaller sums, panic can set in. This is when I often receive a call. But by this time it is usually too late to benefit from the opportunity that’s been lost. The lucky few are those who inherit money from someone who prepared them for the funds. Better yet, the people leaving the funds set up the estate in such a way as to protect the next generation.
If someone comes to me expecting to receive a windfall I often give one small piece of advice before anything else. We plan a small, controlled spending spree. This is the “get it out of your system” money. We allocate a few dollars to this and plan for longevity with the balance. Of course there are debts to pay and possibly gifts to consider but the focus is really on the long term.
Whether you are leaving money or receiving money, be sure to plan ahead and get the right advice from a qualified professional.
This article was prepared by Joe Bowen who is a registered Mutual Fund Representative with Dundee Private Investors Inc. (“Dundee Private Investors”), a Dundee Wealth Management company. This is not an official publication of Dundee Private Investors and the views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of, Dundee Private Investors.
Listen to Joe on CFUN AM1410 Sundays 5 to 5:30 p.m. www.joebowen.ca 604-603-2336
Copyright North Shore Magazine Issue Jun - Jul 08
