Most people spend the prime of their life working hard to earn money for their immediate goals and saving for a financially secure future. A few fortunate ones happen to suddenly receive a huge sum of money – the most common sources being by winning a lottery, settlement of some legal suit, inheritance or selling off some ancestral land.
Such unexpected windfall gains are not easy to deal with, especially emotionally and require careful planning.
Dos and Don’ts –
- Avoid the temptation to fritter away huge sums on money on making drastic changes in your standard of living like splurging on expensive lifestyle goods, buying expensive cars and exotic holidays.
- Sudden wealth will bring new friends and investment agents giving investing tips and business ideas and wanting to share your success, organizations asking for donations etc. Do not jump into anything immediately.
- Avoid falling into bad company and bad habits like gambling, alcohol, drugs etc. This is one of the common fallouts of being unable to handle getting rich suddenly.
- Pay off all your debts first if any – home loans, educational loans etc.
- It is advisable to initially block the funds into liquid or money market funds for the short term till such time you are ready with an investment plan.
- Prioritize your goals. Differentiate between your needs and dreams and choose the former above the latter. Owning a house is an important goal while going on a world tour or buying a luxury boat is just a desire. It can wait.
- Choose your financial planner carefully and entrust your wealth only after verifying his or her credentials. Improper planning and bad investments are one of the main causes of wealth erosion. It is important that your financial advisor is able to identify your specific need and situation and channelize your money into effective long term investments.