Dreams sometimes do come true! Occasionally some of us suddenly receive a large sum of money. For the luckiest, it might be a lottery win, for some it might be an inheritance and for others the sale of a business or property. Suddenly being rich is exciting, but for most people it is also frightening.
Fear comes from lack of knowledge about the options that are available for spending or investing, not knowing how to choose the best option, worry about making the wrong choice, not knowing who to trust for advice, and worry about the risks of losing the money.
What should you do if you are in the enviable position of suddenly having a lot of money? The first thing you should do is pay off any debts. If there are still funds left over, set aside a small amount to treat yourself and celebrate your good fortune. The remainder should be set aside safely in the bank until you decide what to do with it.
The circumstances, good or bad, that lead to suddenly having a lot of money are usually full of mixed emotions so it is best not to make big decisions for a few months. Find someone you can trust who can advise you and act as a sounding board. Next, spend some time thinking; not about what you could do with the money, but about what the important things are to you in life. Money is what enables us to get what we want out of life, whether that is helping our children, helping the community, having interesting and enjoyable experiences, living in a comfortable environment, or enjoying our retirement. Once you have established what is important about money to you, allocate part of your fortune to each of the items on your list.
Liz Koh is an Authorised Financial Adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com