What would you do with a Million dollars?

Whether your new money comes from an inheritance, lottery winnings or selling your business, it is easy to believe you are set for life upon receiving a large windfall.  However, most people; as many as 70% who receive large sums of money end up frittering it away within 1-3 years.

It doesn’t really matter where the money comes from, what is important is how you are going to handle this new and greater financial responsibility. 

The initial amount might be mind-boggling, hundreds of thousands to millions, and could temp you to satisfy too many personal and family requests.  Don’t make any major purchases or extend loans to family members – this could very quickly whittle the principle down to an insignificant amount.

One of the first thing most people should do is pay off high interest debt, then low-interest debt; followed by topping up RRSPs and TFSAs.  After that top up your emergency savings, kids education plans and non-registered investments.

Following that, the best thing to do is nothing, until you have had time to think.  You can park the balance of your windfall in a high interest savings account until you come up with a plan. 

It is also important to control your spending, with a lump sum windfall no matter how large, it should not be treated the same as a continuing high income, you don’t want to burn through your newly acquired nest egg.

Learn to say no.  Such a windfall could mean a lot of unsolicited calls from friends, family and charities for seed money, loans, and gifts.  Learning to say no will help prevent a lot of stress and hassles.

Once you have had time to absorb your new financial reality, it is time to make a plan.  What do you really want out of life?  Can you afford to stop working?  What about other lifestyle goals like travel, vacation properties or starting a new business? Remember, a large windfall is usually a one-time event, wealth and estate management is not.

If you don’t have one already, it is time to build a team.  You will need to revise your Financial and Legacy Plans with me; your Financial Planner, as well as your Accountant and Lawyer.    

Part of my job will be to take the emotion out of the financial decision making process and to guide you to ensure you have financial stability and income to last the rest of your life.

So, whether you find yourself with a large windfall or just need to help with day-to-day cash flow management, I am here to help you make the best decisions for your personal situation.

Have a great weekend,

Tracey

 

 

 

 

 

 

 

 

 

 

 

 

 

Sources:  Article by Camilla Cornell posted Advisor.ca 11-29-13, article by James Dolan posted Advisor.ca 09-05-13, original post on The Money Tree 11-08-13