Steps to make the most of your newfound wealth
In a recent article I talked about “Sudden Wealth Syndrome,” which occurs when people unexpectedly receive a large sum of money (e.g., from an inheritance). Once you overcome the initial shock, it’s time to take action to ensure you effectively handle your life-altering windfall.
Don’t put an immediate dent into your sudden wealth! It’s tempting to splurge on a new home or vehicle, or to take a grand vacation, but this won’t lead to long-term financial success. Safely park your money in a money market mutual fund or high-interest savings account – somewhere you can grow your wealth, even modestly – while we create a solid strategy for your money. That strategy might benefit by prioritizing the future expenditures you may have in mind – both required and desired. This means putting a new roof on your home might come before a third car or second home!
Most people aren’t comfortable managing large sums of money, and there are many questions to answer:
- How do you invest across a range of potential products?
- How do you generate proper cash flow?
- How can you invest with maximum tax efficiency?
- Does your will or other aspects of estate planning need changes?
- Will you donate to your favourite causes?
When the task seems overwhelming, a financial advisor can help. They are already familiar with your financial situation and family circumstances and know your risk tolerance, investing objectives and time horizon, plus other factors to consider when updating your financial plan. If everything’s in a frenzy and you don’t know where to turn, a financial advisor can be the rational, trusted expert who leads the way.
Managing a large amount of money is complex and requires the coordinated efforts of a specialized team. For instance, tax issues are best handled by an accountant. A lawyer can set up a corporation to help shelter your money, while an estate professional can restructure your will if you change allocations to your heirs. A financial advisor can be the “point person” who maintains the big picture, takes charge of your financial plan and engages other experts. We’ll work together to manage your money for future success.
Coming into a large sum of money, can be exciting and overwhelming at the same time. Just like with any other situation which changes your financial position, it’s important to seek advice on what to do with your new wealth.