What happens when you get that unexpected pot of gold?

Hundreds of columns are written every year about how to get in control of your money, but what happens when a pot of gold lands in your lap? It might sound like a dream, but it can bring some incredible challenges and problems that you would never have considered before the event happened.

I can’t talk from my own personal experience I’m afraid, however I can share a story that gives you an idea of what I mean.

Many many moons ago I was working in Ashburton as a bank teller.  To give you some context, I was earning around $9,000 dollars a year at the time. I was living at home and building up my savings to buy my first home. I was going out with my girlfriend at the time, (let’s call her Sally, not her real name) and about a month after we met she won the Golden Kiwi.  This was back in the day before lotto: you bought a ticket for around $5, which gave you the chance to win $500,000. Now that might not seem a lot now, but back then it was like winning a big lotto 1st division prize. Put another way you could have bought 7 to 9 average houses in Ashburton.

While incredibly exciting, especially given her background was like mine, coming from a blue collar family, the issues that followed were considerable and not what you would have expected. But more on that later.

Unexpected windfalls can come in many ways. You might win lotto or some other form of prize, perhaps receive an inheritance, or even a settlement from a relationship breakup.

Whatever the reason, there are some things you might want to consider before touching your new found wealth.

First, take a breath. By that I mean let the outcome sink in. Don’t do anything for a while, until the initial excitement has flooded over you. Time and again I have heard of horror stories where large amounts of money were spent on spur-of-the-moment treats, like cars, holidays and other luxury items. In some cases, people quit their job, which can be quite a knee-jerk reaction when you look back later on.

The key here is taking stock of your situation. Look at your current circumstances and, depending on what they are and your current age and stage in life, taking a month or so to build a plan can be an incredibly powerful use of time and effort.

Where possible try to keep the windfall as quiet as you can. It’s been really interesting reading over the years, about those who have found themselves in this kind of situation and are amazed by the number of old ‘friends’ and family members they haven’t heard from for years, who come knocking on their door seeking a handout.

Make an initial list of all the things you might like to do with your new found wealth. This can include, but not limited to, helping close family members, working on your short, medium and long term personal objectives, improving your current lifestyle, and even supporting some charities that you have wanted to help but never been in a position to support in the past.

Depending on your career and the amount of money you have, try to keep your day-to-day routines in place. You may not like your current job, but taking the short term pleasure of saying you quit means you will be eating into your new nest egg straight away. This is also a clear signal to your circle of friends, family and others who prey on people like this, that your circumstances have changed and the phone, doorbell, and social media alerts will start ringing.

The other thing that I think is incredibly important is to seek some professional financial advice. Yes it will cost you to get this, but it will be a small investment if you get the right advice for your personal circumstances. Having a plan will not only give you peace of mind for the rest of your life but a great map to do all the things you want to and even build up greater wealth for future generations, depending on the windfall.

Some of the things you would expect to be covered in the meetings are:

·         Listing all the spending activities you have in mind short, medium and long term

·         How you might like to help your close family members

·         What you would like to do career wise before hitting your retirement years

·         The types of investments you are comfortable with. This includes what you are not happy to invest in

·         Getting a very clear idea on your total financial position now. This includes any debt, and other commitments that you might have had before coming into the money

·         Any other goals you might have

With that information in hand, a good financial adviser will then build you a plan that takes into account those and other aspects of your life and provide some options around what is achievable and what isn’t.

You will get plenty advice from family, friends, and the uncle who knows everything, however they are not independent and in most cases are not qualified to really help your cause. Without some professional advice the outcomes can be catastrophic. The main reason is, whether you like it or not, having substantial wealth will change you to some degree or another and sometimes those who are most close to you.

To this end, it’s no surprise that when some Kiwis come into money they very often end up back where they started. This is because the impacts can be so negative to their overall wellbeing that they just don’t want to be in that situation anymore.

So, getting back to my story. Sally and I had some wonderful experiences, she bought a new house, the first CD player I had ever seen, a new car and we went on a couple of cool holidays. But I found it challenging. Not because she had so much money but because I was brought up to pay my own way. I tried to keep up but over time it was becoming more difficult, and she also had a lot of family pressure, so in time we went in different directions. I shared some of my thoughts with her before we broke up, based on some of the above. Many years later she reached out to me (before Facebook was king) via a basic network called friends I think or something like that and she told me that, amongst other things, she wished she applied what we talked about and that her wealth over time had dwindled somewhat.

So, if you find yourself at the end of the rainbow with that pot of gold, hopefully some of the above just may help you not only enjoy your new found wealth, but also maintain all the other parts of your life you had before bumping into that little leprechaun.