Corepathi for Now or Forever: Personal Financial Planning Tips to Manage a Windfall
A windfall? Yes, that’s what we call the sudden wealth that comes our way through inheritance or, say, a lottery or game show win. Won’t it be perfect? Now, imagine that you are on the Kaun Banega Crorepathi (KBC) show and our own Big B announces that you’ve won 5 crores!!! Your first thoughts would be “Yaar, mera tho life ban gaya!” Sadly, such sudden wealth stories do not always have “happily ever after” endings, thanks to a complete lack of personal financial planning.
You don’t believe me? Let me share with you the story of a winner of the KBC show.
The story of a KBC winner
One of the participants of KBC won a whopping 5 crore in the 2011 season of the show. After tax cuts, he took home about 3.5 crores. This money meant that the winner and his family could now conquer the world and live in luxury for the rest of their lives. But today, he is reportedly left with a house, some land investments, and some financial investments. He is on his way toward building his future again by becoming a trained teacher, while also giving back to the society. But there are reports of disappointments in the way the magical story turned out to be.
Could the story have been any different? How can you manage a sudden inheritances or sudden fortune that comes your way? Let’s find out.
Tips for efficient personal financing planning of windfalls
Avoid non-experts do backseat driving with your money
The moment you receive a windfall or an inheritance, you will see a lot of “experts” telling you exactly what you should be doing with your money – some opinionated relatives, long-lost friends, never-seen-before investment planners, and the list goes on. In most cases, these well-meaning advisors are living their dream through you, advising based on their life experiences, or hoping to make a small profit for themselves. But remember that your life goals and realities are completely different and every decision you make is going to impact your life, not theirs.
Take a step back before deciding
Planning your finances is a huge responsibility and often closely linked to planning your life too. So take some time off, stay away from distractive influencers, and think about what your life goals are. Include your family in the thinking process. Find out what percentage you would want to spend, to save, and to give out. Are there any mortgages or loans that you should prioritize? What about your children’s education, parent’s health, your emergency fund, a home, a new business, or charity? Asking such questions and making a clear and detailed planning will give you a good idea about your current financial situation and what it means to you about, say, 25 years from now. Consider all your finances in addition to your windfall – your assets, income, your expenses, etc., before you take a final decision.
Obsess about growth
One of the biggest danger zones of getting sudden wealth is the tendency to go on a financial static or hyper zone. You might quit your job, splurge on unnecessary purchases, or invest blindly – all these put you in a financial limbo. So completely avoid emotional decisions when it comes to money and focus logically on financial growth. Learn about making smart financial decisions – not just today but also in the long term. This way you will get your financial priorities and investment plans right – the first step toward smart personal financial planning.
Get help from an expert
Make sure you get the support and gain from the expertise of a financial planner or registered investment advisor, rather than depending on your next-door Mr. Shastry. Well, unless he runs a certified financial advisory services company! Look for experts who use the best of technology to assess your life goals, current status, requirements, ambitions, and liabilities to deliver the best combination of financial planning that will help you stay a crorepathi. Experts will also warn you about the other consequences of sudden wealth – the effect it will have on the taxes you will have to pay, the extent of savings you would need to maintain, and the right percentage of splurging, sharing, and savings you can manage. Where can you find such an expert? Just visit some of the best financial planning websites in India or cut the chase short and visit our experts at PrognoAdvisor.com
A sudden income from litigation, inheritance, or a surprise win is always an exhilarating experience worth celebration. But once the balloons have been popped, get down to some serious thinking with the help of some serious support. Else you will either go into a financial paralysis or a joyride – both of which can be detrimental to your financial situation in the long run.