san antonio investment advisor, investment planning

Many people dream about becoming wealthy overnight. Sometimes this dream becomes a reality – unexpected inheritances, year-end bonuses, and yes, in even one in several hundred million chances, a winning lottery ticket.
The reality is that great wealth carries great responsibility. Too often, the instantly wealthy are ill-prepared to deal with the emotional, social, and even financial responsibilities which accompany sudden wealth.

Make sure you have good tax, legal and financial planning advice.
This is a good idea even if you never receive a windfall. A qualified tax adviser, an attorney expert in estate matters and a financial planner will ground your fulfilled dream in reality. Should unexpected money appear, each expert can look at your personal situation and assess the risks and strategies necessary to accept the funds without costly tax or investing mistakes.

Force yourself to think about true necessities before luxuries.
The adage “Pay yourself first” also works in the dream world. What are the biggest financial problems you’d like to solve today? That may be the best approach to thinking about your reaction to a windfall. Have you always dreamed about buying a home and owning it outright? Shoring up a retirement and health care strategy that would prepare you for whatever the market did for the rest of your life? What about paying for your kids’ college in cash so they could avoid debt after graduation? Taxes can eat away a significant portion of unexpected wealth, but setting your priorities first can create a lifetime of financial health. A brand-new luxury car in the driveway makes little sense if retirement goals and other family objectives are not met.

Develop a plan for helping others.
The news media are littered with stories about those who wasted sudden fortunes after being preyed upon by friends, family members and strangers with a “cause.” Giving to others – whether part of a wealth management strategy or simply a year-end tax strategy – should be planned with the best advice based on your personal circumstances. As long as you’re dreaming about wealth, consider the people and organizations you would really want to help with any extra money you had, and commit to getting the right financial advice before writing a single check. There are a few smart ways to give away money – and many more dumb ones.

Take a look at these alarming statistics on pro athletes and lottery winners:
•   Nearly 1/3 of large lottery winner are bankrupt within 10 years.
•   By the time they have been retired for two years, 78% of former NFL
    players have gone bankrupt or are under financial stress because of
    joblessness or divorce.
•   Within five years of retirement, an estimated 60% of former NBA players
    are broke.

Possibly the most important thing to remember when thinking about sudden
wealth is that most wealth is created over a lifetime. An inheritance or lottery jackpot is a one-time event. When you receive a paycheck and normal stream of income you become accustomed to spending money as it is constantly coming in. A one-time windfall only generates investment income. That income is further diminished by taxes and inflation. The value of objective and independent advice is critical when dealing with this unique opportunity.

Most of this content was prepared by the Financial Planning Association®, www.FPAforFinancialPlanning.org