Receiving a large sum of money can be a thrilling yet overwhelming experience. Whether this windfall comes from an inheritance, tattslotto, a divorce settlement, or workers’ compensation, the initial excitement can quickly be replaced by stress and uncertainty about what to do next.
Here are some thoughtful steps to help you manage your newfound wealth wisely and enjoy the benefits for years to come.
Stay grounded
The initial rush of receiving a large amount of money can lead to impulsive decisions. Before you indulge in luxury purchases or make any hasty financial moves, give yourself some time to process the situation. Take a few weeks to let the news settle and think seriously about your next steps. In the meantime, consider placing the money in a high-interest account. This way, your funds are secure and earning interest while you plan.
Seek professional financial advice
Even if you’re knowledgeable about finances, consulting with a professional financial adviser can be invaluable. Friends, family, and online resources can offer advice, but nothing beats the personalised guidance of a qualified expert.
A financial adviser can help you define your goals and create a plan to achieve them, leveraging your new wealth effectively. Establishing an ongoing relationship with a financial adviser can also provide you with peace of mind. They can offer continuous support and advice, helping you navigate any financial challenges or opportunities that arise in the future.
Prioritise paying off debt
While it’s important to think about long-term financial goals, addressing your debt should be a priority. Work with your financial adviser to identify any high-interest debts, such as credit card balances, that should be paid down first. Reducing or eliminating these debts can save you money on interest and improve your overall financial health.
For some, paying off mortgage debt might be a wise move, as it can lower the amount of interest paid over the life of the loan. Evaluating your debts and understanding which ones to tackle first will help you make the most of your windfall.
Boost your retirement savings
Contributing to your superannuation fund (or retirement savings) is a smart move, especially considering its tax advantages. While it might not be the most exciting option, boosting your super can significantly impact your financial security in retirement.
The benefits of super contributions are more substantial if you’re still several decades away from retiring. Compound interest—earning interest on both your initial investment and the interest it generates—works best over long periods, potentially leading to substantial growth in your retirement fund.
Keep in mind that superannuation funds are generally inaccessible until you retire or reach a certain age. Additionally, there are limits to how much you can contribute each year before incurring extra taxes.
Explore other investment opportunities
After addressing debts and boosting your retirement savings, you might still have funds left to invest. The best investment strategy will depend on your financial situation, risk tolerance, and long-term goals. Younger individuals might opt for riskier investments with the potential for higher returns, while those closer to retirement might prefer more conservative options.
Consider diversifying your investments to spread risk and increase potential returns. This might include stocks, bonds, real estate, or other investment vehicles. A well-balanced portfolio can provide financial stability and growth over time.
Plan and enjoy your wealth
Handling a large sum of money responsibly doesn’t mean you can’t enjoy it. Treat your money with the same respect as any other earnings. Avoid an “easy come, easy go” mindset and make deliberate, thoughtful decisions about your spending. Once you’ve created a solid financial plan, allow yourself to enjoy some of the money on things that bring you happiness and fulfilment. Take your time, plan carefully, and enjoy the opportunities that come your way.
Chat with the team at APS Financial Planning.
Written by APS Senior Financial Advisor, Paul Hatzigeorgiadis.
Paul has over 25 years of experience in the financial services sector. Over Paul’s history, he has provided advice to an extensive range of clients from wealth accumulators to pre and post retirees advising them on Wealth Creation, Cash Flow Management, maximising Centrelink benefits in Retirement, Personal Insurances, Debt minimisation strategies and Superannuation. Paul is married with a 12-year-old daughter and enjoys spending time with family and friends. Whether it’s assisting clients to meet their short-term goals or working with them over a longer term, Paul enjoys helping guide his clients with their financial future.