Chris Kemper thought she was dreaming when she learned that her grandmother had inherited $ 6 million in 2010.
But his excitement quickly turned into horror when he realized he had no idea what to do with so great fortune. ”I was afraid to waste it,” says the 44 year financial executive and a resident of Ohio.
The sudden fortune is something that can touch anyone.
Examples abound: the artist David Choe accepted five years ago that Facebook will pay in shares for a mural he painted in the offices of the then modest company. Within months, these actions could generarle Choe up to $ 200 million when the social network makes its debut on the stock market. Or Jeremy Lin, the player the Knicks basketball team in New York, whose meteoric rise could generate several hundred thousand dollars in sponsorships from major brands worldwide.
However, these sudden fortunes can fade quickly, say counselors working with people who have become rich in the overnight.
Fortunately, there are several strategies that can maximize the money and extend it, says Lisa Featherngill, director of financial planning Abbot Downing, a division of Wells Fargo working with wealthy clients.
The key, says Featherngill is good planning. She recommended forming a team of advisers that includes a lawyer, accountant and financial advisor. These are some of the recommendations they could give:
Take your time
A mistake many new rich is to act on impulses. Many of the blunders-shopping-extravagant and unwise investments committed in the first months after receiving the unexpected fortune. The advice: wait.
“Take time to make a list of objectives and determine what you would like to achieve with their new wealth,” suggests Judy Haselton, a financial planner Harmony Financial Advisors in New York. Some experts even advise not to take any decision during the early days.
Count your money well
To determine how much money has actually subtract from the gross amount payable taxes and outstanding debts. Before making an investment or major purchases, put your money in a safe place, like a high yield account or certificates of deposit, short-term, advisers say. Reserve an amount in a separate fund with enough money to cover 18 months of expenses, which will not touch until absolutely necessary.
Do not be naive
Sure many people will come to you with offers of investment “you can not lose.” If your uncle says he has a great business, tell them you need to consult your financial advisor.
Richard Hearn, president of the California firm financial advisory StarCare Associates, tells his clients to be referred all investment offers they receive. Then he asks the proposers a business plan. ”In 99% of cases receive nothing,” he says. ”But it’s a bad way to repel potential investment ideas.”
There is also the temptation to help family and friends. If you do, be sure to include formal contracts drawn up by both parties. Lending money in disorder can destroy relationships quickly. The directors recommend that loan installments not exceeding 36 months.
Plan your estate
Do not underestimate the taxes they must pay on his new fortune. Recheck your will, update and verify who their heirs. If you do not have a will, set a proxy, that allows to delegate the management of their finances to a relative or friend in case you become ill or unable to make decisions.
Then, hire a lawyer to help you plan a distribution of money for their children, grandchildren and other relatives, including a trust for minor children.
Invest for the long term
After you’ve put your estate in order, it is time to concentrate on your investment strategy to minimize risks and ensure a reasonable growth rate.
Those who get rich from the overnight thanks to shares in a company that just debuted successfully in the stock should not fall into the mistake of keeping a lot of money in that company only by a spirit of loyalty. Instead, spread your money in stocks, bonds and mutual funds in real estate, suggests Jim Steiner, director of Abbot Downing. Because financial markets are highly volatile, keep part of his fortune in cash to have some cash available, Steiner added.
Having outlined a financial plan, you can start making those purchases with your dreams.
Kemper, the financial executive of Ohio, did not know what to do with his heritage and refused to spend. Tom Bentley, his financial adviser, helped open the funds to protect their wealth, while finally encouraged her to build the house she and her husband always dreamed of.
The couple decided to erect a four bedroom property for U.S. $ 502,000. Only for pleasure included a cinema and a jacuzzi.
Taking advantage of low interest rates in the U.S., the couple decided to apply for a mortgage for the property rather than pay cash. ”It’s very exciting,” says Kemper, who moved to their new home in July.
Now that you have a little more money, Kemper is taking the pleasure of taking his family to all those vacation you always dreamed of but that were previously unattainable.
by Jay Thadeshwar, My Profile