 |
| Home | Moneymax Services | Liz Koh | Get FREE financial advice! | Buy the Book | Testimonials | Articles | Useful Links | Contact Us |
Recent Articles: Frugality is not the Key to Riches How to Lower the Cost of Your ACC Premiums Have Your Say on Retirement Income Policy How Safe are Your Bank Deposits? How to Plan your Investment Portfolio Start Saving with Two Simple Steps Find your Personal Financial Flow How Retailers Get You to Spend Four Best Money Tips for Christmas How to Recession-Proof your Finances Three Reasons Not to Pay off your Mortgage Quicker Ten Questions to Find Your Passions Smaller Investors Miss Out on Advice How to Avoid Poverty in Retirement Asset Rich, Cash Poor in Retirement Is your Boss Short Changing You? How to Avoid the Six Common Pitfalls of Retirement What it Takes to Have an Extraordinary Life Elderly People Who Won’t Spend Seven Top Tips for Spending Less Money Issues for Blended Families Do you Have a Poverty Mentality? How to Pay Off your Mortgage Faster Financial Advice for Kids Leaving Home How to Make Smart Financial Decisions 8 Steps to Financial Freedom (Part 2) Five Secrets to Happiness in Retirement Designing an Investment Portfolio Strategies for Financial Literacy A New Era for Financial Advice Top Up your Retirement Savings Five Good Reasons to Invest Offshore Is Property Still a Good Investment How to Set Goals and Achieve Them If I Had My Life to Live Over Again The Biggest Risk for Retired Investors Get Rid of Debt in Five Easy Steps Five New Year’s Resolutions to Build Wealth in 2011 The Benefits of Being Generous New Rules for Financial Advisers How to Rebuild your Wealth after a Recession A Guide to UK Pension Transfers When Retirees Run Out of Money The Eight Worst Credit Card Mistakes Use Market Volatility to Make Money What to do when Sharemarkets Fall How to Manage your Money in Retirement Three Good News Tips for First Home Buyers Wealth is Just a State of Mind Are you Missing out on Free Cash? Understanding your Money Personality Light at the End of the Tunnel Get Rich with Banking Technology What to do with Lots of Money? Mortgage Holidays a Last Resort Spending without Feeling Guilty Managing Money for Business & Pleasure |
What to do with Lots of Money? So you didn’t win $36 million in the big lottery, but then neither did several million other people who during the last week poured enough money into the prize pool for retailers to notice a dip in their sales.
That doesn’t mean, however, that you won’t ever get lucky. Every week, some Kiwis receive large inheritances or relationship property settlements or find themselves with large amounts of cash after selling a farm or a business. Suddenly having a large amount of money doesn’t mean, however, that all your worries are over; your worries are just different from the ones you had before. The first thing to do when you suddenly get a large sum of money is to pay off your debts. It’s great to be able to spend some too, but most of what you have left should be put to one side in the bank for a while. When money has come unexpectedly, emotions go into turmoil and that’s not a good time to be making decisions. Spend several months thinking not about what you could do with the money, but about what the important things are to you in life. Money is what enables us to get what we want out of life, whether that is helping our children, helping the community, having interesting and enjoyable experiences, living in a comfortable environment, or enjoying our retirement. Once you have established what is important to you about money, you can then allocate part of your fortune to each of the items on your list. Inevitably, you will need to prioritise, as you will soon find that even a large sum may not be enough! There are many pitfalls to be aware of that could lead to unexpected legal or tax consequences. To start with, there is the issue of gift duty. While it is most people’s desire to share their wealth with family members, giving a total of more than $27,000 in any one year to one or more people, even family members, will trigger gift duty. Be aware too, that any gift you make to someone in a relationship can become relationship property, so that if the relationship ends, it may be divided between the two partners. One way around this problem is to draw up a loan agreement with the person receiving the money for an interest free loan, repayable on demand. In your Will you can specify that the loan is to be forgiven. Donating money to a registered charity is not only free of gift duty, but you can claim a tax rebate for your donations. Other issues to consider are whether to establish a family trust to protect your wealth, and ways of investing your money so that you don’t pay more income tax than what you need to. The recent financial crisis has shown that the risks of investing are not always apparent. For all these reasons it is important to find someone you can trust who can advise you and act as a sounding board. Ideally, this should be a person who is knowledgeable about money, but it can also be a trusted friend who can help you get expert advice. June 2009 |