Take the Money and Run

Take the Money and Run

…To a Financial Advisor You Trust

By Kara Stefan

kara_stefanFor many, instant wealth presents relief, freedom, choices, and wish fulfillment. Then again, some people just go hog wild.

Not thirty-three year old Amy Watson, who recently sold a company she helped start up six years ago to a larger firm in Silicon Valley. Now she’s a millionaire. The Ft. Lauderdale native has decided to quit her job in public relations and pursue her lifelong dream of writing novels.

With the “Who Wants to be a Millionaire?” mentality sweeping the country, overnight millionaires have become far more prevalent in recent years. But much like having children, sudden wealth doesn’t come with a handbook. “Every dime I’m spending I look at very carefully,” says Watson. “I regard this money as a resource that will allow me to live according to my values.”

Watson’s binge buys include a laptop computer and a docking station–not exactly spendthrift indulgences considering they’re tax write-offs for her next profession. The rest of her fortune is invested, she plans to live off of her interest and leave the principal intact. Furthermore, her husband plans to continue working.

The Great Estate Transfer
Experts predict over $10 trillion will be inherited by today’s baby boomers over the next two decades. For many, that’s instant wealth right there.

For Lolly Jelks, a thirty-six year old children’s counselor attending law school in Boston, her inheritance came sooner than expected. Her father–a self-made millionaire–decided to grant his children their inheritances long before he passed on in order to remove it from his estate and avoid excess taxes upon his death.

The first thing Jelks did was interview financial advisors to get help managing this windfall. “It’s so important to find a good money manager–someone who’s not only competent but whom you like, trust, and who gives you respect,” Jelks declares. “So often you find managers from the old school, who say ‘Now don’t worry your pretty little head about this.’ You want someone who can explain things clearly and keep you in the loop.”

Jelks further advises that you should educate yourself on investment choices and make sure your money is properly diversified–don’t rely solely on your money manager. After all, if you don’t know anything about investing or managing money, how can you tell if he or she is doing a good job?

Unwanted Wealth
According to a recent AARP Modern Maturity survey, Americans view wealth as a double-edged sword: One that can cause as much grief as relief. Findings from the survey revealed:

  • 33% of respondents didn’t want to be wealthy.
  • 80% said they fear it would make them greedy.
  • 75% worried it would make them insensitive.
  • 40% of women said they wouldn’t want to become wealthy.
  • 27% of men said they wouldn’t want to become wealthy.

Perhaps the fear of wealth is bred from ignorance of how to manage it. American Express Financial Advisors offers the following investment tips to lottery winners, dot com millionaires, nouveau riche heirs, and other new recipients of sudden wealth:

  • Hire a good attorney, accountant, and financial advisor, and plan long-term goals.
  • Focus on major financial issues–limiting tax liability, buying a house, education planning, charitable giving, retirement, and estate planning.
  • Consider taking the money as a lump sum. In many cases, a large portion can be invested and grow at a higher rate than if divided into annual payments.
  • Assess your working situation. A winner should consider continuing to work for six months, allowing enough time to ease into a new lifestyle.

Sudden wealth isn’t all material possessions, investments, and taxes. With it comes new insight and wisdom for those who are paying attention. “You do reach the point where you realize how unimportant money really is,” says Jelks. “Family, good friends, a good job, feeling that you contribute to the community–wealth doesn’t mean much if you don’t have all of these.”

Then she chuckles with embarrassment: “I guess that’s real easy for me to say when I’ve got that big bank account!”