As some of the most experienced and trusted financial planners in the Perth area, we have worked to help a lot of people minimise taxes and maximise revenue from their inheritances. Unfortunately, we have also seen the results of people who try to do it on their own.
When someone receives an inheritance, their usual reactions are surprise and happiness, followed by indecision. Because of what is known as our “reptilian brain,” it is difficult to make good decisions alone when we have just received a huge chunk of money. While we pride ourselves on our logic and rational thinking, the reality is that the emotional part of our brain is a lot larger than the part that makes rational decisions.
This is a common reason why people who are otherwise intelligent are often roped into Ponzi schemes or “get rich quick” scams. Unfortunately, even intelligent people sometimes do stupid things. Here are five things not to do if you receive an inheritance.
Try to Make Money Too Fast
The first advice you will hear from well-meaning friends and, unfortunately, scam artists is that you should “make your money start working for you.” Even if you have a large amount of money, the first thought for many is that it needs to be making even more right now.
The most important priority is this: before you worry about making money, make sure you don’t lose all of the money you have.
It is especially important to be wary of people who tell you they have a “guaranteed” investment. The only guarantee in investing is that there are no guarantees in investing. There is no such thing as a “safe investment” that beats the market. The more you can make, the higher the risk. The only “safe” investments are those that protect your money by providing returns that will be somewhat more than inflation but not the gaudy returns that a more risky investment can bring.
Become a Venture Capitalist Overnight
Whenever you come into a large amount of money, friends and “long-lost cousins” will come out of the woodwork asking you to invest in their dreams. It can be tempting to fund the startups of friends and relatives. Unfortunately, most of them go nowhere. Not only are you out of whatever money you “invested,” you have probably burned a bridge with a friend or relative.
It is also tempting to start an investment portfolio and manage it yourself. This is a terrible idea because you are competing with professional investors with years of knowledge and experience.
Brag About Your Inheritance
If you receive a tidy sum of money, you will be happy. It is human nature to want to tell everybody about your good fortune. This is a terrible idea. It will bring you a lot of attention from people who often feel they “deserve” a piece of your good fortune. Eventually, if you don’t go broke, you will never know whether someone actually wants to know you or if they just want a piece of your “pie.”
Another way to “brag” about your inheritance is to buy a bunch of flashy and extravagant things you don’t need. It is tempting to spend it all on everything you ever wanted, but if you do, it won’t last long. If you don’t spend it all yourself, you will attract someone into your life to spend it for you.
Not Take Care of Your Own Estate Planning
Even though you just received your inheritance as part of an estate, it is human nature to not think about planning your own estate. If you have a lot of money, it is especially important to have your affairs in order. Failure to do so could tie up your funds and keep the right people from receiving them.
Not Calling the Most Trusted Financial Planners in Perth
The worst mistake you can make is to manage your inheritance on your own. You need professional help if you want to make sure your money is yours for the rest of your life. Call Purely Finance, the most trusted financial planners in Perth: (08) 9453 8888.