ALMOST everyone may have encountered already the article regarding a lotto winner who blew his P14-million jackpot in just three months and ended up with almost half a million in debt. Although this kind is the only story that surfaced, a lot of similar stories appeared in other countries.
In the Philippines, there is a saying in the vernacular, Libre lang mangarap [Dreaming is free]. The probability of winning the lottery is one out of 14 million, but what if, with a stroke of luck, you won the jackpot. Or something similar, inherited a large amount of money, recipient of exorbitant gift from a random generous person, or found a hidden treasure lying in your attic amounting to P100 million. Oh goodness! What will you do?
The greatest temptation of an individual after getting rich overnight is the immediate change of lifestyle. Like there is no tomorrow. So before you slap your employer with your resignation letter, follow these steps on how to make your riches sustainable and meaningful.
Shhhhh! Keep a low profile
Keeping a low profile is for security and safety purposes. The joy of winning a jackpot is of course difficult to contain. Make sure to keep the information within a handful of trusted individuals or family members. Posting on social-networking sites is a huge mistake and will immediate mark you by thieves and people with malicious intent.
From everyday commuting to driving a brand-new sports car in just one night. From renting a room to a two-story mansion in an exclusive village. These grand lifestyle changes will definitely attract attention. Don’t make lifestyle changes that are too obvious. Once you are in the spotlight, it will just be a matter of time before relatives and friends begin bothering you for balato.
Hire a financial planner, accountant, and a lawyer. Don’t go cheap on your consultants and make sure they are “competent” and can be “trusted”. These two characteristics should go hand-in-hand when selecting consultants. They should primarily focus on your interest while maintaining unbiased in their advise and recommendations.
A financial planner will help you provide options on investments and how to make your wealth sustainable in the long run. An accountant and lawyer will help you on all legal and tax regulations that you need to comply for every financial decision you plan to make. As you consult with professionals, educate yourself as well so as not to depend on them indefinitely.
Choose sustainability vs instant gratification
IF you won P100-million jackpot, should you spend P100 million on the things that you want now, or buy an investment that produces P3 million to P4 million a year? Take advantage of your large capital to produce sustainable income instead of on expensive things that only generate expenses and liabilities.
Even with conservative investments such as bonds, you could generate 3 percent to 4 percent per annum guaranteed while preserving your capital investment.
Invest and diversify
IF you don’t have any knowledge about investments, learn from your financial planner. He or she would be able to provide investment options that are perfectly suited to your risk profile. Don’t place the bulk of your winnings in a single investment basket (i.e., expensive business franchise, high-end condominium, etc.). Diversify your investment properly to reduce risk.
For starters you may invest in pooled funds such as mutual funds or UITFs (unit investment trust funds). These investments do not require much attention but provide significant return on investment compared to time deposits, for instance.
Share your blessings? Make it sustainable
I believe donating a part of your winnings is a generous thing to do. But instead of making one-time, big-time donations on charities, which will last a limited time only on their operational expenses, why not invest the money instead and donate the earnings from the interest earnings of your investment? For example, investing P10 million worth of donations that could make P300,000 to P400,000 not just for a year, but for a lifetime.
Preserve, protect and be healthy
TO help you preserve your assets, buy insurance: medical, life, accident, disability and critical illness. These insurance contracts will mitigate the financial damage caused by life’s uncertainties. Maintain six-month worth of monthly expenses in a savings account to prevent premature withdrawal on your investments in case of financial emergencies.
But of course, insurance contracts are not enough. You still need to apply preventive measures by living a healthy lifestyle. Maintain proper diet, eat or drink food supplements and engage in regular exercise.
Jake Lingan, RFP is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 49th batch of RFP Program from August 22 to October 10. To inquire, e-mail [email protected] or text <name><e-mail><RFP> at 0917-968-9774.