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Managing Sudden Wealth (Steps To Take When You Get A Windfall) - YouTube
Channel: Martin Bamford
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when you suddenly come into a lot of
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money there are many things that can go
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wrong whether it's just a lucky
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investment or an inheritance from your
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grandparents there are some common
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mistakes people make when they
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experience sudden wealth syndrome in
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this video we're going to talk about
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sudden wealth syndrome and why it's so
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important for you to do these things
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once you get rich all of a sudden being
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on the receiving end of a significant
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sum of money sounds great doesn't it but
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it can also come with a great deal of
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stress and worry there is a recognized
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psychological affliction it's called
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sudden wealth syndrome and it can cause
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us to do some silly things with money
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ultimately leaving us worse off than we
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were before the windfall which is not
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good i'm sure we've all heard the
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stories about lottery winners who
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subsequently declared bankruptcy
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according to the national endowment for
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financial education 70 percent of
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lottery winners end up broke that's
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sudden wealth syndrome play scottish
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hospital porter john mcguinness won 10
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million pounds on the national lottery
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back in 1997. he gave away 3 million
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pounds to family members three quarters
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of a million pounds to his ex-wife he
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bought cars holidays and even a 200
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pound wedding to his second wife and he
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invested four million pounds in
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livingston football club which later
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went into administration making him
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liable for its debts by 2009 he was
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broke and became a virtual recluse there
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are countless stories like this about
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lottery winners and professional
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athletes who come into big sums of money
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only to lose it all in the us 78 percent
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of nfl players have gone bankrupt within
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two years of leaving the sport sudden
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wealth syndrome is a psychological
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condition or an identity crisis in
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individuals who have suddenly become
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wealthy the syndrome is characterized by
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isolation from former friends guilt over
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their changing circumstances and extreme
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fear of losing their money
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so what can you do if you have to deal
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with this sudden wealth syndrome if
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you're on the receiving end of a cash
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windfall expected or otherwise the
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starting point is to have a sensible
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review of how much money you actually
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have now six or seven figure sums are a
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lot of money especially when they arrive
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suddenly when they're unexpected but
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even a multi-million pound sum might not
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be enough to last you an entire life
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lifetime it all depends on how you spend
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it because wealth isn't what you get
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it's what you keep you also need to get
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your head around the terms and
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conditions associated with the money
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here in the uk lottery wins and gambling
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wins in total are tax-free but
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inheritance is taxed at 40 percent on
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sums over and above the nil rate band
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capital gains are taxed at ten percent
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or twenty percent or eighteen percent or
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twenty eight percent on property gains
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make sure you set money aside for paying
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the tax bill as hm revenue and customs
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do not mess around when it comes to tax
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also make sure you really have received
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a windfall you don't have the money
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until you have the money in other words
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don't count your chickens until they've
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hatched until that sum actually lands in
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your bank account once the eyes are
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dotted and the t's are crossed on any
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associated legal paperwork are you
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really about to receive a life-changing
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sum or is the promise of a big payment
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part of some elaborate scam be
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especially wary if you're asked to pay
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some money to get some money that's
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almost always a scam at play step two is
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to seek advice preferably before the
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money arrives and a long time before the
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money arrives fairly on in my career as
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a financial planner i was working with a
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new client who had sold his tech
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business for a multi-million pound sum
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and during my first meeting with him and
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his wife the sell proceeds arrived in
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his bank account he checked his online
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banking and the money had just arrived
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they had carried out no forward planning
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before this huge amount of life-changing
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money arrived and they had no plan about
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what to do with it and at the same time
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the business deal he'd done had become
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common knowledge in his industry and he
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was getting bombarded with cold calls
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from investment managers all other sorts
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of financial salespeople all trying to
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get their mitts on his muller look we
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don't always know that we're going to be
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on the receiving end of a windfall
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that's why it's called a windfall i
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guess but we should plan for it if we
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know it's coming down the track creating
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a financial plan with the help of a
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suitably qualified regulated and
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experienced professional before that
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money arrives in your bank account this
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will allow you to make more rational
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decisions in line with your goals in
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life you should always start with what
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you what you want to achieve in life
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what it is you want
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with that money being the element that
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finances those goals so instead of
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asking yourself what can i buy with this
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money i've got now ask yourself how you
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can use the money to advance your life
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goals understanding that there's a
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difference between the skills you need
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to make money and those you need to keep
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it and grow it that's key to all of this
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especially if the source of that
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windfall was luck recognizing that it
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was luck and not down to skill that can
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be hard we all like to think we got to
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where we are today by virtue of our hard
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work and our superior judgment but if
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you pick the random number on a lottery
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ticket and that's how you won the money
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you probably don't have the skill set
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required to make savvy investment
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decisions or run a football club sorry
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but that's just the way it is recognize
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that your sudden wealth means you need
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to acquire a brand new set of skills
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read widely and consult with trusted
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sources to obtain the knowledge and
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expertise you need before you make big
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financial decisions even with the best
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advisors in place you should still have
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enough money knowledge about money and
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investing money to assess their
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recommendations before you take any
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action i think this is why so many
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professional football players and other
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athletes they get course out because
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they rely on entirely and they trust
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their professional advisors they don't
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actually make that judgment for
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themselves always always have enough
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knowledge to assess what you're being
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told to do part of the financial
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planning process is the lifetime cash
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flow forecast so we use sensible
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assumptions about investment returns
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charges price inflation etc and it
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allows us to graphically illustrate the
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likely path of your wealth over a period
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of time typically all the way through to
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age 100. armed with that forecast we can
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then model the financial impacts of
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different investment or spending
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decisions what will it mean if you give
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away a million quid to your friends and
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family will it result in a higher or an
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intolerable chance of you running out of
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money before you run out of life on that
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topic of giving away money to family and
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friends you need to be seriously careful
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here sudden wealth has the nasty
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potential to attract new friends who
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aren't really friends or encourage
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previously estranged family members to
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appear back on the scene separating
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genuine friendship or family
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relationships from opportunists can be
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almost impossible and this isn't to say
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that you need to cut off ties with
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friends and family doing that would lead
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to some fairly miserable times in some
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cases but you do need to establish some
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really clear boundaries in fact you
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might even want to come up with a cover
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story to explain the source of your
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sudden wealth avoid publicity at all
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costs especially if you're a lottery
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winner or you've sold your business for
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a large amount of money never disclose
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the exact sum always refer to an
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undisclosed amount
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this is one area of life where the
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privacy element is essential for
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maintaining your safety for maintaining
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your state and mental health if you have
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picked up any publicity around sudden
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wealth take steps to protect yourself
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you can change your phone number you can
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create a new email address only trusted
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contacts have even consider temporarily
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deactivating social media accounts it's
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also a good time to take your cyber
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security really seriously strengthening
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your passwords and your online banking
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security another really important step
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to consider is to delay making any big
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purchases i can absolutely understand
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the temptation to visit the nearest
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porsche dealership or go and see an
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estate agent who specializes in country
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estates don't do it stop take a deep
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breath and spend some time reflecting on
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what will actually make you happier
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rushing into significant financial
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decisions at a time of high emotions
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that's unlikely to put you in a good
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long-term position rather than making
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big financial decisions that involve
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lasting commitments instead consider
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dipping your toe in the water just trial
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different living situations or even
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vehicle choices this is what renting is
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for and you can celebrate the moment but
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without blowing massive amounts of cash
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treating yourself to a holiday or buying
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some small but special gifts for your
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loved ones these things are fine to do
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but drop in a few hundred thousand
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pounds on a supercar or a few million
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quid on a property without taking the
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time and having the patience to consider
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that purchase first and also considering
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it within the context of your overall
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financial plan your goals in life that's
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usually a bad thing if you've
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experienced sudden wealth syndrome or
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you're just starting to experience it or
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you're about to in the future so your
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business is doing well you're about to
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sell it or you're about to get a big
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inheritance then i hope the tips in this
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video were useful for you tell us in the
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comments what are some steps that you
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would take to deal with sudden wealth
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syndrome and what would your cover story
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be if you won the lottery i'm really
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interested to hear that one too thank
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you for watching this video until next
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time i'm martin bamford and remember
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when it comes to your money the more you
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know the faster
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it can grow
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