For many of us, the thought of having 8 digits in the bank account is a serious fantasy. But we know that for one lucky Mackay resident this is now his reality. This is no doubt a life-changing win but deciding what to do with any large sum of money is often a scary concept, particularly if you are not used to dealing with this much cash.
Over our lifetime, there are many ways that big financial windfalls can occur, with cases we often see including:
- Lotteries (we know they can and do happen!)
- Insurance and injury payments
- Sale of a capital asset (i.e. house)
Now that you have the funds, what is on the bucket list?
- New house
- Cars, boats, 4-wheelers, planes
- Being debt-free
- Kids schooling & university funding
- Helping out family
- Owning a sporting team … the list is endless
Let’s assume that our lucky winner decides to gift away half of his winnings to family, friends and charity. Perhaps they spend a further 25% on the bucket list items. There’s still a staggering $12.5 million remaining. How much does it take to make sure he never needs to work a day in his life?
Well, if we go by MoneySmart’s website, a single person only needs a little over $44,000 for a ‘comfortable’ lifestyle. But now that you are a multi-millionaire, it’s ok to dream a little bigger. Let’s assume they invest just 10% of their winnings ($5 million) into a portfolio of diversified shares and property assets. Assuming that we don’t want to draw on the initial capital and just live off the earnings, and perhaps our winner wants the money for the next 60 years, they can afford to draw a little over $280,000 p.a. (increasing every year with inflation). That’s over 6 times what’s needed for a ‘comfortable’ lifestyle. The graph below demonstrates this:
Talk about being set for life!
Now the last question to answer – and it doesn’t matter if you won the capital or you’re saving it, the question remains, how do I invest my money to achieve this? The key is seeking expert financial planning advice to set in place a plan for funding each of your most important goals and allocating capital appropriately, as well as selecting assets to fit this.
Teneale Laister (CFP® Professional, AFP®, BCom[Fin,FP,Mgt](Hons), ADFS[FP]) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.