HOW TO HANDLE THE WINDFALLS IN YOUR LIFE

You might have missed but the US is currently abuzz with news of a $1.5b (sh4,700b) lottery jackpot that was won last week. It turns out the money will be shared between three ticket holders in three different states – Tennessee, Florida and California.

History shows that these lottery winners often blow all the money they win, leaving them worse off than they were before the event. With such windfalls they go out and splurge on bigger houses, bigger cars, boats and so when the money runs out as it always does they find themselves deeper in the hole in trying to maintain their new lifestyle.

In the event that you land on the windfall of a life time what should you do.

1.       Adjust your thinking

Thankfully this is coming before your windfall. You need to adopt the attitude of the rich, which is that money is not for eating, it is for making more money. Just because you have a lot of money does not mean you will always have a lot of money, but by deliberate action you can not only stretch out your windfall but actually get to the point where it is working for you, throwing off more and more income into the future. One difference between the wealthy and the rest is that they consume less of their income than they invest, and the richer they get the less they consume in relation to their total income than they consume. To tell if you are a rich person or not when you get a windfall you will more likely think of all the good things you will buy and then once done will think of investing --- the truly wealthy think the other way around.

2.       Meet your tax obligations

Even if you win at the lottery the tax man’s obligations have to be met, however painful this is. Because even if you finish the money before they get to you they will hound you till you pay them, as they should. As it is now lottery earning attract a tax of at least 15 percent. Don’t try and be clever. As it is now if you buy any property of above Sh50m on transfer you will have to show how you got them money to buy and if you are not tax compliant they will slap you with a 30 percent tax on the cost of the property. So why not do away with the pain at the beginning, you might even pay less instead of suffering death to the taxman, by a thousand cuts!

3.       Park the money away

In case the windfall came out of the blue – like the three lottery winners in the US, park the money away. Either open a fixed deposit account (with that kind of money the banks will be falling over themselves to have you as a client) or buy government paper. This will not only allow you to start earning off your money but will also give you time to think or get sound advice on how to employ your monies.

4.       Don’t be a hero

We all like to have the ego satisfaction of saying that is my business, that you employ people, that your business makes money for you as you sleep. But business like every other worthwhile endeavour in life takes time to learn. Think of it this way, It does not mean because you have all the text books for P1 to P7 when you are in P1 that you know very thing. You have a head start yes but that’s all it is, you are going to have to bear down and learn the things in the books and that takes time. The worst thing that can happen to any businessman is to start off with a lot of money. Park the money and live off the interest and if your entrepreneurial itch persists use some of the interest to start experimenting on business, learning as you go. If you jump in with a lot of money you will soon find out that money is not the main ingredient in a successful business.

5.       Investing in yourself

Related to the above the smart thing to do is invest in yourself. And I am not talking about buying fancy clothes or fast cars or women, I am referring to learning. Buy a book, go to a seminar or pay a good advisor in the enterprise you may have set your sights on.  Inspirational speaker Robin Sharma says, “To earn more you must learn more.” He goes further to say, “To double your income you must triple your rate of learning.” The point is the difference between living happily ever after off your windfall or looking back on “the good old days” after falling back into destitution will depend on the content of your head.

Good luck to you!