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Wealth

How to handle sudden wealth in South Africa

A lot of us dream of being wealthy and living a super comfortable or luxurious life. For the majority of people; this is just a pipe dream. However, there are people who are lucky enough to strike it big. This sudden wealth can be overwhelming if you come from a humble background. This is a guide on how to handle sudden wealth in South Africa. Everything you need to know to avoid messing things up.

There are many ways in which sudden wealth comes to us, it can come from inheritance, lottery or gambling, or a breakthrough in our careers. Either way it’s usually difficult for most of us to deal with this new found success. This is why a lot of artists and athletes go broke shortly after ending their careers. Sudden wealth often comes with a new reality that we are often completely unprepared for.

Sudden wealth may end up causing more damage, leading you to overspend or reckless investments. One lottery winner said winning the lotto was a curse.

How to protect your wealth

1. Don’t tell anyone

Tell people how much money you have and they will come up with all kinds of problems that demand your money. Keep it quiet, don’t even tell your best friend, no one needs to know until you have completely collected your emotions and decided on what you are going to do.

2. Calm down

Wait for sometime before making any decision on what you are going to do with the money. Your emotions will likely overpower logic if you act too fast, just wait, take a holiday if needs be, just to clear your mind. You have to accept your new found reality, understand that your financial position has changed.

3. Make stable investments

Emphasis being on stable; don’t take your wealth in invest it in your friend’s business. What happens when the business fails? You will lose your money and a friend. Invest your money in stable assets that are guaranteed to bring returns and protect your money from inflation.

Being wealthy is often the destination for most people, now that you are wealthy, do your best to avoid not being wealthy again. You do this by investing in stable assets, these assets are generally meant to protect wealth while simultaneously growing it. Most of these investments produce interest and dividends, this is the money you can spend recklessly, not your principal amount.

4. Hire an advisor

There are many wealth planning companies that are set up to deal specifically with these kinds of things. Hire a financial advisor, most financial advisors will work to your benefit. There are some that may not work to your benefit, but hiring a financial advisor is definitely a good investment.

5. Make one big purchase

Make one big purchase in order to get the urge to spend out of your system. It can be a car or a house or both. Just make sure that you don’t spend over 10% of your money on one big purchase, with the only exception of a house. You can spend up to but not more than 30% of your money on a house.

How to handle relationships

Your relationships with your partner, friends and family will definitely be affected by your new found riches. You personally might not change but they will change their conduct towards you.

The best thing that you can do is not change, show that you are still the same person that you were and don’t be overly suspicious of their motives. Buy them little gifts or do things that are meaningful to them, a lot of people expect to share in the wealth of their friends or partners. You can give them this feeling by doing things that are worthwhile for them while not blowing your money.

Make sure that most of your money is inaccessible, even to you, lock it in long term investments. You can’t give away money that you don’t have.

Conclusion

This was a guide on how to handle sudden wealth in South Africa. Do you have any thoughts or questions? Comment below.

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