Even a sudden windfall needs financial planning In the course of professional practice, having dealt with innumerable people
we notice that the trend is of people coming to financial planners when they are experiencing a ‘life
transition'. Sudden illness, disability or death could ‘quickly put the family wealth at risk'. Marriage, divorce, children, jealousies, misunderstandings and simmering tensions can also wreck a family's finances when there were no clear decision-making processes. We have seen that people realize the need for a financial planner when they experience a drastic change in their financial status. While in case this transition is a loss of money, there isn't much a financial planner can do except suggest means to earn it. For, ultimately, the role of the financial planner is
significant when the money is there, in whatever amounts, small or big, and needs to be channeled and built towards certain goals. The more significant transition is when there is an inflow of money, which leads to a temporary state of being, a financial limbo, a time where ‘what was' no longer exists and ‘what will be' has not yet fully taken form. I say significant because, that is more often the time when enthusiasm gets the better of prudent financial management. The transition period can be caused by money received by way of inheritance, stock options, lottery winnings, divorce settlements, bonus issues, sale/split of a business concern, retirement payouts, insurance proceeds and so on. The causes are numerous as are the methods of handling them. The decisions made by such recipients while in this period of change can ultimately shape their financial future. It is important to understand that there are two aspects to these decisions: a financial aspect and an emotional one. The secret of success when dealing with such decisions lies in taking a methodical and objective approach to the decision making process. This process begins with three main steps:Knowing your New Resources Organizing and Prioritizing your ChoicesThis is an important step because the enthusiasm of having received a lumpsum may lead the recipient to taking some rash decisions of spending and investing. Utilizing your Resources to create the life you want to leadHow you handle your finances during these periods is different from that during general situations of planning one's finances. Normal day to day schedules of financial planning would include questions such as where to invest, how to invest, how much to invest and so on. In the case of financial planning dealing with sudden transitions, the procedure is significantly different. Besides the usual questions relating to money and various investment avenues, it is important to deal with the ‘new normal' situation; and this is achieved by making the correct decisions out of the multitude of choices available to you at this juncture. People who experience such a change not only require financial knowledge and analytical skills to manage their newly acquired wealth, but also require practical and effective ways to deal with the emotional challenges they face on a personal level.The author, Zankhana Shah, is a Certified Financial Planner. If you have any thoughts and experiences to share on financial transition, you can mail her at info@moneycareplanner.com.