Navigating windfalls and washroom wordsCOFFEE WITH WARREN, with Warren Harbeck Not long ago four winning tickets split 34 million dollars in the Super 7 lotto. Leading up to the big draw, radio talk shows were asking listeners what they would do if they won so much money. One caller said she'd change her name and move out of the province. Another said he'd change his underwear. Then there was the farmer who said he'd keep on farming till all the money was gone. For a more satisfying answer to the question of what to do with a windfall, I turned to coffee companion Gerald Miller. Gerry's an investment and retirement planner with the Royal Bank of Canada. Before entering the money management profession, he raised cattle. He understands the importance of long-term thinking and patience when it comes to financial responsibility. I asked Gerry how he would advise clients who came to him and said they suddenly had a big bundle of money, and wanted to know what to do with it. He said this question comes up fairly often, and not just because of lottery winnings. More often the question arises because of inheritances or sale of a business or property. "The first thing you should do is get together with a professional financial planner – preferably before picking up the cheque," Gerry said. Without a solid plan in place, all the best intentions in the world could disappear as fast as the money, once the cheque is in hand. Cash planning, tax planning, estate planning and life insurance are major issues to be addressed. Even before talking dollars and cents, Gerry would want to know what kind of person the client is – age, lifestyle, values, etc. Is the client charity-minded? How about dreams of a new business venture? Then comes the detailed discussion of how to actually divide up the money. "The main thing is that, because there's so much money that you're not used to having, put some away for a year so that you cannot touch it," Gerry said. "Out of sight, out of mind." For this purpose, Gerry recommends secure investments such as GICs (guaranteed investment certificates). Next, Gerry said, use some of the money to get rid of non-tax-deductible debt, such as mortgages and car loans. This is also a good point at which to decide how much to give away to others, such as family members and worthy causes. "Now what to do with what's left," Gerry said. Consider investing some in stocks and bonds, with careful consideration of one's tax situation, Gerry advises. Write out a wish list, too. Have some fun with part of the money. Travel, buy new clothes, get a new set of golf clubs. But ultimately the suddenly wealthy have to decide what they are going to do with the rest of their lives, Gerry said. "You can only golf so many days of the week before you get tired." * * * * * On the lighter side, I received an email from Cochrane coffee companion Libby Graham responding to my recent column on humor. Libby personalized what must be one of the funniest stories ever told: "I was on my way back from Edmonton recently, and decided to stop at a rest area in Red Deer. I went into the washroom, and as the first stall was occupied, I found my way to the second stall. I had just sat down when I heard a voice from the next stall say, 'Hi there, how is it going?' "It is a little unusual to strike up a conversation with a stranger in a public washroom while you are in the bathroom stall. I didn't quite know what to say, so I finally said: 'Well, not bad....' "Then the voice said: 'So, what are you doing?' "I was starting to find this a bit weird, but I said: 'Well, I'm on my way back home to Cochrane.' "Then I heard the person, all flustered, say: 'Look, I'll call you back. Every time I ask you a question, this idiot in the next stall keeps answering me!'" © 2002 Warren Harbeck |