Specialist
We’ve all had fantasised about what we would do if we won the Euro millions and had more money than we could think of. Who we would buy houses for, who we would give a few quid to? What car would you buy? Where would you go on holidays? Would we give up work, reduce hours or do charity work instead?
For most people, winning the lottery isn’t realistic. The odds of winning the euro millions is almost 140 million to one. That’s like being given the name of a person in Russia and getting one guess of picking them out of the entire population! It’s not a good use of money. But lots of people do come into money in smaller, although significant amounts, usually through inheritance or share options in work.
Paying down debt
In my work as a financial planner, the number one thing done when people come into money is paying down debt. Mortgages and debt repayments are the biggest financial obligation that people have. Central banks around the world use increasing the cost of servicing these debts to reduce spending when inflation gets too high.
Not having this obligation give people the financial freedom to do other things and they are able to save more for the future too.
Children
Children are expensive! And they are expensive to educate. I’m not just talking about people who send their children to fee paying schools. Their children may move away for college, with rent, food and bills to be funded as well as the college fees. They may also want to do a Masters when they are finished their primary degree which will cost at least another €10,000. And as there usually isn’t that big an age gap between your children, you will probably be paying more than one set of fees at the same time. People like the peace of mind knowing that their children’s future education costs are covered.
Then there is “helping them get on the property ladder”. With the cost of property so high in Ireland, it is difficult for people to get the money together for a house deposit. In the last 15-20 years, parents helping out with the deposit has become quite normal.
Extension/ Moving house
Houses aren’t as big as they used to be. Families soon run out of space as their family gets bigger. Coming into money gives them the opportunity to either extend their current home without taking on more debt or they can move to a bigger house elsewhere without increasing the size of their mortgage too much.
Cars & Holidays
Replacing the car is considered “treating yourself” from a windfall. With electric cars becoming more popular, people tend to be switching to EVs or hybrids with their treat. Or they might bring the family on a nice holiday, especially if they have spoken as a family of going to visit a particular place. I have worked with families who have spoken about trips to Australia and it’s great to tell them that should spend the money on that trip to Oz, it won’t put their future lifestyle as risk.
As you can see, people are pretty conservative and boring when they come into large amounts of money. While they may not see it as life changing i.e. no need to work again, it is in that they no longer have any debt and have a lot more disposable income. And that can change your life in a less noticeable way.
By Bluewater Financial Planning