Michael Ford
Estates & Wills & Trusts

What you should do when ‘unexpected’ financial news is good

By Ian Hull

The financial industry is relentless in encouraging Canadians to “plan for the unexpected” – and highlighting how anything can happen. You could lose your job, become disabled, lose your home to a fire, lose a loved one – the list of possible bad news seems endless.

The solutions that the industry is pushing – emergency funds, insurance, retirement savings – are all smart choices, and it’s important to have protections against bad news in place. But what about the good news? Do we need a plan of action when happy financial events occur?

The answer is absolutely. But luckily, your actions can take place after the good news. Unlike the bad news event, no advance planning is required.

Unexpected good financial news can come in many forms: an inheritance, large gift, work bonus or promotion, or a rapid rise in the value of shares that you own. And if you experience financial good fortune, it’s important to integrate the unexpected additional assets into your financial plan.

For example, with a more secure financial base, you may be more comfortable with investment risk, and more willing to adopt a more aggressive investment strategy to enhance your long-term returns. Conversely, if your savings are already aggressively invested to achieve your retirement goals, the additional wealth may allow you to structure a more moderate risk portfolio.

If you are currently retired, financial good fortune can also affect your retirement income strategy. If you draw on your new funds to meet your immediate cash flow needs, you’ll be able to withdraw less taxable income from your registered plans – and this could significantly lower the taxes you pay.

Of course, the most unexpected – and most unlikely – piece of good financial news is what nine Montreal co-workers received around Christmas: a $60 million lottery win, representing nearly $7 million each. The group seemed surprisingly tight-lipped in the press reports, not even disclosing where they worked. But you definitely get a sense that this is a savvy group who will plan well.

https://www.theglobeandmail.com/news/national/group-of-montreal-colleagues-wins-60-million-lotto-max-jackpot/article37437149/

And while the article below contains advice for a lottery win, it really applies to any financial windfall.

https://www.thestar.com/business/personal_finance/spending_saving/2016/01/26/the-five-things-to-do-after-you-win-the-lottery.html

Enough of the bad news – here’s to good financial fortune for you in 2018.

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