When people receive large sums of money - whether in the form of inheritance, settlements, lottery winnings or sporting achievements - one of the most common financial errors that they make is that of short-termism. Consumers often focus their thinking on the short term rather than the longer-term picture. As a result, their immediate wants or needs tend to take priority over provision for the future.
This is often evident in people cashing in their retirement policies in order to fund purchases, such as home improvements, a new car or even luxuries such as holidays. We are noticing that funds are still being channelled away from investments to meet immediate cash needs.
It is crucial that consumers start to make themselves aware of their true savings requirements. People need to start taking their financial commitments seriously and have an overall financial plan in place that addresses both their short- and long-term needs. If they do not do this, then what may be classed as poor savings habits now can prove to be potentially disastrous a few years down the line.
It is important to bear in mind that in today's uncertain environment there are both potential investment opportunities as well as possible pitfalls, so getting proper advice from a reputable financial intermediary is critical. A financial adviser can make recommendations based on someone's personal financial circumstances and steer them in the right direction in terms of meeting their financial goals.
Financial planners can help people to devise a financial plan and make sure that clients not only adhere to that plan, but also help them to get back on track if they do deviate. People can be so easily tempted to disregard well-formulated plans. Employing a skilled financial planner can be compared to the role of a coach for the Olympic Games competitors; just as they assist athletes to stay on track with their overall fitness programme in order to meet their long-term goals, such as winning a Gold medal, financial planners can assist consumers to realise their financial goals better.
People who receive large amounts of money must resist the immediate temptation to spend the money and should rather use the opportunity to reap the long-term benefits of a fruitful investment by seeking the advice of a qualified financial advisor.
