Hi, and welcome to this week's episode of Money with Alpha. This week, I wanted to, to do something that has kind of been consuming my world for the last sort of, oh, six or seven months . And that is, what what do you do when you receive a lump sum, generally in the form of an inheritance but it can be a redundancy from a divorce potentially as well? Although, that one will probably be treated a little bit differently, and I'll explain why. And it's, you know, I'm getting into my, my late 40s. You know, it's my birthday soon, and I'm inching closer to the 50 mark. And one thing I've noticed in talking with clients and friends is that we're getting into that time where our parents are aging. There is likely going to be some shifts that are happening in where people are on this earthly world. My father passed away in June last year, which many of you will already know if you've been listening regularly. And it's been, it's been quite a journey on, on multiple levels. And to say I'm disappointed in our system is an understatement. There are a lot of things that would need to be overhauled, but it's probably not a priority for a lot of the sort of main organizations that would be doing that sort of thing. So I'm hoping to be able to share some of my experiences with you so that you can take some of my learnings and and have them if and when you need them. So you can always revert back to this episode if you're ever like, "Oh, what did Alpha say about that, and what were her experiences through this? I'm I'm struggling to know what to do in this area." You can always listen to what I did or obviously bring in professionals, absolutely, and you can also obviously follow your path too, 'cause everyone's circumstances and situation is slightly different. I was at an advantage because I was already managing my father's money. I'd already organized his finances about seven years ago, so I knew where everything was. I had all the passwords for everything. I knew how I knew who to contact and, and what to do in that regard. But I that still... The load was, was intense, even having all of this, and I was authorized contact on most of his accounts, so I could kind of activate things or deactivate things. And and I was also the and the executor, et cetera. But it's, it still made Because every organization that you deal with deals with it differently. They have a different process. You have to notify people at different times. Different people, different organizations need different documentation. Like, it's just... It's, it's a lot. And then amongst all of that comes, you know, if, if there is some money left then what do you do with it? And how do you integrate that into your, your life and your future in a way that's actually intelligent, I suppose, for want of word, or useful? Because it creates a certain degree of pressure then to like, "I don't want to get this wrong." Like, "I..." You know, "If I've got some extra here, I, I don't want to, you know, make a mistake and, and you know, and dishonor, in a way, my, you know, the hard work that my dad did do, and what he tr-" I know he wanted to have more left than he did but life circumstances made that not possible. So so we did what, you know, the best... I did the best I could for him with what he had left, and then now there's a some of that now passing to me. But then I'm like, "Okay, well, again, that pressure. What do I do with it?" So I wanted to share that part of the journey. The rest of it, I will likely cover in another episode, but I'm still in the midst of it, and I'm probably a little bit I don't have the perspective that I would like to have before I discuss it in a calm, rational way. So... I'll just talk about the money side. So I've broken it down into six things. I usually have five areas, but I had a, I had a sixth one that, that snuck in and I'll just tell you what those are quickly, and then I'll go into detail for each of them. So the first one is timing. So much of it is timing, and that's timing in relation to money in and money out. The second one is tax. You must be considerate of the tax side of things. Another one is also asset protection. This is particularly important if you've got siblings and there's a complex family structure. Then there's portfolio planning, which is then what you actually physically do with the money. Then the fifth is have a plan. If you can try and have some idea of this before anything happens... I thought I had a plan but not enough of one, so learn from my mistakes. And number six is be kind with yourself. That, that one snuck in because it's probably... I debated whether or not I'd make that one first, but I felt like it might be a bit more impactful if I said it last. But it is above and be all above and... That's just a question mark now, what that's saying is. Above, over and above the most important one. Above all. There we go. I'm struggling with my, with my term set. So the first one I'll touch on is, is the money timing side. So when I say timing in and timing out, it's also not everything is going to happen all at once. So there's staggered things. Like, if you've got your, you know, your mum or your dad or your, even your grandparents or whoever the, the inheritance is coming from, or the lump sum, even if it's a redundancy, that will generally come in a lump sum in one go. However, not always. If there are share options, that can also... You know, there might be an initial redundancy payment which is based on, you know, leave payouts and salary and just, you know, that, that handshake kind of payment. But then if if you if you were in like a, a share options thing in the company that you're working for, then you might actually have that that comes in at a, at a later date as well. Or you might Anyway, there's different things that you can do. So not everything will always come in at one time, so just to be prepared for the staggering of things.And then also when the money is going out as well. And the reason I say timing there is because I know I felt a little bit of pressure at first to have it all figured out so that as soon as the money came in, I knew what to do with it. And then I'm like, "Oh, hang on a minute. But I don't know if I'm prepared to put that much in the market right there and then. What if the market crashes?" Like all of these different scenarios were going into my brain, so. I suppose the, the learning I had there was, timing is important, but you don't have to do everything straightaway. And then interestingly enough, I listened to another podcast where they had this, this wealth advisor who was talking about what he does with, with families and in this situation where they have inheritances. And he's like, "Don't do everything straightaway." And I'm there just going, "Oh my gosh, yes, that is what I needed to hear." I had sort of got there on my own, but it's nice to be validated that that, that is correct. Like you don't have to then go and chuck it all into, you know, the share market or buy a property or do whatever it is like all at once. Because the thing is, I think to a certain extent, I know I did, I underestimated the emotional impact. And it's not just the initial emotional impact. It hits you in waves. Like it hit me over Christmas in strange things, like eating plums, because my dad loved plums. And every time I have a boiled egg, I cannot not think of him because he made my life an absolute misery in relation to trying to find eggs when they were really hard to find. So it's just those interesting parts, and other times it just comes out of nowhere as well. So trying to make your long-lasting financial decisions is, it's too difficult to try and do all of that and manage the emotional side and still run life and business and family and everything else that goes on with it. So that's where it's like timing. Just, you know, give, give yourself some, some grace periods if you can. Obviously if there's debt to repay and things and other stuff to tie off, some things have to have to happen straightaway, but if you can give yourself a little bit of time to decide what you will do actively with, with some of the money that's coming in, then I would suggest to do it. The next one is tax. This one, find yourself a good tax accountant because if this is going to impact you in terms of tax years can you put extra into superannuation and gain a tax benefit from that? What can you do to minimize tax legally and maximize the money that you're receiving? So that is definitely where a tax accountant can help you sort of from an overarching structure. Alongside that though, you do actually have to have the legal aspect. So that's that next step, which is the the asset protection. So if you... if the money's already in a in a trust structure, does it stay there? You know, who are the, who are the beneficiaries? How do... So there's, there's still considerations of, of that side of things too, to make sure that things are happening in a calm and fair way. Because I have seen situations where trusts can be stripped before all the beneficiaries have received what they were meant to receive. So it's making sure that if you have multiple trustee, trust or, or, beneficiaries , and even multiple trustees too, that, that can make things tricky too. But just to make sure that that part is clear and is actually happening according to the trust deed and the intentions of the person who has passed. Because again, I've seen things happen where it hasn't and lawyers were brought in too late. So make sure you have a good estate lawyer on your sides and a good accountant and that they are talking. So that's, that's something I would emphasize, especially where it's slightly more complex and there is perhaps more of an estate to, to dispense as well. So the portfolio balancing one then, which is number What have I... I'm up to number four. I had to write them down because I like, need to make four." Is where it can get a little tricky as well, because if you're already monitoring this if you're not, then I would highly suggest you do. And when I say portfolio balancing, it's what are the... where is your money going that's more sort of liquid and safe? Like where's the, the cash, the term deposits, even gold to a certain extent? What what are... how much of your money from a percentage perspective is sitting in those sorts of assets? Then you calculate, well, how much how much money have you got sitting in shares or property to try and figure out what your balance is in terms of percentages? So if you looked at everything holistically as your sort of net worth, where is it all going? Which ones are growth? Which ones are defensive, as they're called? So the defensive are the cash one, more cash liquidity kind of assets, and then the, the growth are the ones that are a bit riskier. So like your shares crypto if you're in crypto, commodities property, managed funds or all of that sort of thing. So once once a, like a lump sum's coming in, to try and sort of optimize the, the risk and return kind of thing, which as we get a little older is a little bit harder because your balancing starts to change. When you're in your 20s you can have like 80% of your portfolio, if, you know, percentage-wise, sitting in growth assets. Admittedly dollar-wise it's probably... they are probably smaller numbers. And as we get older, hopefully if we've been adding to things little by little, it's grown. But when we're older we start to, to flip that around a bit. So kind of like the 50 mark is where I've... for me anyway, it starts to kind of go back down. Like I've, I've sat in the you know, the 30/70% zone for a very long time. So, you know, 70% growth, 30% in defensive. But then once you start to get a lump sum in, that 30% in dollar terms becomes quite high. It's like, "Oh, I don't know if I want to have that much sitting in defensive and not d-You know, the money's not being used as smartly, or is, you know, it's not growing as much. So I've had to look at different options in that regard. So started to look at things like private credit. And, you know, there's, there's things like La Trobe and TermPlus and places like that that have different offerings that are kind of almost midway. They're not like cash or term deposits, but they're not, you know, shares and ETFs and, and managed funds and property, so it's, it's something sort of somewhat in between. So I've had... I've done... I've gone down a rabbit hole basically, in the last six months trying to figure all this out. And this, this sort of leads into the next one as well. And I'll, kind of flip-flop between this, this one and "have a plan" is, it would have been really good to have a plan. Like I've been, I've been staring at my spreadsheet a lot, fiddling around with where things should go and percentages and amounts and, you know, what am I... what am I doing with this to be able to... 'Cause I know the sorts of things that my dad wanted. And like I said, he wasn't able to, to leave as much as he wanted, but it was... it's still, you know. He still worked hard and there's, there's something there but I want to be able to make sure that I do the best by that but at the same time balance things out. So if you have a bit of a plan of... and some research done in relation to where you want things to be, and I would highly recommend that you already be investing on a regular basis. I was following Scott Pape when he had his, you know, Barefoot Investor sort of newsletter and, and membership for many years. And then when he stopped that, he issued a Idiot Grandson portfolio which, recommended three three ETFs, which were all in Vanguard, and I was excited that I was already in two of them, so I was like, "Yay, I did the right research." And the third one that I had was very similar, but it wasn't exactly the same, but it was, you know, basically in the same assets, just in a different sort of container. And so it's sort of spread across different markets of the world and different countries. And you can... if you have that already, you can just add more to that. I've been doing that now for a number of years, so I had gotten a little bit bored with the same old, same old, and started adding to it. So I'm, I'm now looking at adding into different types of ETFs, so looking at different markets and sectors and all of that to just to, just to try a few things out. Not putting a whole lot of money in some of them I just wanted to try it and see what what it's like. And then I, I do my own performance reports every three months, so I want to track it and see what, what it's doing. But yes, but have a bit of a plan. Like I I sort of... I guess I had a bit of a plan in the fact that I I could have just done more of what I was already doing but it imbalanced. It created this imbalance in my portfolio, so I ended up with too much. I would have had to have too much cash in just bank, like bank savings, which just felt like a little, bit of a, a waste of opportunity when I still have years to go to be able to do some investing, so that's why I thought, "I'll look at some of these other options." And if you want to know where I'm getting the information from, I subscribe to Money magazine. There's lots of really good articles and ideas in that. I listen to a few other podcasts. Like there's a really good one RASK, R-A-S-K, they had some really good information on ETFs. I went... I go to conferences. I just pick up local things I go to. You still have to apply your own level of judgment and being informed is important 'cause it is easy to get swept up in some of these. Like you come away from some of these seminars and go, "Oh my God, I could be making this and this and this" and then that, you know, the next day you come crash to reality and go, "Oh, but do I actually want to do that?" "Do I want to take on that much risk or more debt or..." And then it's like, "No, no, just go back to my plan and focus on the plan," and and come back to, for me, I'm still in that 70/30, so I still work on 30% defensive assets and 70% growth assets, but I've now got this kind of like somewhat straddling the two so I'm sort of putting them into defensive, the, the sort of more private credit kind of ones, but yeah, they're not quite as sort of safe as cash in the bank. So yeah, so have some have a plan and do your own portfolio planning. And even if you don't have the, the, sort of the larger lump sums right now, you can even just start doing this with what you do have now. And it doesn't have to be big amounts. Like literally, I was putting... to start with, I was putting like $100 a month in, and in a micro-investing account I was putting $10 a month. And little by little over time, I've added more and more to that because the rest of my finances have just kind of evolved to the point where I don't need more stuff. I put money aside for travel. I put money aside for my daughter. I put, put... I have my money pie sorted, so I can actually then challenge myself to, to do more with less, if that makes sense. So... And then, you know, income has increased over time as well, so it's a matter of just getting that momentum going and creating that, that kind of plan and working with that over time. And like I said, the last one is to be kind with yourself. It's just such a turbulent time, both emotionally and in the world as well. There's so much going on. You're like, "Oh, if, if I... you know, is the market going to crash?" Just 'cause things have been happening that are very unusual and unpredictable, and the responses to those things have also been very unpredictable and unusual, so it's very hard to, to see what's happening. I suppose the, the only constant is change making sure that what we do we understand, first and foremost, and that it suits our lifestyle, in which case we have to have clarity over what that lifestyle is and what it is that you want and how you want to live it. And for the most part, what this has actually taught me, this, this having to, to work through this inheritance side of things, is that what I was doing was what I'm happy with. I just need to amplify that and maybe make a few tweaks here and there but it was a really good opportunity for me to go, "Would I change anything? Not much, really." So that was a good validation. So it's, it's something to, to kind of help with your own life, to plan now. And that's not to say you're planning to to receive an inheritance, but it's still important to plan because you might want to leave an inheritance someday to your kids and you don't want them to have to go through the turmoil of trying to figure out what to do, which is I think what Scott Pape was trying to get at with his Idiot Grandson portfolio. You can set this up for you, but you can pass it down too. Do you like that rhyming? So so just start to think about it. And if you have any questions, please reach out because I would love to be able to help shorten your journey and the mental bandwidth that all this has taken me to, to get to, to that point of clarity and peace. So I hope that's been helpful and I'll leave you to have a lovely week and we'll catch you next episode.
