By John Kariuki
With the intense business competition and low buying power, occasioned by the high inflation rate, many companies are doing everything in their power to retain their customers.
And so everyone, from mainstream banks, televisions, newspapers, mobile phone service providers to supermarket chains, businesses are giving out freebies and making people instant millionaires.
But how does one handle the windfall after winning a lottery?
Personal finance experts say that while sudden affluence can take care of a winner’s needs, extreme monetary caution is needed lest the victors go on destructive ego trips.
Some lottery winners have been known to go on acquisition sprees, buying household goods, flashy cars and clothes, and even taking on extra lovers.
Sudden riches often bestow the costly privilege of sitting in neighbourhood committees and councils on some people. This silent power gets into their heads, and soon they waste their finances on all social causes.
Unlike people born into money and raised with it, some lottery winners don’t know how to handle even small monies. Their windfall becomes more of a curse than a blessing.
Disregarding all social decorum and financial advice, such sudden millionaires plunge into a cascade of monetary mistakes that culminate in their bankruptcy.
strike a balance
So, what should people do with the sudden income if and when they win the lotteries?
Felistas Waringa, a personal banker, advises people who win big money to strike a balance between setting something aside in an emergency savings account and paying their existing debts.
“One should begin by budgeting,” she says, adding that one should invest the remainder of the windfall.
Waringa warns against rationalising that the money “was not even there” in one’s plans and squandering it.
“Treat it as a business start up and start something,” she says. This banker, however, warns lottery winners against embarking on investment ideas that they know nothing about before seeking expert advice.
She points out that financial advice can help sudden millionaires to turn their fortunes into real and sustainable wealth. Money is not riches, she adds, but a means to it.
“People who have built their wealth from scratch understand the need for financial expertise and which they regularly hire,” she says. But people who gain sudden wealth are often reluctant to seek for help in the mistaken sense of security that the vast amount of money they own gives them, she adds.
This banker adds that many people who win lotteries often go broke within a few years.
blast from the past
“These losses often result from poor planning and being unprepared emotionally to handle wealth,” she says. “On the other hand, people who have built wealth slowly have had time for their emotions and habits to develop to match their wealth,” she adds.
Allan Mburu, a previous winner of one lottery, says that often people from one’s past are a major drain to a sudden windfall.
“When one makes big money, relatives and friends materialise from one’s past requesting financial assistance,” says Mburu. When his money began dwindling, he decided to track all his spending.
“I realised that I had been going to the bank to withdraw money every few weeks to help my kin and friends who were in financial problems,” he says.
He advises lottery winners to relocate to far places where they can launch their money plans in comparative peace. “Allow the money to ‘cool off’ in a bank account while you develop a watertight investment plan,” he adds.
