Ralph Moss Limited

SMART MONEY MOVES

Why a financial windfall deserves even more planning

Every year, hundreds of thousands of Canadians collect substantial extra money from inheritances, early retirement packages, divorce settlements, insurance payments, and other sources.
The larger inheritances alone endow some 80,000 Canadians each year with an average of $400,000, according to one estimate.
Whether it's $100,000 or $1 million plus, it makes sense not to do anything rash. In fact, your first smart move might be to put that money into a 30-day term deposit or Treasury bill, while you take the time to think about the following:

1. Taxes.
   Tax implications should be examined carefully with the help of professional advice. If you're receiving an early retirement or severance package this year, you'll probably want to roll over as much as possible into your Registered Retirement Savings Plan (RRSP), for maximum tax deferral.
2. Debt reduction.
   If you have high rate non-deductible loans outstanding, paying them down could be your most profitable investment. In fact, a penny saved on interest costs could be worth as much as 1.5 cents earned, because you don't pay tax on money you save. Pay off or reduce non-deductible loans, starting with those that charge the highest interest rate.
3. Investments.
   By investing wisely, you can help your windfall grow to many times its original size. Choose investments that conform to your personal asset allocation plan.

YOUR MOVE. Remember that a sound personal financial plan is your best guide for both everyday money matters and for handling unexpected windfalls.