Impact of Anticipated Windfalls on Investment Strategies

Anticipated windfalls can mislead financial planning, hindering true independence and control over investments.

### Anticipated Windfalls and Early Retirement: How to Navigate Financial Planning
* 💰  Anticipated windfalls, such as inheritances or future financial gifts, can create behavioral traps in financial planning by leading individuals to **over-rely on these uncertain future funds**.
* 📉  It is risky to base current financial decisions on anticipated windfalls, as the **timing and amount of these windfalls** are often unpredictable.
* 📊  The best approach is to plan as though the windfall does not exist, focusing on **saving, investing, and living within one's means** independently of the potential future funds.
* 💼  Building financial independence through personal savings and investments is more **reliable and empowering** than relying on **external windfalls**.
* 🏆  Taking control of one's financial future and becoming the "**hero of your story**" is emphasized as a **proactive and empowering approach** to financial planning.
* 👨‍👩‍👧‍👦  It is important to maintain healthy relationships with potential future benefactors (e.g., parents) by **not overly relying on their financial support** for personal financial planning.
* 👨‍👩‍👧‍👦  Independent children who are financially responsible tend to be viewed more favorably by their parents, potentially creating **additional opportunities in the future**.
* 📚  The financial advice provided encourages individuals to focus on **what they can control (savings, spending, investments)** rather than on **uncertain future windfalls**.

[Music] All right, we've got a question from Aaron up next. It says, Do anticipated windfalls have any impact on how you allocate investments? If my goal is to retire early, should I focus on investments that are available without tax penalties? Hold on, okay, do so the first. So, I think he wants to retire early. What I heard, anticipated windfalls, that's where kids who have parents with money. I think of like inheritance, which I can definitely talk about that, but what? How did it took a turn on there? So, anticipated windfalls, but then you went into taxability. What was the question? Yeah, 'cause he's asking. I'm going to read again. It says, Do anticipated windfalls have any impact on how you allocate investments? I'll add like right now without the windfall, 'cause he's saying, If my goal is to retire early, should I focus on investments that are available without tax penalties? So, I think and does the interconnected. If I'm going to get an inheritance, if I'm going to get a

big windfall. Do I really need to focus on retirement accounts? Do I really need to think about doing that, or should I focus on like after-tax assets? Now, I want to answer the first part, um, first part first, uh, how do windfalls, uh, play into our financial, uh, decision-making. Here's what I think is unfortunate: a lot of times we see folks that, whether they mean to or not, behaviorally they begin doing mental math and accounting for a windfall at some time in the future that they probably shouldn't. Uh, we've seen people who are far too confident with their financial situation where it is today, and we say, Hey, the way that you feel and the things that you're saying and your level of confidence does not match where you are financially. And then we come to find out, Well, the reason that's happening is because they expect there to be a windfall in the background. The problem with windfalls is they're often not known when they're going to happen. Uh, something pretty sad generally has to

happen in order for that windfall to take place, and you have no control over the timing or if it actually happens. The worst thing you want to do is say, Okay, I'm going to plan that I'm going to have a windfall at this age, and it's going to be this amount, and then all of a sudden you get to that age, and either the windfall doesn't happen, or maybe the thing that the windfall is going to come from, whether it be an inheritance, whether it be the sale of a piece of property, sale of a business, doesn't actually materialize in the way that you had estimated. You can get yourself into a lot of trouble. You've kind of begun to allocate and spend dollars that have not yet shown up. So what we tell folks around that situation is plan as though it were not there when it comes to how you behave today. I mean, still shoot for a 25% savings rate, live on less than you make, have a reasonable level of lifestyle that you are comfortable with.

still allows you to save for the future, but don't also discount that if there are things that you might not be otherwise able to do, and you know that there's going to be a windfall coming your way, you can factor it into how you plan for those future expenses. But you can't lean on those fully and 100% agree for sure. I mean, I even love that you, because I had written it down already, but mental math is something that I think, and this ties back to earlier, I was talking about the behavioral coping skills that us as humans can do on this. And when you're doing mental math, you find ways to cut the corner when it comes to hard decisions you have to make with lifestyle, with hard decisions you have to make with am I saving enough and doing investments. And I don't mind sharing that we've been working with clients, I mean, between the two of us, we're getting close to 50 years, and you see all the time with very

successful families that have, you know, and the kids start looking at these assets, is that this is one day going to be theirs. Realize that, first of all, it's exactly what you said. You're counting on a negative event that you don't know when and where, and you hope that you're not having to count the days for your own financial independence. The other thing is, is that from the parent's perspective, sometimes there's strings attached to this. I mean, all through, um, we see it with the relationship. Money and relationships can be hard roads to travel sometimes, and that's why I would hate for you, um, to build your financial life off of this. Because here's the next thing I wrote down. What can you control when it comes to future windfall money, inheritances, or other things? And you're already structuring your asset location plan off of money that's not yours. You don't control that money. It's under the control. It's just, it's back to that. We've said it before on shows when Shaquille O'Neal talks to his kids and

they start talking about decisions of man. We're wealthy and we're rich. He's like, Uh-huh, uh-huh. I'm rich. Your mother's rich. You're not rich, and that's something you need to tell about what can you control. You can control your savings. You can control your spending. You can control when you're walking on your path towards financial independence. And guess what? You'll own your time that much sooner that way. When this windfall potentially comes your way, I'll tell you what. If you make all these things and you're building your own independence, if you're actually controlling the things you can control to the point that you're actually good with money, you will be better. Those who can be good with a little can be great with a lot, and you will have developed those skill sets. That's what goes into the financial order of operations and all the other things we're teaching you. I don't want you to feel like you're indebted or you're waiting for some future event to bail you out of all the

things out there. CU remember I shared it in the book, and it's one of the quotes that's gotten some attention: Villains and victims never win, but the victims have the opportunity to be the hero of their story. So, take that active role of being the hero of your story. And by the way, your parents, if that's where the money's coming from or wherever this windfall is, they're going to be impressed too, and that might even create other opportunities. What's funny is that we work with multiple families, and it's interesting: the children that are the most independent are the ones that are building on their own. Typically, they turn out to be the executives; they turn out because the parents know that, once again, if they're good with a little and they've maximized on their journey, man, that shows that they're going to probably be a good steward and be good with this money in the future. And I just don't want you creating that behavioral trap where you actually stymie you becoming the best.

version of yourself because you're counting on somebody else's Great Big Beautiful Tomorrow to be your future, and that's just not healthy. It's great

Should Anticipated Windfalls Affect Your Investment Strategy?

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The Impact of Anticipated Windfalls on Investment Allocation

Anticipated windfalls, like inheritances, can influence financial decision-making and investment allocation.

Many people become overly confident in their financial situation, relying on future windfalls that are uncertain.

This can lead to a mismatch between their current financial status and their level of confidence.

Relying on a future windfall for financial planning can be risky, as the timing and amount are unpredictable.

It's important to plan as if the windfall won't happen, maintaining a 25% savings rate and a reasonable lifestyle.

While a potential windfall can be factored into future expenses, it shouldn't be the sole basis for financial decisions.

The Dangers of Relying on Future Inheritances

Relying on future windfall money, like inheritances, for financial independence is risky and uncontrollable.

Parent-child relationships can be strained by financial expectations, and it's important to focus on personal savings and spending.

Building financial independence through personal control and good money management is key to achieving true wealth.

Victims have the opportunity to become the heroes of their own story by taking an active role in their lives.

Independent children who build on their own often turn out to be successful executives, impressing their parents and creating more opportunities.

Relying on someone else's success for your future is not healthy; it's important to maximize your own journey and become the best version of yourself.