Kristen Peterssen on the pleasures and pitfalls of coming into a huge inheritance, PLUS an expert offers advice

‘The first thing I did? I went to DionWired and bought a tumble dryer.’ Kristen Peterssen woke up a multimillionaire at the age of 26, and had to grow up very fast. Here’s how she handled the pressures of suddenly coming into money.

It’s

the stuff daydreams are made of. Some mysterious uncle comes out of the woodwork and leaves you a vast fortune (and maybe a sprawling mansion) in his will. Or you buy the winning Lotto ticket. Hey, it doesn’t even have to be the jackpot

– a few mil would do just fine! The question is: what would you do with your newfound wealth?

In the space of a week, 26-yearold Kristen Peterssen became a multimillionaire. Which sounds amazing, until you hear the rest of the story… Her mother, who had been diagnosed with cancer the year before, passed away, leaving her a retirement policy that paid out R4 million, plus an insurance policy of R1 million. Then, in the same week, a wealthy aunt and uncle left her another million each. She also inherited a house, a flat and an SUV – amounting to another R2.5 million in assets. Kristen hadn’t been particularly well off before.

‘I was naturally overwhelmed, and I’m not ashamed to say,

I cried.’ Now, two years later, she shares what she has learnt.

Get a financial advisor

Most people who suddenly come into a substantial amount of money will need help managing

it, especially if you were not particularly wealthy before. That’s where a financial advisor comes in. Of course, you need to make sure you have one who has your best interests at heart – not their own. Kristen went with a professionally certified financial advisor who was not affiliated with a bank; that way, they weren’t selling her products, but actual advice. ‘My advisor gave me a proper price comparison of all my options so that I could make a real decision and keep my portfolio diversified.’

Lock that money down

‘The smartest thing I did was put it all into a living annuity,’ she says. Now that she’s ‘funemployed’, this is what she lives on. ‘I can draw a salary from that while never touching the base amount.’ And because she has a fixed amount that she gets every month, she’s not tempted to just spend it all. ‘Which, for me, would be a very real possibility,’ she says, laughing.

Don’t rush out to quit your job

Speaking of being ‘funemployed’… If you use it wisely, money allows you the benefit of rethinking your career. ‘At the time, I felt it made sense to quit my job,’ says Kristen.

The company she had been working for was going through a merger, and although they gave everyone a nice bonus and told them that nothing would change, everything changed. ‘They moved us all to new departments and it was very different to the role I had applied for,’ she adds. So, after just a few days of being a millionaire, she cut her losses and resigned. In retrospect, it might not have been the best course of action.

‘I thought: I don’t need the money, so why stay? But then, if you have all the money you need, why leave your bed? Looking back, I should have kept more of a set routine; having that structure would have been good for my mental health.’

After having gone back to school and struggled to find a job after her studies, Kristen has now started a small side business that keeps her busy.

Use your money on experiences, not material things

‘The first thing I did? I went to DionWired and bought a tumble dryer,’ she laughs. Practical, yes. But she understands the temptation to go out and get yourself a Lamborghini, or a jet ski. ‘I would rather use that money for other things. I host a dinner party for my friends once a fortnight, and I splurge on my birthday and travelling,’ she says.

So far she’s been to Rome, England, Thailand, Canada and Turkey (to name just a few destinations). She finds travelling and experiences more rewarding than buying flashy material goods that won’t retain their value. Kristen’s financial advisor suggested that she put money away in a fixed savings account to pay for these expenses. While it sits there, it also earns interest for her.

You are going to lose people

‘Money doesn’t change the person – it changes the people around them,’ says Kristen. Her newfound wealth has ruined many of her relationships. ‘I had cousins hitting me up for loans, and when I said no, they would badmouth me on social media,’ she says.

Lending money to friends or family can get ugly very quickly, and you shouldn’t feel obliged just because you have it. Hopefully, she says, you’ll have loyal friends and family who don’t think of you as a walking ATM.

Keep cooking

Another thing that nobody tells you about sudden wealth: you’re going to eat a LOT of takeout and restaurant meals. ‘Why cook when you can eat sushi every night?’ As a result, Kristen admits she put on weight, and is now making a concerted effort to eat healthily. She has even started her own vegetable garden.

Go to therapy

Inheriting such a large amount of money is overwhelming, says Kristen, and not as thrilling as you would think, especially considering her circumstances: people close to her had to die for her to be in this fortunate position. Sometimes you just need to speak to an outside person so you can a) deal with your loss and b) deal with your gain.

‘The easiest and most accessible way to ensure your loved ones are taken care of is through life cover.’

What the expert says

The first thing to do when you come into a large sum of money is keep it out of your personal account, says Samke Mhlongo, finance media personality and founder and chief executive of The Next Chapter (TNC) Wealth Partners (tncwealth.com). ‘If you are getting that amount as a lump sum, you should move it into a non-transactional interest-bearing call account immediately so that all that money isn’t sitting in your primary account.’

This is not only to keep you from dipping into those funds, but to keep others out, too. ‘We often give out our banking details to friends, family members and institutions for debit order purposes, and we don’t realise that even having just that combination of account number, branch code and account name is risky.

‘Once you’ve moved the money into a non-transactional interestbearing call account, you can look at a financial advisor,’ says Samke. She suggests shopping around and comparing rates and fees as well as the advice they give. As is the case with most industries, there are going to be both bad and good ones and, when it comes to your money, you want to find the best. Also ensure they’re certified and accredited. The Financial Planning Institute (www.fpi.co.za) lists all professionally certified financial advisors and you can check their accreditation with The Financial Services Board (www.fsca.co.za).

Of course, there’s the temptation to treat yourself with that money, says Samke, especially if you aren’t used to having that amount in your account. But, she warns, once you spend that first rand, it’s even easier to spend the next, and ‘it’s a slippery slope from R1 000 to R10 million.

‘When it comes to good principles of financial planning, and especially legacy building (getting that money to last from one generation to the next), you’ll want to consider what I call the wealth distance principle,’ she says. To create wealth, there needs to be a distance between your primary source of income and where you spend it. ‘I would recommend that your primary source of income goes into funding another vehicle that creates income for you.’ The more vehicles you have, the longer the money will last.

‘So let’s say you invest your money in a franchise. The net profit coming out of there goes into another income-generating vehicle, say, property investment. Then that income can go into your financial instrument: a share portfolio or a unit trust.’ The money you draw from here, you can spend on yourself. This way, you’re not only leveraging every rand from the lump sum, but it will also be very tough for you to spend it all.

‘It’s important for people to realise that wealth is a journey, not a destination,’ Samke adds. ‘Your financial position is always fluid – you’re becoming wealthier or poorer with each passing day.’