Garina Fearon has a lot to think about these days. After winning the New York Mega Millions lottery recently, the 34 year old, Jamaican born, corrections officer has been given a rare opportunity to do whatever she wants with her life. And she doesn’t have to worry about money.
Only thing is, starting with paying Uncle Sam, she does have to worry about money. If she can plan and carry out the plan wisely however, she can make it last for generations. If she doesn’t, she can see it go up in smoke in 5 years like many other lottery winners.
For starters, as a money advisor I must say, I love her working class work ethic. Many people say they would love to just quit their job and do whatever they want. Well after six months that’s a bit challenging to figure out for some people. Especially if they’re used to working hard. Not to mention the concern for payment of the new monthly bills.
Now Ms. Fearon said she intends to still work for the Department of Corrections which is fine. But three years from now she may feel differently. She may come to a point where she realizes the money she has and the responsibilities she has and it may not seem like a fair tradeoff for her. We’ll see. So along with looking at where she is now, Ms. Fearon may want to work elsewhere, start a business of her own, volunteer at her local charity or a combination of all these ideas.
Also, many employers offer benefits at much lower monthly premium rates then if someone paid on their own. Not a concern most times but if she has a major sickness she won’t have to use the lottery money if she doesn’t want to.
Next, I love the fact that she wants to take care of her mother. That’s what money is for, to help you and your family. Her mother can have family along with a caregiver to take care of her.
After her mother is taken care of, she can turn her attention to her two children. For them I say put them in private school if she hasn’t done so already. Best in the country. Doing this will insure that they not only get on the right track education wise but they start to form networks with other success driven kids for their future. So if they want to become architects, painters, business owners, or anything else they have peers they can potentially call on in the future to help.
She can’t allow them to just sit back educationally and relax because they will become addicted to that lifestyle and by the time they’re 45 she’ll wonder what happened. Also, they’ll need the skills to take care of their family. Education being key has not changed.
It’s also important that she makes sure they keep a good work ethic. This money doesn’t mean they don’t work. I’m not saying they have to completely fend for themselves either. The advantage of having money is giving your children a leg up but not a hand out. School work schedule permitting and if they don’t participate in afterschool activities, they can get after school jobs working in a law office, church, doctor’s office, hospital, construction site or a homeless shelter giving of their time. But whatever they decide, they need to work. Video games and movies in the evening and on weekends.
And chores around the house not only teach responsibility but also a commitment to helping fellow family members. It can go a long way when it comes to family bonding that people may not realize until later in life.
A good example for Ms. Fearon in raising her children is the book “Titan” by Ron Chernow. The biography profiles the life of John D Rockefeller on not only how he amassed the wealth he did but also on how he managed it for himself and his family. Religious values, money, family, education and giving back all rolled into one life.
She also needs to set aside money for their college and maybe even post graduate schooling. These are investments in their futures and should be funded with enough money to allow them the best that money can buy.
If her son wants to go to medical school and learn to communicate with sharks to see how they can help humans cure cancer, diabetes or any other diseases, he’s going to need the money to do that. Working a part time job in school may take away that focus.
Next Ms. Fearon can look at charities that have meaning to her and map out a five to twenty year plan on how to give to those charities. She can start with a charity that focuses on finding a cure for diabetes which her mother suffers from. She can look at homeless shelters as well.
She’ll get many offers to donate and she’ll find it tough to turn them down but unfortunately she’ll have to for many of them. Others she’ll have to give small amounts to. If she doesn’t, she’ll begin to run low on money for the lifestyle she wants for her family. As a compromise, she may be able to encourage other people to give to charities she can’t.
Now where Ms. Fearon moves her family is critical. This is where she has to be very, very careful. If she buys a home or homes that bleed her cash every month at a high rate she can quickly find herself among those who win a fortune and see it gone in five years. I’m not saying she has to stay in a small apartment eating rice and beans by candlelight either. She just needs to be careful on how many homes she buys. Also, what they cost monthly compared to monthly income and what other household items cost.
And I know for many people having a home completely paid off is a comforting feeling but I would recommend that she not pay off a home completely just so she has a reserve for later. How much to put down for the home(s) will be a very important and personal decision. She needs to be patient and think it through.
The same goes for cars, jewelry, meals, trips and gifts. She could easily spend like there’s no tomorrow and in fact in five years she has no money left.
Retirement is another concern for Ms. Fearon. Again, if she stays with the Department of Corrections she’s going to have her savings, benefits and pension in her retirement. She can compliment that by setting up retirement accounts outside of the job that in many cases let her contribute as much as she’d like and offer guarantees on the money she puts in. Something that can give her great peace of mind.
Ms. Fearon can also put her money to work for her. The strategies would not only help take care of some of the responsibilities mentioned already, but it would look to increase the value of what she received from the lottery winnings. She has to understand them though. To learn about them she can do her own research or she can talk with family, friends, coworkers and trusted financial advisors.
Saving accounts, money market accounts, cds, cash value permanent life insurance along with, bonds, and bond funds are basic ways she can put her money away. They’re pretty straightforward and don’t require too much of a learning curve when it comes to understanding them. For all of the accounts except for bond funds, there’s only an increase in the value of the money put in because of the dividends or interest that is paid. Bond funds can fluctuate in value but historically not as much as stock market based funds.
Stocks and mutual funds are not bad options to consider either when it comes to getting around the learning curve of how they work. Stocks represent partial ownership of one particular company and stock mutual funds represent a basket of different companies. The challenge in choosing them however is that they can fluctuate dramatically as many people have found out in the last few years. So again, understanding how they work is not really the challenge. Which one to buy in many cases requires the advice of an expert financial advisor.
Real estate is another way Ms. Fearon can consider putting her money to work for her. But she has to be very picky and patient when it comes to it if she’s never done it before. She can find opportunities here in the US and Jamaica if she likes but she has to make sure she always stays focused on the income she would receive from the properties and the potential price increase on the properties she would look at. Again, and especially in this environment, a lot of research and expertise would be required for her to move forward at this point in real estate but if done correctly it can work for her.
She can also look at starting a business. This is not as easy as it may seem also. Yes she has the money to start it but where will it be in two months, two years, five years, and twelve years? Who is going to manage it? What is her understanding or more importantly passion for the business?
If she doesn’t have that then she needs to sit down and work through that. If she plans and executes incorrectly she can have a money pit on her hands that her landlord loves but her bank account doesn’t. She can also look at buying into a franchise or buying another existing business. All viable options, but options that carry the most potential to be a money pit.
So as you can see, there are a number of items for Ms. Fearon to consider not only in the coming days and weeks but months, years and decades. All of the planning comes down to balance and prudent management. In fact having a decade long plan for all of this is not a bad idea for her. That way she has a road map to keeping the money.