Maslow’s hierarchy of needs is a motivational theory in psychology comprising a five-tier model of human needs, often depicted as hierarchical levels within a pyramid. The five levels of the hierarchy are physiological needs, safety, love/belonging, esteem, and self-actualisation.[i]

Buying a house as shelter might be a priority to meet several of these needs. Yet, once you have that security there are good risk-related reasons not to go into the business of being a landlord, developer, or land banker.

Then again, who dares wins… greater risk means greater chance of reward, but also of loss.

If a million dollars fell into my lap, I would be ecstatic! However, it’s important to make wise decisions with such a large sum of money. Here are some ideas on what you could do with a million dollars:

1. Invest: Consider investing in stocks, bonds, or real estate. You should also work with a fiduciary financial adviser to help you make informed decisions.

2. Pay off debt: If you have any outstanding debts, consider paying them off. Paying down consumable or non-investment debt will help you save money in the long run. Where else can you get a guaranteed return for the cost of the debt plus your tax rate, being the return, you would need to earn on an investment.

3. Save: Put some of the money into a high-yield savings account. This will help you earn interest on your money whilst maintaining liquidity.  These savings are good for your plans in the short term, or as emergency funds should you need a sum quickly due to unforeseen circumstances.  (Note: A sound investment plan will have a laddered maturity profile to meet short terms liquidity needs.)

4. Travel: Take a trip around the world or visit a place you’ve always wanted to go! Traveling can be a great way to broaden your horizons and create lasting memories with loved ones. Memories and quality time aren’t exclusive to travel, of course, but if a windfall came your way and money was no object – why not take it to new locales and enrich your life with things you enjoy doing, once you’ve actioned steps 1-3?

5. Donate: Consider donating some of the money to a charity or cause that you’re passionate about. This will help you make a positive impact on the world – again doing the things that enrich lives and we enjoy doing. Helping our communities (local or global) is rewarding for all involved and great for our mental and spiritual health.

6. Treat yourself: Finally, don’t forget to treat yourself! Whether it’s buying a new car, renovating your home, or splurging on a luxury item, it’s important to enjoy the fruits of your labour. Don’t go too far–keep it within scope and find a balance between treats and burning Future You’s nest egg. It’s a bit like starting at a chocolate factory… you can eat all you want, but pretty soon you’ll see the consequences of indulging over-much.

Remember, a million dollars is a lot of money, but it’s important to make smart decisions with it. By investing, paying off debt, saving, traveling, donating, and treating yourself, you can make the most of your newfound wealth.

Most of all, you need a plan (and expert help to keep you on track wouldn’t go awry either). A windfall like winning Lotto is life-changing, whether it’s one million or a bigger jackpot. Any sum will go quickly if you lack a plan and a financial support team. Ironically, many lottery winners can be at increased risk for bankruptcy as they overspend without planning how to stretch the sum to cover their future needs – and that’s not even considering the flood of attention if the winner goes public, including targeted financial scams aiming to take advantage of the newly-minted millionaire.[ii]

The benefit of working with a fiduciary means receiving advice independent of any bias, however well-meaning, that others in your life may have. A trusted, local financial advisor can offer face-to-face advice and support to make sure you stay on track – taking away stress and allowing you to spend more time on the things you enjoy.

Whether you subscribe to Maslow’s ideas or not, feeling secure is a lot easier when the burden of financial stress is shared.

by Bruce Jenks (Financial Adviser at Stewart Group)

·         Bruce Jenks is a Financial Adviser at Stewart Group, a Hawke's Bay-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 341.

·         The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz

[i] https://www.google.com/search?q=maslow%27s+hierarchy+of+needs&rlz=1C1CHBF_enNZ970NZ970&oq=maslows+&gs_lcrp=EgZjaHJvbWUqCQgBEAAYChiABDIGCAAQRRg5MgkIARAAGAoYgAQyCQgCEAAYChiABDIJCAMQABgKGIAEMgkIBBAAGAoYgAQyCQgFEAAYChiABDIJCAYQABgKGIAEMgkIBxAAGAoYgAQyCQgIEAAYChiABDIJCAkQABgKGIAE0gEIMjU3M2owajeoAgCwAgA&sourceid=chrome&ie=UTF-8

[ii] https://www.businessinsider.com/winning-lottery-downsides-2018-12#winners-have-a-higher-risk-of-going-bankrupt-8