Sudden Wealth Planning

You’re suddenly rich. Now what?

What’s the plan when you have a windfall? Through luck, inheritance, talent, or legal decisions, some people receive “sudden wealth” – a lump sum of money that is at least several times their annual income. Sometimes people think that the money will solve all of their problems. But if they aren’t careful, it can create entirely new ones.

Sudden wealth often comes with emotional baggage attached to it. If you’re suddenly wealthy, you may experience degrees of fear, guilt, anxiety and even paranoia in the months following your good fortune. As Dennis Pearne, Ed.D., author of The Challenges of Wealth notes, sudden wealth “changes what you can do, what you no longer have to do, where you can live” and other aspects of your life that seem set in stone. “So much changes so fast that it can be terribly overwhelming, and some people go into money shock.”1

We’ve all heard stories about people who won the lottery and ended up broke. In fact, you may have seen stories on TV or in magazines or newspapers about people who lost sudden fortunes in a matter of years, or let wealth wreck their families. It seems incredible, but it happens.

So, how does it happen? And how can you avoid it?

Rule #1: get financial advice from a qualified source. You would think that anyone who receives a six-figure or seven-figure check would immediately talk to a financial advisor. But that is not always the case.

Some people put it on their “to-do list” … and then go out and do other things with the money. Some never bother to seek qualified financial advice at all. Instead, they listen to relatives or neighbors.

The problem is, sometimes these relatives or neighbors

  • Have never had great money and do not understand the responsibilities that come with it
  • Only see wealth in terms of material things and purchases
  • Would like to vicariously live out their fantasies as a byproduct of your good fortune
  • Urge you to take chances (risks) with your money
  • Assume that you are “set for life”
  • Want you to look at wealth from their mentality, or want you to associate with their shady lifestyle

E-MAIL US