Written by: Fiona Smith, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
Believe it or not, getting rich through a sudden windfall is not always easy. Sometimes it might even be a curse more than a blessing if you don’t prepare yourself. In this article, you’ll learn how to manage sudden wealth, and protect your money. Let’s dive right in.
5 Tips to Manage Sudden Wealth
Sudden wealth could help you become a millionaire. But many people spend all the money ‒ and then some! In fact, it’s so common for people to spend their sudden wealth and bury themselves into even more
debt that psychologists have dubbed the “sudden wealth syndrome.” It actually exists! So how do you protect yourself and your money from sudden wealth syndrome? Here are 5 tips that can keep you safe from your sudden wealth:
1. Mentally manage your sudden wealth
When humans get sudden wealth, they often think something has to be done with the money immediately. And since most humans don’t know how to properly manage money, they typically resort to spending money instead. The first step to managing sudden wealth is simply to mentally prepare yourself for that windfall.
2. Prepare a team of experts
Before you pull out your checkbook and go on a spending spree with your sudden wealth, talk to the financial experts. In fact, before you even are given your sudden wealth, get your expert team together. This includes:
Wealth advisor
Tax advisor
Investment manager
Estate planner
Psychologist
At the bare minimum, find a wealth advisor and a tax planner to help you manage your emotions, wealth, and tax picture. Especially if your goal is to make your sudden wealth last into the future, you’ll need wealth and investment advice. Your wealth advisor can be your quarterback, helping walk you through the emotional and financial pitfalls that typically come with sudden wealth.
3. Address tax, liability and investment risks
If you come into sudden wealth, then there are probably several tax considerations to think about as well. That’s why you’ll need a good team of experts around you to address these tax, liability, or investment risks you might be facing. That’s why I would hire accountants and/or CPAs (Certified Public Accountants) who specialize in inheritance tax and other tax issues potentially stemming from sudden wealth. Don’t tackle these tax and other liability issues on your own.
4. Process your emotions and decisions
It’s very common to feel guilt, sadness, or a mixture of feelings when coming into sudden wealth.
Since a windfall may stir so many emotions, it is critical you take time to process your emotions before acting on them. You may even feel pressure from family or friends to spend money, give them money, or pay off their debts. That’s why it’s not always a bad idea to have a psychologist or therapist in your corner to help walk you through your emotions. If that’s not something you agree with, at least a wealth advisor can give you motivation and emotional support where needed as well.
5. Align your goals with your spending
Remember how sudden wealth syndrome can bury you in more debt than when you first found out about your windfall. So before you start spending your sudden wealth, make sure to take the time and think carefully about your goals. Consider what you need this money to achieve:
A college education for your children
Paying off your mortgage
Paying off your student loans or other debt
Going on a family vacation
Investing for your retirement
Sudden wealth is like a second chance at life. So make sure you use your new wealth wisely to accomplish your goals and fulfill your needs.
Closing Thoughts
People who have sudden wealth syndrome don’t get a lot of sympathy from others. I get it. But think about it, if you’re working a minimum wage job and fall into sudden wealth, your entire life can be turned upside down. That might not always be a good thing. So, if you think there’s a chance that you might get sudden wealth, it’s time to proactively protect yourself emotionally, mentally, and physically.
Fiona Smith, Executive Contributor Brainz Magazine
Fiona Smith is the founder of The Millennial Money Woman. She holds her Master of Science Degree in Personal Financial Planning and has co-founded a local non-profit community teaching financial literacy. She is the author of the personal finance book How to Get Rich from Nothing and her work is featured on Forbes, Oberlo, and FinCon.
