Many people dream of sudden wealth. Whether it is a lottery or contest win, an unexpected inheritance, or inventing the next go-to social network, wanting to be rich is common. But, does a large windfall come with any downsides?
The answer may surprise you.
Lonely at the Top
A sudden change in financial status can affect your relationships. Friends and family may be suddenly uncomfortable around you or may be resentful of your unexpected success. Some even see it as an opportunity to ask for money, which can be awkward at best.
As a result, unexpected wealth is an isolating experience. You may have less in common with your friends who are still struggling as you once did. If you quit your job because of the money, you might see your social circle shrink almost overnight. And that can lead to more frustration.
A Loss of Self
Just as becoming suddenly unemployed can make you question who you are, receiving large sums of money can also lead to an identity crisis. People maintain a certain vision of themselves. Part of that picture is your current financial status and responsibilities. Sudden wealth changes your financial life. The effects can radiate as you question everything that was tied to it, like your job and goals.
The money can feel like an open door to any opportunity, and that can be hard to handle. The explosion of possibilities and changing priorities make it hard to figure out what to do first. It has the potential to be very overwhelming.
Sudden Wealth Syndrome
The above-mentioned issues are part of a larger affliction referred to as Sudden Wealth Syndrome. The suddenness of the change can be traumatic, and most people are not entirely prepared to manage the stress.
Many people who find themselves in a new financial bracket begin feeling positive. Often, they go on spending sprees, quit their jobs, and make risky investments. The feeling of power associated with the money blinds them to the negatives. In some cases, this stage can cause their riches to evaporate as they make poor financial choices. At times, they will end up in worse positions than they experienced previously.
Eventually, if they don’t bankrupt themselves early in the process, those feelings subside, and people become more accepting of their new circumstances. They can feel vulnerable, especially if they have already been targeted to provide handouts to anyone they meet. So limits are set and planning for their lives becomes a priority.
Over time, the issues reconcile. People become more stable in their new situation. Often, they can determine how they want to manage their money and can take action accordingly.
How to Handle Sudden Wealth
This is a situation where planning is your friend. Since it is hard to see clearly at the beginning, seeking the services of a financial advisor is wise. First, the money should be deposited in a safe place (or places, depending on the amount involved). And don’t make any rash decisions regardless of how good the decision may appear.
Next, take time to build a plan. Learn what is required to have the money work for you to best meet your needs and goals. Focus on core values and determine whether you want to leave a legacy for your family. Finally, create a budget that supports your new lifestyle based on the money you have and make an effort to stick to it.
By focusing on reason and logic, you can create a financial plan that suits your new capabilities without risking your future. So don’t let emotions carry you away and you’ll find yourself in a better place for years to come.