Would you know what to do, if a few million dollars was deposited in your bank account, without any notice? It sounds thrilling but knowing how to manage wealth is not something people learn overnight.
The greater the amount you receive, the greater your stress.
Investopedia’s recent article, “Tips For Handling Sudden Wealth” reports that there’s even a stress-related disorder called "Sudden Wealth Syndrome."
This stress results in the recipients doing things that will threaten their good fortune and may leave them worse off than before they got the money.
Let’s look at few ideas to help you hang onto that new wealth:
- Tally your money. Take the time to carefully review all the documentation associated with the windfall. Note the areas you don't understand and talk with your attorney.
- Create a comprehensive financial and life plan. Don’t settle for a cookie-cutter solution. Look for customization that takes into account your circumstances, your goals and your desired legacy.
- Be wary of friends and family. A downside of sudden new wealth is that new friends and estranged family members may come out of the woodwork. One idea is to pay yourself a salary, which can put some distance between you and these people.
- Don't buy big ticket items until you’re comfortable with the advice and understand your new financial position. You should address your taxes on the gain, pay down debts or take a small vacation. However, don't make too many changes all at once. Talk to your advisors.
We’ve all read the story of lottery winners who end up with less money in their bank accounts after their big win. Be cautious and take your time deciding what to do with your new wealth. Speak with an estate planning attorney, who will be able to help you plan and protect your windfall.
Reference: Investopedia (June 25, 2019) “Tips For Handling Sudden Wealth”