How to Survive Sudden Wealth

RichesDid you just come into a lot of money? Maybe you received an inheritance, won a lawsuit, sold a company, or simply won the lottery. Now you are figuratively sitting on piles of money. What a great problem to have!

Except that it really can be a problem. We’ve all read the stories of lottery winners who now live in trailers or are dependent on Social Security. What happened to them? How could they burn through millions, even tens of millions of dollars so fast?

Psychologist Stephen Goldbart coined a phrase for this all-too-common downfall of the newly wealthy: Sudden Wealth Syndrome. Goldbart found that many people who receive an unexpected windfall of cash experience a rush of adrenaline and invincibility that leads them to go on wild spending sprees or to make unsound and risky investments. Soon enough, the money dries up, and the individual is left dazed, confused, and poor.

If you have recently received a windfall or believe one might be coming, here’s how to survive:

Stay True to Yourself

Receiving a lot of money can be confusing and stressful. People may start to treat you differently, or you may feel like you have to live a new lifestyle. Take a deep breath and remember that you are still the same person with the same dreams and values. Money can’t change you – only you can do that. When you feel confident in who you are, you won’t let your newfound wealth take control.

Take Your Time

Just because you suddenly have money doesn’t mean that you need to start spending it right away. The personal jet and yacht can wait. Put your money in a secured account and give yourself a few days, weeks, or even months to process.

Build Your Team

You are probably not a financial expert, which is why you shouldn’t be the sole person handling your money. Begin building a team of knowledgeable and experienced money experts. You’ll need an accountant to help you manage your tax liability, a financial advisor to help you define your goals and start putting your money into investment vehicles that can work for you, an attorney who can help you with estate planning, and an insurance expert who can help minimize your estate tax issues.

Address Debts and  Financial Security

Before you start on an epic spending spree, pay down your debts, make sure you have your taxes covered, and take care of your future. That means putting money away for retirement and bringing your savings accounts up to speed so you always have a safety cushion.

Remember Your Values

Before you start spending, take time to think about your values. What do you truly want out of life? Do you want to spend more time with your family, start a business, see the world, or help find a cure for cancer? These values can help guide you when it comes time to spend your money and save you from the problems sudden wealth can create

For more great financial articles just for women, view our Savvy Women archive.

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