Could I handle sudden wealth responsibly? This has been on my mind lately and we all know why! One of the many ways to grow wealth for a better future is through savings and investments. This is the generally accepted norm. Another quicker way to wealth has been through sudden wealth. Sudden wealth refers to people who benefit from a windfall and suddenly have huge amounts of money. Best example would be lottery winners, especially when the pot balloons to insane amounts of money, resulting in otherwise conservative people getting pulled into the feverish coverage on television and radio advertisements buying tickets in hopes of winning, which results in even higher payouts. Winning big often leads to disruption of normal life and has been responsible for many families torn apart. Preparation is crucial in these circumstances. Here are some pointers that is of use for everyone, not just people who experience sudden wealth.
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Sudden Wealth Mistakes To Avoid:
When sudden wealth happens, be it through lottery winnings or inheritance, it is important to keep a clear head. This is not the time to be making decisions that will affect you for the rest of your life. First thing to do is find out exactly how much you will have once all the necessary taxes are deducted. Lots of people forget about the taxman!
Spending Sprees (Over Spending):
The urge to spend is a very powerful one. This is something we all struggle with, and it is intensified when one comes into sudden wealth. It is extremely important to calm yourself down and not spend your winnings, sometimes before you have cash in hand. There are lots of stories of lottery winners who are on a yearly pay out plan, but yet take out loans against their future payments, paying huge interest rates and are then unable to catch up, eventually losing all their money and becoming homeless. Studies have shown that roughly one-third of all lottery winners go bankrupt. Look at all the different ways MC Hammer blew through his millions of dollars.
You may want to shout about your good fortune from the rooftops, but it is important to keep things quiet. Wealth has a way of bringing out the worst in people. Jealousy rears its ugly head. Friends and family beg for money, and will resent you if you don’t give it to them. They accuse you of “changing”. Tell only your trusted friends and family.
Keeping your sudden wealth a secret from your spouse or children is a terrible idea. Your sudden wealth may make you think you will become a magnet to the opposite sex and therefore should dump your current spouse and or kids. Stories of people doing the very same are plentiful. Spouses file for divorce so they wouldn’t have to share the wealth. This leads to families being torn apart and more than likely, your spouse will find out and end up getting their chunk anyway. Be fair.
Best Ways To Handle Sudden Wealth:
Get help from professionals:
It is important for you to realize that your sudden wealth doesn’t make you a money manager. It is important to seek our professionals who can help you manage your money and ways to make it grow and last you a lifetime. There is a middle ground, you have money to spend on frivolous things, yet you invest, could be in real estate, stocks, funds etc.
Plan for Life:
This ties up with the first point above. Plan for your money to last you a lifetime. While it is important to trust your financial planners, don’t take your eyes off the ball. Make them accountable. Know how much you have at all times by keeping your own spreadsheets. Even professionals can be careless with investments or will steer you towards funds etc that earn them a huge commission but doesn’t serve you well. Read books that will help inspire and guide you.
Related Reading: Know your worth
Help the less fortunate:
The first thing most people do when they come into sudden wealth is to quit their jobs which is of course to be expected. No longer working may lead to a loss of identity since we are usually defined by what we do. Your free time can be used to help others less fortunate. Donations to charities, helping out by donating your time and maybe knowledge to groups will make you a happier person.
It’s important to make sure that your sudden wealth doesn’t disappear just as suddenly. Remember, life is long and your good fortune should be taken as an opportunity to improve the quality of your life by handling the money in a responsible manner. There is a reason for that old saying that a fool and his money are soon parted. Don’t become a statistic.
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Could you handle sudden wealth well? Would you be able to resist temptation and make your money last? Have you any further advise for people who are lucky enough to be in a sudden wealth scenario?