You wake up one morning and you are suddenly wealthy beyond your wildest dreams – you’ve won the lottery or come into an inheritance. How do you deal with such an occurrence?
I remember a friend telling me that when his kids graduated, the only problem he wanted to have was which colour car he should buy them. I think that’s a fantastic position to be in and I am sure that in some way or the other, we all want to be in a similar position, maybe not necessarily to buy them a car, but to know that we have the financial wherewithal to do so if we choose.
But really, how are we to deal with such a phenomenon? Sudden Wealth Syndrome (SWS), is a phrase created by psychologist Stephen Goldbart to define the stress, guilt, social isolation and confusion that happens when a person comes into a huge amount of money suddenly.
I am sure we won’t mind being stricken by it – once it’s properly managed of course. In fact, to my mind it’s a great problem to have, except that it could really become a problem.
We have all read stories of people who have won the lottery, NBA & NFL players who are now broke, movie stars and music icons who have all been stricken with SWS and ended up living on the streets or have died broke.
As a matter of fact, the story is told of a man who won the lotto years ago in Trinidad, and he moved into the Hilton Hotel. I am sure I don’t have to tell you how that story ended.
A sudden shift in financial status, either positive or negative could be traumatic; people who come into sudden wealth get a feeling of invincibility and go on wild spending sprees and generally make poor financial decisions that could eventually lead to ruin.
I know of a lady who was married to a wealthy stock broker, who died in his early 50’s and left her with considerable wealth. Before he became ill, they were the toast of the town, they lived at a fashionable address and was always invited everywhere.
After he died however, she experienced social isolation, she was suddenly not on anyone’s invitation list because she was now single, wealthy and she looked and dressed fantastic.
She decided that she would throw her own parties and boy those were some parties, the best champagnes and wines and the very best food that money could buy. She attracted and fell in love with guys from the other side of the track.
When her fortune ran out, she even went as far as dipping into the kids trust fund. She is now living in section 8 housing (low cost, government assisted) in Florida.
Women today are confronted with a different and unique set of circumstances, it is important therefore that we learn to make smarter financial decisions to protect ourselves in the long run. It is imperative that we educate ourselves on financial matters, so that we know how to protect our assets, ourselves and our loved ones.
It becomes important then that you acquire new skills to help you avoid going on wild spending sprees and making risky investments with your money. Gaining wealth suddenly also brings with it a copious amount of new best friends and family that “have always been there for you,” some of whom you never even know existed.
Let’s look at some possible coping strategies to help you keep and grow your new-found wealth:
Remember who you are fundamentally at the core – Gaining a large lump sum can add a lot of pressure to your life. People start to treat you differently and there is initial guilt associated with your new status.
Remember your core values, money does not change you fundamentally, only you can do that – hold steadfast to your dreams and goals that you’ve always had for yourself. Do not start spending wildly.
Surround yourself with trusted advisors – You are not a financial expert, therefore getting help to figure out what to do with your money is critical, as you want to avoid risky investment. You will need an Accountant, an Attorney, an Insurance Advisor and a Financial Planner.
Sometimes they may show up all rolled into one, don’t make that mistake – make sure they are four different people.
Get out of debt and secure your financial future – It is crucial that you address any debt situation before you start spending. Create a budget and start putting away money for your future self and get your savings on track.
Coming into wealth suddenly does not automatically secure your financial future, you have to take steps to ensure that it’s secure. Remember Michael Jackson and Gary Coleman.
Savour It – The bling and the fancy car can wait. Coming into a lump sum of money does not mean that you must start spending stupidly, throwing wild parties, or buying super expensive clothing and jewellery. All that can wait, take your time, deposit your money into an interest-bearing account and acclimatise yourself to your newfound wealth.
Ladies, it is important to remember that on average we live about 5 years longer than men, which means that you would need your assets to last longer. Therefore, you must take steps to ensure that you are able to live out your years comfortably
Remember that the planning and budgeting process is very important in helping you to set boundaries and priorities plus it gives you a sense of structure.
Putting a structure in place helps you to avoid those wild spending sprees, it gives you more freedom to say no to the ridiculous requests from friends and family and it helps you stay true to who you are at the core.
(Judy McCutcheon is a partner in the firm Go Blue Inc, a Human Development Company)