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What Are the Best Tips for Handling Sudden Wealth?

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  • Written By: Susan Abe
  • Edited By: Jessica Seminara
  • Last Modified Date: 02 September 2016
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Whether by an inheritance, lottery winnings or a small start-up business going global, the acquisition of sudden wealth can have its pitfalls. In fact, studies prompted by the experiences of Silicon Valley multimillionaires and lottery winners has led to the designation of a new medical and mental health disorder, sudden wealth syndrome, complete with symptoms and treatment recommendations. Financial planners and bankers have known of the issues surrounding new wealth for decades and their advice mirrors many of the medical recommendations. Lots of money, newly available, is not necessarily a positive event; if someone has a dysfunctional life, sudden wealth can sometimes only make the situation worse. The best tips for sudden wealth involve the newly wealthy individual taking as much time as necessary to evaluate his situation, determining priorities and enlisting the services of trusted and credentialed advisors.

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Mental health and financial advisors most often recommend that a person presented with sudden wealth take the time to privately discuss with his significant other what the influx of money will mean to them and what priorities they feel need to be addressed first. If at all possible, this should be a private time outside of the notice of the media, for example, or even extended family and friends. One of the most frequent complaints of individuals presented with sudden wealth includes being ill equipped to handle requests for money from family and friends. This period of private time can best be used to seek out legal, financial and tax advisors with experience in handling similar situations. These advisors can recommend the best means for dealing with requests for money from family, friends, the community and charities.

Obtaining professional financial advice is also strongly recommended before someone with sudden wealth begins to purchase expensive items he has long desired. In many situations, the newly wealthy grossly underestimate the amount of taxes due on the new money, often before they even receive it. Credentialed financial and tax advisors can help establish a reasonable but liberal budget and provide a clearer picture of the immediate and future tax repercussions. The number of lottery winners who find themselves bankrupt in less than a decade is sobering. This situation, often inconceivable to the newly wealthy, can be avoided with care and professional advice.

Sudden wealth can also be extraordinarily alienating to the person experiencing it, according to authorities on sudden wealth syndrome. The individual may begin to avoid old friends and family due to feelings of guilt or to avoid frequent requests for loans or gifts. He also often dismisses the veracity of new friendships, assuming them to be based only upon his money. Deciding whether to keep his job or not, how to handle requests for gifts or loans and how to interact with old friends are some of the tasks that can be completed during his private time of reflection and planning with the assistance of chosen advisors.

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Buster29
Post 2

My wife and I have those conversations about what we would do if we won the big Powerball lottery. Most of the time, we settle for paying off all of our existing debts, buying a new car and house, then donating a large chunk of that money to our church. I figure a lot of the winnings would have to go towards taxes, and there would also be the problem of continued upkeep for an expensive car and a large house.

Unless the amount of those winnings was substantial, there might still come a day when more income would be needed. This means that quitting a job might not be such a good idea in the long run. You don't necessarily have to keep working a menial job for low wages, but you may want to consider earning a college degree or getting specialized training so you can still earn additional income and keep yourself occupied mentally and physically.

Phaedrus
Post 1

I've heard you never really know how many friends and relatives you really have until you win the lottery. I remember reading stories about people who won lotteries or received huge legal judgments and were suffering from severe depression five years later. They just couldn't handle all the problems that came with sudden wealth, like relatives and friends seeking handouts and advisors steering them into bad investments. Some of them still had plenty of money, but they couldn't find a place to truly get away from it all.

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