The person who suddenly comes into wealth needs much more than financial planning. Lottery winners, those who inherit wealth, people who sell a family business often fall prey to the “sudden wealth syndrome” and frequently lose what they have gained. Sudden wealth recipients’ immediate concerns may have little to do with financial planning or investment strategies. Even people who know they’ll be getting money at some point—such as an inheritance—may significantly underestimate the amount. Failing to address the psychological ramifications of sudden wealth can lead to financial ruin. The assistance that these people need is often more psychological than financial, at least at the beginning .
Newfound wealth is usually a very emotional thing and people usually make terrible financial decisions when they are emotional. People who win the lottery or inherit wealth need to give a lot of thought and decide what they want their lives to look like. Some of the dangers that these people face include:
Advice to those who achieve sudden wealth. Don’t do anything sudden.
Arie J. Korving, a CERTIFIED FINANCIAL PLANNER™ professional, has been delivering customized wealth management solutions to his clients for more than three decades. Prior to co-founding Korving & Company, he was First Vice President with UBS Wealth Management and held management positions with General Electric.