Newfound wealth can strike you in any form- be it money from an inheritance, a whopping success of your book, or hitting the jackpot.
How will you react to your sudden rich status?
Will you book a holiday cruise or hit the casinos?
Well, managing an enormous sum of money is easier said than done. Instead of feeling at the top of the sky, people become anxious.
How to manage an enormous sum?
Some prefer to go on a shopping spree. Unfortunately, this can make the matter worse. If your buying power increase, the savings become null.
Thus, it is important to have a simple plan to deal with the windfall wealth. It is what the blog is all about.
Windfall gain often leads to wealth syndrome.
Wealth Syndrome: A sudden shift in composure
Sudden wealth syndrome is the instinct that provokes one to overspend and make impatient investment decisions. An individual doesn’t realize this until he loses all his wealth. Sudden wealth may lead to draining all savings.
Wealth syndrome is all the stress and anxiety that comes with sudden money. This struggle to adopt an alternative lifestyle can be utterly stressful. This behavior may adversely affect the ties with friends and family.
This newfound wealth brings along the feelings of–
- Shock: Individuals find it hard to believe that they have won an enormous sum. It scares them, as they do not believe in the new status hike.
- Guilt: Individuals might experience the feeling of guilt, thinking that they do not deserve such a huge amount.
- Uncertainty: Instead of feeling happy, they feel stressed about utilizing the money.
- Anxiety: The fear of losing the wealth they just got. Individuals often make irrational investment decisions.
Some individuals ditch jobs and announce retirement early. They believe they no longer need to work or take a loan worth 5000. They make rash career decisions, which could have serious outcomes.
If you encounter a sudden pool of cash, here is how to deal with it:
How To Manage Newfound Cash?
Here are some tips for managing the newfound wealth and avoiding sudden wealth syndrome:
Note the lottery cash
Your first step should be to understand the money you just earned. Add up the winnings and liabilities. How many taxes, bills, and debts do you have overhead? Keep track of these items because once you spend them, the money is gone.
Pay off the liabilities first bothering you for a long time now. While you might have planned a cruise holiday, sudden wealth utilization doesn’t work that way. Don’t forget to view the other side of the coin.
Money ensures a comfortable life, but managing it well makes it lasts long. Calculate and have a tab over your extra money. Pay off liabilities first and get debt-free.
Maintain discipline with sudden cash win
You don’t get professional immediately. Gaining expertise takes time. The same happens with sudden money blows. Yes, react patiently to that urge to make dream purchases. You may find it challenging amid the elite class you surround, but it is a moral decision.
Getting disciplined with current newfound cash is critical for future planning. Your future self will thank you for this attitude. Gauge your spending curve, analyze your priorities and make a list. Analyze:
- Do you need to pay someone?
- Did you wait for that one particular thing? Is that useful in the future?
- How can you maximize your investments along with keeping some money aside?
- What are your current needs that you need to address immediately?
Having a tab over these can help you create an overview of the priorities. It will help design the spending plot and avoid the fear of missing out (FOMO)
Count on a financial expert
If you are still unclear about financial management after windfall wealth gain, it is ideal to consult a financial expert. Financial experts help gauge the current financial situation, lifestyle, liabilities, and plans.
Apart from this, a financial expert helps encounter any taxes and long-term changes in the tax brackets into consideration. Managing it all by yourself becomes a challenging deal.
Here are some of the financial experts that you can consult according to your requirement:
- Financial Planner – A financial planner helps analyze your current financial situation, create a plan to pay down debts, and invest your assets for a secured future.
- Certified Public Accountant (CPA) – A certified Public Accountant (CPA) helps protect your new assets and helps you with the tax strategy personalized to your circumstances. He helps in diving deep into the tax strategy for the years to come.
- Estate Planning Attorney (EPA) – He helps in estate planning and considers windfall wealth.
Depending on the windfall amount and your priorities, you can consult any of these. It will help you manage the enormous sum the right way. If you have any queries, get them cleared in a healthy discussion with your financial advisor.
Keep the recent cash-win a secret
When you receive sudden cash from a lottery, inheritance, or business gain, it is important not to disclose it.
Keep it a secret and not talk about it to even the most-trusted person. Keeping it under wraps will help you avoid unnecessary attention and trouble that may follow.
It’s important to keep this secret and stay calm under pressure. Think about managing money and paying off your liabilities.
Apart from this, it will also help you avoid persons who will wish to have some of your price money. Carve out time for the activities that you love to engage in. It could be anything from joining singing classes to aerobics.
Avoid making rash investment decisions
Before making investment decisions, identify the risk appetite. Conduct thorough research of the stocks you are investing in. Will these turn out to be profitable in the future?
According to a good rule of thumb, if you have the least idea regarding investments, it is ideal to invest in gold. It is one of the transparent liquid options to invest in with promising future returns. It also requires a bit of research. Thus, if you are encountering a hard time deciding, it is ideal to consult an expert.
These are some ways that can help you deal with sudden wealth on your doors. Maintaining monetary discipline and staying calm is essential in such situations.