Think about how sudden wealth occurs – one day, your life is good, and the next day, you are wealthy. In an instant, your life changes forever.
For many, money appears to be the answer to their prayers. And for some, it is, but for others, it is not.
Before we dive in, I want you to think about sudden wealth.
After decades of working and saving for retirement, you can start spending it to enjoy your golden years. However, the accumulation of wealth over several years differs from those who get a windfall of money.
If an individual has a plan and team of professionals, they have had years of establishing neural pathways to make good decisions. As a result, they are generally less likely to blow their windfall. They have learned how to make money decisions from their prefrontal cortex (adult brain). While many receive a lot of money when they retire, they do not want to return to work, so they spend their money wisely.
This rarely is the case for money windfalls. Most studies share that over 90% of lottery winners are bankrupt in less than five years.
The sudden wealth scenarios we are discussing result from receiving a large sum of money.
Examples include:
- Jackpot or lottery winnings
- Large inheritance
- Divorce
- Life insurance or lawsuit settlement payouts
- Professional Athletes receiving a large signing bonus
Most people who receive large amounts of money end up broke, often worse off than before they got the money.
There are important steps we are going to discuss in this article that can help you avoid becoming like them.
Overview of what you will learn:
>> (1:44) The impacts of a financial windfall
>> (3:19) Studies on lottery winners
>> (9:31) Receiving money from a divorce or death
>> (19:40) How to respond to family and friends about money decisions
>> (20:33) How to determine how much passive income you need
There are important steps we are going to discuss in the
“4 Steps to Manage Sudden Wealth”
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1. Pause
Taking a pause allows your prefrontal cortex (rational, logical, and adult brain) to catch up.
One of the most common mistakes people make when receiving a sudden windfall is making quick and impulsive decisions.
They think they are rich and do not realize that wealth is finite regardless of the amount of money. Yes, Bill Gates is wealthy, but even his money is limited. He can buy more stuff than most of us, but not everything.
And it makes sense—coming into the good fortune of sudden wealth can be an intensely emotional experience.
Too often, they immediately
- Quit their job
- Buy a bigger home
- Take their dream vacation
Acting quickly and impulsively can create a cascade of events that may lead to losing your new fortune.
Instead of taking any action, pause and assemble your team.
A team may include financial professionals such as a financial advisor, CPA, and attorney.
It may also include a money mindset coach. If you experience guilt or sudden wealth syndrome, you may need to hire a qualified therapist.
Don’t make any major financial or life decisions until you have a plan.
2. Identify Your Goals
During your waiting period, start dreaming about life with your new wealth.
Begin by identifying your goals (this is important even if you don’t get a windfall).
I did this fifteen years ago when I set this crazy net worth goal, which I hit in 2021.
There is a powerful exercise in The 7 Principles of Becoming a Fulfilled and Wealthy Millionaire. 
It is at the end of Chapter 1, called Releasing Mental Blocks and Core Beliefs , and includes an exercise to remove money blocks and clarify what you want.
Part of the process is a handwriting exercise that includes writing questions with your dominant hand.
For example:
- What matters to me and my partner?
- Where do I want to live?
- How do I want to spend my time?
Next, answer the questions with your nondominant hand.
This is a great place to begin and will give you valuable insight.
3. Practice Saying No Gracefully
It is important to remember you have a limited amount of money and that you are not a bank. Many who have experienced sudden wealth have family members and friends asking for money.
It is not your job to help others out unless you choose to. Giving people money rarely is the best solution – especially if their financial problems are recurring.
Saying ‘no’ can be challenging, as you could be experiencing guilt around your sudden wealth and feel obligated to share it.
Giving an intentional gift is always an option – once you have your financial plan and budget in place, know how much income you need for your expenses and are not touching your principal.
It won’t be easy, but protecting your financial security and well-being should be your priority. Remember that it’s your money, and you decide how and when to use it.
The habits and rules you create will impact you and your family and friends’ future more than anything else, so take time to develop healthy boundaries.
Your financial advisor and money mindset coach can help you with this.
When someone approaches you with the “exciting new business opportunity” or the “once in a lifetime opportunity,” tell them you have an advisory team and that you review all financial matters with them. Do not proceed unless your advisory team agrees.
The Power of Saying No Without Using the Word
Sometimes, saying no requires a diplomatic approach. A good option for business opportunities is, “Thank you so much for sharing this opportunity. Our advisory team supports us, and we consult them on all our money decisions. I will let you know if they think it is a good fit.”
If they are aggressive, refer them to your financial advisor.
4. Create Your Plan
Another critical step is to create a plan. First, assess your knowledge of your personal finances to determine where you need support. For example, do you need support creating a financial, tax, retirement, estate, or investment plan? 
Then you must create a spending plan (Yes, even multi-millionaires need one!).
Rich people rarely have a spending plan, whereas multi-millionaires commonly do.
This will determine how much money needs to be invested in assets that generate passive income. Click here to learn more about ways to create passive income.
You must also review and update your insurance plan and create a tax and estate plan. Before proceeding with an investment plan, you must confirm your risk tolerance and goals.
When hiring any professional, proceed with awareness and ensure they have the expertise you need. For example, do they have experience with sudden wealth, including mindset and money?
Confirm the prospective professionals have a fiduciary standard. This is an obligation to always act in your best interest.
Conclusion – “4 Steps to Managing Sudden Wealth”
Receiving a windfall can answer your prayers if you get the right advice, create a plan, and implement the plan.
It is important to pause and let the reality of the situation settle in so you can make informed decisions that protect you and your money.
Setting goals, learning to say no, and creating a comprehensive plan are all steps in the right direction.
If you have received a windfall or are nearing retirement, start here:
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Thank you so much for joining me for
“4 Steps to Managing Sudden Wealth.”
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Bye for now.
