Sudden Wealth Syndrome

Although everyone wishes to be wealthy, your wealth can be troublesome if it is sudden. The overnight millionaire could be having more troubles than you can imagine. Sudden wealth can cause anxiety, stress, and confusion. If you find yourself in this situation, you may even feel helpless. How do you navigate the problems of sudden wealth syndrome? Professional wealth advisors are the right people to consult in such situations.

What Is Sudden Wealth Syndrome?

Sudden wealth syndrome is a type of distress or confusion, stress, adjustment issues, and money mismanagement that afflicts people who suddenly acquire large sums of money. Sudden wealth can lead to making decisions you otherwise wouldn’t. You may suddenly become wealthy due to an inheritance, a successful lawsuit, an insurance payout, lottery winnings, or other means. The sudden wealth can cause anxiety, and you may fear that you’re going to lose the money.

Common Causes for Sudden Wealth Syndrome

Getting large sums of money suddenly is different from accumulating wealth gradually. With gradual accumulation, you slowly grow into a new financial status, and your mind gets prepared for the changes along the process. Sudden accumulation is almost a shock for some people, and that’s why it may cause stress. Some of the common causes of sudden wealth syndrome are:

• Societal and family pressures: You may feel pressure from family and friends to conform to a specific lifestyle or share wealth.
• Lack of financial education: People with little or no financial knowledge may feel overwhelmed by the sudden wealth. Financial education includes learning how wealth affects your psychology, behaviors, and emotions.
• Difficulty adapting to a new lifestyle: After acquiring sudden wealth, you may face changes in your relationships, social status, and even identity. You must deal with new challenges, opportunities, and choices you were unprepared for.
• Unrealistic expectations about being wealthy: People who suddenly become wealthy may have unrealistic expectations. They may think the money will solve all their problems or make them happier. However, money can increase their happiness only to a certain point.

Signs of Sudden Wealth Syndrome

How do you know if you or someone else is experiencing sudden wealth syndrome? The first condition is suddenly coming into a large amount of wealth. The following are the signs to look out for after acquiring sudden wealth:

• Excessive spending: Overspending and financial mismanagement are obvious signs of the syndrome. Mismanagement is mainly due to a lack of financial knowledge.
• Spontaneous decision-making: You may feel pressured to make rash decisions, such as buying an expensive car or house, quitting your job, or lending money to friends.
• Preoccupation with wealth loss: You may fear losing the money as fast as you got it. You worry that you may lose the money to lawsuits, taxes, bad investments, or theft.
• Feelings of guilt: You may feel guilty because you have more money than the people around you.
• Tension in relationships: You may face demands from friends, relatives, or even strangers to share your suddenly acquired wealth, which may strain your relationships.

How to Deal With Sudden Wealth Syndrome

Sudden wealth acquisition can be problematic, and it may affect the people around you as well. Sudden wealth is not necessarily a bad thing in itself — it’s the consequences for the unprepared that can be dangerous.

Here are some tips for dealing with sudden wealth syndrome:

Educate Yourself

Managing sudden wealth can be challenging if you lack the proper financial knowledge. Although learning personal finances can be overwhelming, it prepares you for situations like the sudden acquisition of wealth. Start with the basics, like budgeting and saving. You can then move on to understanding the dynamics of risk versus returns. Learn to use financial planning tools that can help you manage your finances.

Create a Financial Plan

Some financial windfalls cannot be anticipated. However, for sources such as inheritance, you can foresee yourself acquiring a large amount of money quickly. In such situations, you should be able to plan ahead. High-net-worth parents can help prepare by organizing meetings with their children and discussing how the wealth will be distributed when they pass.

Whether the windfall is foreseeable or not, you can manage your sudden wealth by creating a financial plan. A good financial plan will help you identify your goals and stay on track. If, for example, you receive a huge insurance payout, creating a financial plan will help you stay focused on the money and avoid the signs of sudden wealth syndrome.

Keep the Windfall Discreet

Keep the information about the sudden wealth discreet. Opening up to the wrong people may lead to problems such as feelings of guilt and tensions in your relationships. No one will have expectations if they don’t know how much you have. You should only discuss your newly acquired financial status with a financial advisor because professional wealth managers cannot disclose customer details to third parties.

Don’t Make Quick Decisions

It can be tempting to make large purchases to get the things you’ve always wished to have but couldn’t buy because you didn’t afford them. Take your time, assess your long-term goals, and see how your wealth fits them.

You should also avoid complex investments about which you have little knowledge. People will present you with opportunities with what they may term guaranteed returns. Avoid any investment with high returns but low risks.

Tax Planning

Coming into sudden wealth also puts you on the tax authority’s radar. Your tax obligations out of the windfall should be one of your first priorities. An experienced financial planner should be able to advise you on these obligations and help you minimize your tax bills.

Consider Therapy if Necessary

Sudden wealth syndrome may cause mental issues that may require therapy. Therapy will help you understand why you’re feeling the way you are.

Meet a Wealth Advisor

Wealth managers have experience working with wealthy clients, and they should help you navigate the challenges you’re facing. They know how to handle your money and will advise you on suitable options.

Seek Financial Help From Fort Pitt Capital Group

Getting your finances in order can be a challenging task if you don’t have the proper knowledge and tools. Poor financial decisions can lead to losses and regrets, but you can avoid such situations by seeking the advice of financial planners at Fort Pitt Capital Group. We are a team of in-house financial planners with experience in financial planning, wealth management, and investment analysis. Whether you suddenly acquired large sums of money or have any other financial issues that need the services of financial planners or wealth advisors, we are here to help you. We operate based on a simple conviction — to do what we believe is best for you. Feel free to contact us for more information about our services.