Sudden Wealth? Here’s Your Playbook


Sudden wealth can come in many forms: receiving an inheritance, finding yourself in charge of your finances after a divorce, a fortuitous career change, and yes, even winning the lottery. It may seem wonderful – and it is – but big changes often bring stress and anxiety with them

To make things even harder, these feelings of stress can be awkward to discuss with friends and family. Will your stresses fall on deaf ears? Will they treat you differently? As a famous philosopher once said, “Mo money, mo problems.” If you find yourself with sudden wealth, here are some potential challenges and how to best deal with them

Not Knowing What to Do Next

We should probably state that “sudden wealth” implies an unexpected windfall that’s sufficiently large enough that it necessitates you to take action. If it’s small enough that you stick it in your bank account and go about your day, that would fall outside the realm of our discussion. Your windfall needs to be big enough that you stop and think about what to do next.

So, what do you do next? Anytime you’re facing uncertainty, the door opens for stress and anxiety. You may ask, “What’s the wisest thing I should do?”

“How can I be the best steward of this money?”

“Will my friends treat me differently?”

“Can I afford a Porsche 911 GT3?”

The uncertainty around sudden wealth creates mental and emotional stress around the larger issues of our relationships, our future, and even our identity. Beyond that even, it creates stress around the sudden need to figure out the right accounts to put it in, the right investments to choose, and how to pay the taxes.

You may even find that you feel guilty that you’re the beneficiary of this windfall, especially in the case of an inheritance. Typically, this would be the place to joke about totally deserving every penny in the case of a divorce, but guilt can creep up there too.

If you’re experiencing any of these feelings, it’s okay. This unexpected change in your personal balance sheet just pulled the rug from under your normal state of being. Simply acknowledging that this has changed your life can help you process your emotions and accept what’s happened. There’s a great book that I love called Loving What Is by Byron Katie that could be helpful.

It’s okay to stop, take a deep breath, and tackle this new personal project: figuring out what to do next.

Relationships May Change

Just as you’re struggling with these emotions, seeing a change in your relationships with your loved ones can add to the stress. Friends and family may treat you differently once they learn of your unexpected windfall. Seeing changes in behavior from those closest to you can be unnerving, especially if you’re getting more attention and flattery. It can make you question the integrity of these relationships to begin with.

Alternatively, some friends and family may feel resentment toward your new wealth. They may give you the cold shoulder. Not only can these types of reactions feel like a betrayal, but there’s also a sense of isolation that can accompany it. While your net worth has changed, you’re still the same person.

As existing relationships change and new relationships form, the question of the integrity of these relationships exist. Do they appreciate me for who I am or are they interested in me because of this money? Will my new friends distance me from my old ones?

Sudden Wealth: What to Do

If you find yourself in a situation where a windfall has come into your life, here’s a playbook on how to handle it:

Keep things close to the vest. While you may not be able to keep things a complete secret, it’s best not to spread the word far and wide. Even if the news does get out eventually, keeping quiet buys you time to put a plan in place before you have to deal with any potential changes in behavior from those around you. If you need help, make sure that you trust them and they can keep a secret.

Don’t quit your job just yet. While I love the idea of pulling a Johnny Paycheck, stay at your routine until you have a plan in place. A million bucks doesn’t go nearly as far as you’d think, especially if you quit your job.

Do not buy a Porsche 911 GT3. Or the new Corvette. Or any new car. There’s nothing that’s going to tip people off faster than a flashy new car. I’m not saying that you shouldn’t buy a new car eventually, just press pause for the moment.

Hire a fee-only financial planner. If you are already working with a fee-only financial planner, stick with them. “Fee-only” is the key term here. You can find one at the XY Planning Network or NAPFA. Interview three. If one gives you the willies or tries to sell you something, walk away. Ideally, you can find someone who will do a financial plan for a fee without you having to invest all your money with them first.

Hire a CPA. It’s hard to find a CPA these days that wants to do more than prepare your return. If you have sudden wealth, you need more than that. Instead, you need someone who will do tax planning too, especially in the first year of your sudden wealth. There may be certain tax strategies available to you that end on December 31st.

Consider paying down your debt. A great first financial goal would be to completely pay off your debt, if possible. This puts you in a stronger financial position without tipping anyone off that you’ve come into money.

Work on your relationship with your significant other. If your relationship with your spouse is already on rocky ground, more money will not help things. There are those that say money doesn’t build character, it exposes it. The same goes for relationships. You may also find that you and your partner have very different ideas about what to do with your newfound wealth. Seeing a counselor is never money wasted, especially if both of you are committed to making things work.

Watch for changes in behavior. At some point, word of your windfall will get out. Pay attention to any behavior changes of those around you. You may have to keep your guard up for a little while. Also, pay attention to your behavior during this time. How has this new money impacted you

Understand you may be a target. Sadly, if people think you’re rich, you could potentially become a target. This goes beyond someone breaking into your house when you’re away, thinking they can help themselves when you’re gone. People can also attempt to target you with lawsuits. This is where an umbrella liability insurance policy comes in handy. Contact your property insurance agent and have them increase your limits.

Don’t lend money or invest in your friends’ business ideas. Here, I’m reminded of the 30-for-30 documentary Broke, where pro athletes had their fortunes siphoned off by clingers and shady business deals. However, friends and family can be hard to resist – this is where having a financial planner comes in handy. Always run business deals past your financial planner and CPA before you get your checkbook out. And don’t fall for the peer pressure. Remember, “No” is a complete sentence.

Fly by your instruments. There are going to be times when it feels like your sudden wealth has unsteadied the foundations of your life. That’s okay. It may feel like you’re flying an airplane with the cockpit windows blacked out. Just remember, it’s still possible to fly using a map and your instruments. If you can avoid making rash decisions, you can navigate the difficulties of sudden wealth and turn it into a success story rather than a cautionary tale.

It’s often stated that lottery winners are more likely to declare bankruptcy within 5 years of winning than the average American. Those aren’t good odds! Even if your sudden wealth isn’t from the lottery, it still has the potential to change your behavior – which is what could lead you down the road to ruin.

By pressing the pause button – and hiring good help – you give yourself the best opportunity to ease the stress and turn the story of your windfall into one with a happy ending.

If you need help with your sudden wealth, then click here to set up a quick, complimentary introduction call to see if Prana Wealth is a good fit. We do still have the capacity to take on new clients.

As a fee-only financial advisor in Atlanta, we can (and do) work virtually with clients all across the U.S. and we’re here to help you when you’re ready.

The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but is intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax, or financial advice. Please consult a legal, tax, or financial professional for information specific to your individual situation. We often mention books and other products that we feel might find helpful. Wherever possible we use referral links; if you click one of the links in this video or description and make a purchase, we may receive a small commission or other compensation. We participate in the Amazon Services LLC Associates Program, an affiliate advertising program designed to allow us to earn fees by linking to and related sites.
ipad free ebook: How to Retire Checklist
Retirement help delivered to your inbox
Subscribe to our monthly newsletter and get your copy of our free ebook: The ‘How to Retire’ Checklist