So You Hit the Jackpot. Now what?
More often than not a story about the gain of sudden wealth has an unhappy ending. But why is it that, despite knowing the stories of those large inheritances, huge athletic contracts and signing bonuses, and enormous lottery wins that were gained and lost, of the people who failed to properly care for their assets, people who hit the jackpot still seem to fail as well? It might just be human nature working against our best interests. Despite the fact that everybody is different, psychologists know there are some predictable patterns of behavior that can lead to this downfall. However, if managed properly, a big winner can avoid having to sing the “I-had-it-all-and-lost-it blues.”
In most cases, the sudden wealth comes with a feeling of excitement, power, and the perception of being on top of the world. This is the time where it seems that everything is possible, the time of celebration with family and friends, and the start of the initial big-ticket-item spending spree, which is typically the time when cars, motorcycles, boats, and other such high-end items are bought.
If this post-win excitation period is not managed properly or lasts too long, it could transform into a condition of despair and frustration. Just like a pendulum, the person swings from one extreme to the other—from joy, excitement, and happiness to resentment, frustration, and despair. We have all heard of people who claim that winning the lottery was the worst thing that ever happened to them.
The best way to handle the problems associated with sudden wealth is to get professional help early on. The job of these professionals is to help you determine how much you have and what you could comfortably spend. In this early stage, taxation and other mandatory expenditures are important issues for consideration prior to any spending spree. Furthermore, a clear strategy needs to be developed on how to handle investment proposals from strangers and the inevitable financial aid requests from family, friends, and acquaintances.
Investors are showing a greater interest in life settlements than viaticals based upon two main reasons—past bad publicity on viaticals as being an ethically questionable investment because it involves the terminally ill and advances in medical technology that have extended survival time for terminally ill patients. As medical technology advances, it is becoming increasingly risky for an investor to assume that in the short term, no cure or life extension would be found for any specific medical condition.
It is important for you to be in and stay in control. We suggest that avoiding the following pitfalls could help you gain and maintain control of your sudden wealth:
1. Avoid making unnecessary decisions.
Depending on the situation, there are certain decisions that must be taken and others that could be postponed. Get expert advice to help you determine the priorities on which legal, financial, and tax
decisions must be taken now, and which ones can be postponed.
2. Postpone the spending.
Determine first how much you will have available after tax and other mandatory expenses before you start spending. Once you know about and are conscious of what you can afford to spend, you will have more enjoyment in spending your assets and less buyer’s regret.
3. Do not make promises or commitments.
Avoid making promises and commitments to friends and family before knowing what you have and can comfortably spend, give, or loan.
4. Try to keep your sudden wealth situation as private as possible.
The fewer people know about your sudden wealth, the better. This will reduce the number of unwilling advices, requests, pressure from others, and stress.
5. Remain sociable.
While you should not broadcast it to the world, it is important to maintain your social life. Continue doing what you have always enjoyed doing with your close friends and family. This social interaction will help you deal with the stress that inevitably will come with your sudden wealth.
6. Avoid drugs and alcohol!
It’s certainly expected that one would celebrate one’s good fortune, but the overuse of alcohol or the use of drugs can affect judgment and this can have negative consequences for points 1 to 5.
To ensure that your sudden wealth will lead to an enhancement of the quality of life for you and your loved ones, you should be in control of the money and not be controlled by the money.