Sudden Wealth Syndrome & How to Avoid It

What is Sudden Wealth Syndrome?

“Sudden wealth syndrome” is a term used to describe adjustment problems, stress, confusion, and often money mismanagement that can lead to sudden wealth or Big wind.

Some examples of windfall situations that can lead to sudden wealth syndrome include a large inheritance, your company’s IPO or acquisition event, a large sale (for example a property), or a large salary for a new one. the work.

A good example of a group of people who suddenly look like wealth syndrome are professional athletes. Minimum starting salary There are about 60 660,000 for an NFL player.

according to a Sports Illustrated Report.By the time former NFL players have retired for two years, 78% of them have gone bankrupt or are under financial pressure. Within five years of retirement, an estimated 60 of the former NBA players have broken down.

Understanding the basics is more important. Personal economy For those who have a lot of money. Many of these challenges are inherently different than most, but the outlook for a stable financial future is relatively the same.

5 Tips to Avoid Sudden Wealth Syndrome

Here are some tips for those who receive a high salary in a relatively short period of time who want to avoid the effects of sudden wealth syndrome, and instead lay the foundation for a lifetime of financial security.

1. Educate yourself.

It is difficult to succeed in anything in life without understanding what you are doing and why. Personal finance can be overwhelming, and many people don’t know where to start. You can start by taking a personal finance 101 online course from a trusted source. Like start with the basics. Budgeting And savings, then move on to the basics of investing, such as understanding the dynamics of risk versus return. Reasonable diversity. Achieving financial literacy will help you better assess your true risk tolerance and how much risk you take into your portfolio.

Getting a complete picture of your finances will help you set a budget, set a debt repayment schedule, and set a baseline for scheduling retirement accounts. You need to understand not only how much money is in your bank account, but also your net worth, which is a complete picture. All Your assets and All Your debt. The free personal dashboard allows you. Calculate your net worth In just a few easy steps.

Start with personal capital.

2. Create a financial plan (with help)

For those who receive large sums of money in advance or for a short period of time and need to make it last, it is a good idea to create a financial plan using financial planning software or online tools. Financial planning tools such as Personal capitalIt can help you identify your goals, run rigorous calculations to present the challenges of your success, and help you stay on track to achieve those goals.

You may need your portfolio to help you in the years to come. You will want to check your portfolio when you have no income periods. Software or tools can help you gauge how realistic the goals are and you can run scenarios for multiple projects to compare estimates.

In addition to retirement, your goals may include giving charity or helping family or friends. This can be a great way to map if possible and how much “giving” your portfolio can really help.

3. Maintain discipline.

You don’t usually become a professional without discipline – and that’s the focus. There will be distractions around you and a lot of misleading effects that you will have to ignore. When you see others indulging in extravagance, planning your future will not feel “cool” at the moment, but your future will be proud and grateful.

Let’s face it – discipline doesn’t mean deprivation – it’s okay to buy good things and spend money!

Evaluate the utility of your personal expenses to find out what gives you the most and the least satisfaction with discretionary spending and work to prioritize backwardness. Then take a balanced approach to see where you can save instead of spending.

There will be many temptations when it comes to fame and sudden wealth, but prioritize your needs to avoid it. FOMO And keep an eye on the rewards.

4. Seek guidance from trusted professionals.

Gathering a team of trusted professionals who put your best interests ahead of your own can add significant value. Consider seeking advice and services from financial, tax, estate, and legal professionals.

Make sure you have a financial advisor. loyal And an expert in your field who can serve as your team captain to hire other professionals. Your team can help you maximize your wealth by maximizing your subsequent taxes, through a holistic approach to risk-adjusted returns.

Not all professionals are equal, so make sure the relevant fees are fully understood, how the individual is compensated, any conflict of interest, and do your best. Check their background Before moving on with someone

Learn more about personal capital wealth management services.

5. Avoid complicated investments that you don’t understand

Finally, my last piece of advice is to make sure you understand the risk and return dynamics of an investment, as well as the costs and the structure of the investment. If you have a large amount of money to allocate, chances are that people will offer you opportunities that are offered as a guarantee.

If you find something that promises higher profits with no risk, move in the other direction. It does not exist without dynamic deception.

If you need help figuring out an opportunity, get help from your team of professionals. However, it is a good rule of thumb that if you don’t understand investing, you understand more transparent, liquid options.

This is not to say that there are no good opportunities in the place of private investment, but this investment is best suited for sophisticated investors.

If you want to become a more advanced investor, go to Step 1 – Education is key!