How to deal with sudden wealth
While Kerr dealt with the win with a level head, in reality, coming into a lot of money – whether it’s through an unexpected windfall; the sale, or partial sale, of a business; inheritance; or divestment of property – dramatically changes people’s lives and not always for the better.
Sudden wealth often comes with an emotional toll – stress, anxiety, guilt, social isolation and confusion. It’s an affliction US psychologist Stephen Goldbart termed “sudden wealth syndrome”.
The co-founder of the Money, Meaning & Choices Institute, says sufferers become overwhelmed, grow suspicious of people around them, and make poor decisions, such as overspending or lending money to family and friends. A common outcome is personal and financial destruction.
Coming to grips with sudden wealth can be daunting, agrees an ANZ Financial Adviser, having seen several clients suddenly come into money. Seeing an adviser can help guide decisions that protect the capital so it lasts beyond the initial high of coming into a lump sum.
One case this adviser refers to is one of his clients, a woman in her early 60s who worked in retail and won about $5 million in a Lotto syndicate she’d taken out with her workmates. Not everyone she worked with was in on the syndicate, which made going to work particularly uncomfortable.
However, the win meant she could pay off her mortgage, quit her job and set some of her family members up for the future.
“The biggest thing for her was dealing with all the extra zeros in her bank account; just trying to comprehend that level of money was a massive challenge,” he says.
“She was getting things thrown at her from left, right and centre, so seeking that professional opinion helped her understand what level of income support she needed to support herself long term and to direct the money into the investment solutions that allowed for that.
“Our role was taking that weight – that burden, if you like – away from her when it came to making big decisions about where the money goes.”
The adviser also had meetings with her children to explain how the money was being invested, and why, and still meets with her regularly to make sure everything stays on track.
“She didn’t particularly care about getting a better rate of return; she just wanted to protect the capital,” he says.
“A Lotto win doesn’t come around very often. Others in the syndicate went down a very different path and spent the money on travel and other luxuries, but she took a very sensible approach to make sure it could support future generations.”