Sage advice for New Found Wealth

[ajob]

There is something uniquely human about the way many of us mishandle money, particularly when it's received unexpectedly. Whether it's a bequest, a court settlement, or a sweepstakes winning, suddenly coming into cash can unhinge any of us. Every day the media reports the misery befalling citizens who previously struck it lucky, but then fell on hard times. We chuckle over poor Joe Slidebuck who pocketed a $3.8 million lottery winning just two years ago and is now filing bankruptcy. Of course, we breathe a collective sigh of relief that the misfortune is not ours, while wondering if we might have fared better under similar circumstances. For various reasons, many persons can't handle a windfall. Let's analyze the mistakes made.

1. An urge to spend. Perhaps the single greatest weakness of mankind, and womankind, is an inability to resist purchasing things. The late English historian C. Northcote Parkinson summed it up in his 1960 masterpiece The Law and the Profits: "Expenditures invariably rise to meet and exceed available income." It's this impulse to spend whatever is available that's the undoing of many otherwise rational individuals. It's not necessarily human nature. Rather, it's a learned reflex that must be unlearned if you hope to remain solvent. If not held in check, spontaneous spending is a recipe for disaster.
2. Voices out of the past. It's amazing how many people you knew that you no longer see, that is until your name appears in the paper. Within days cousin Calvin phones to remind you how his current misfortune can be resolved if you can just see your way clear to assisting him. And don't forget your former classmate Ernie, with whom you stopped exchanging Christmas cards a decade ago. His email extols the close camaraderie you two always shared, adding that the technology IPO his brokerage firm is underwriting is certain to be right up your alley. If you fail to fend off these moochers and hangers-on, you'll find yourself in deep trouble.
3. Take care with those who are closest. With newfound prosperity, relations with friends and relatives begin to change as you are viewed as something apart. It seems that admiration and envy are opposite sides of the same coin, and you will be the recipient of both emotions. Your advice and assistance will be solicited, and although you may at first welcome the attention as a novelty, you will eventually find it more burdensome than complimentary. The pressures to be placed upon you can become overwhelming. If you don't take a step backward, life can become most unpleasant.
4. Loss of anonymity. You are now a known and recognized commodity in your community and as such a natural target. You may expect requests for contributions. Invitations to attend various functions will be forthcoming. You may even find yourself offered honorary positions or encouraged to become involved in activities for which you have no real interest. The toughest job of all will be to say "no."
5. The investment trap. For those without prior investment expertise, coming into money can be an intimidating experience. No one is born with an ability to astutely manage assets. This is a talent that requires knowledge and practice. Perhaps the safest procedure is to refrain from any investment decisions for a full year, while any windfall is parked in non-risk vehicles such as certificates of deposit, government insured savings accounts, and treasury notes. During that period of time, educate yourself. If you attempt to become involved before you acquire an appreciation of the risks and rewards, you are fair game for the thieves and charlatans who regularly prey upon moneyed novices.
6. Charity is often uncharitable. Unfortunately, there is not enough money in the world to satisfy the myriad of organizations with outstretched hands. Charitable institutions that are carefully selected and effectively monitored can be an excellent way to share your good fortune in a meaningful way, but simply pouring out dollars in a spastic impulse is no way to accomplish any good.
7. Beware of yourself. I've saved for the last the most potentially insidious mistake of all. A malevolent effect of sudden prosperity can be your relationship with yourself. Despite the personal unpleasantness of lack of money, it imposes no demands on the ego. Affluence is another matter entirely, and the pressures it creates can be formidable. It is fulfilling the mundane requirements needed to meet daily financial obligations that keeps many people in balance. When this necessity is removed, the balance often goes with it. If you then add to that the ability to acquire unneeded possessions, exert unwanted influence on others, and seek unwarranted involvement, the potential for impairment is unlimited. One thing is certain: You must come to terms with yourself or you will surely live to regret it.

I Pray that non of us will squander this opportunity. God give us all wisdom and virtue with this blessing

[ajob]

THE SEVEN STEP PLAN

Wealth consultant Cynthia Kostas helps people develop skills to manage life and money when they receive overnight wealth. She has developed seven steps to handling financial windfall after years of working with individuals, families, trusts and foundations.

• (1) Realize that you alone are responsible for these funds and your financial wellbeing. Stay involved, read, and learn about financial matters.
• (2) Step back take time to emotionally adjust and understand your new situation.
• (3) Choose your path. What do you want for your life? Who do you want to be?
• (4) Figure out your financial position. How much do you have? What are your current living expenses and what is your income? Is it enough to live on and do what you want to do, as identified in #3?
• (5) Slowly and thoughtfully assemble your team of advisors and gatekeepers.
• Estate lawyer
• Investment Manager
• CPA
• Wealth Consultant

• (6) Create a Financial Plan with your team.
• (7) Implement your plan.

Read more Handling Sudden Wealth

Solicitations from Friends and Relatives

Many times family members will come to you with what they consider to be great business ideas that they have been wanting to try or with legitimate medical needs or financial difficulties such as debt that can be solved with a loan from you. This is a heart-wrenching dilemma because they touch us on a very emotional level. We suggest that you carefully examine the need that is being presented to you. Choose which people you consider to be in your innermost circle. Budget some percentage of your windfall to help such cases and stick to the budget so that your own goals do not get subverted by the troubles of loved ones. Family issues are complicated and multi-layered. Consider the following:

· Set aside the dollar amount or percentage of your windfall that you are willing to spend on family members in true need. Stay disciplined to this figure.

· If possible, do not share the news of your windfall with others.

· Do not get caught in the trap of trying to make all things equal. You cannot equalize financial aid to family members any more that you can equalize love.

· Differentiate another’s wants from needs from emergencies. If a relative or friend has an ongoing problem making ends meet, paying a bill will not help them in the long run. They need to make lifestyle adjustments to match their income. This is different from a sudden accident that leads to sudden unemployment.

· Make clear the limits of your help from the beginning.

· Help relatives find other solutions to their dilemmas in addition to or instead of money. What other sources of help are available for their situation? Can you help them budget or find social services?

· Draw a tight circle around your definition of friends that you would include with family members as being worthy of your financial assistance.

· Remember that getting someone in further debt (to you) often is not doing them any favors. A one-time infusion of money often does not provide the solution, but is only a bandaid. When the money cannot be paid, or is not paid, relationships are strained, often irreparably.

· Evaluate any business that you are asked to invest in as you would any other investment. One out of every three start up businesses fails within three years. Seek evaluation of the business plan (be sure there is one!) from a professional.

· Others may not wish to borrow money, but to control your windfall by controlling access to you from friends and advisors. Sometimes they may wish to create a feeling that you are dependent on them. Or, they may want to gain social status through association with you. (“He or she will listen only to me.”) Beware of anyone who tries to convince you that everyone else who might advise you is an imbecile or a cheat and that they are the only ones that you can trust.

· Of course we all want to help our loved ones when they are in need. All people have emergencies throughout the course of their lives. Being aware of the pitfalls can keep your good intentions from going sour.

[onerighthand]

Good post!

I regret that there are also a few people in this world and on this site who exhibit poor tendencies that I fear will only get worse when they get money. They treat people with much disrespect now and surely will only get worse with the confidence of cash in their pocket. Gods in their own mind. I pray that doesn't happen.

[cris]

All good advice....but, funny how people who manage to keep their new riches are never in the news.....thats the stay anonymous part...lol

[vanommen]

Thankss for presenting a common sense approach to a needed mental adjustment.

[MovieMaker]

This was a fantastic read and so true. Thanks for the eye opening advise. I pray people don't just see this article as WORDS but really take time to take it all TO HEART, THINK ABOUT IT, PUT IT TO ACTION! GOD BLESS YOU AND YOUR FAMILIES IN THIS ADVENTURE!

[ajob]

Thanks folks for your reply's,

I have a small group of about 6 people that have bought

on my advice. Once this happens we will meet that first day

and talk about strategy. I am going to try to keep the group

together as an accountability group to help each other adjust

for at least the first year. We will have to keep the circle of

information tight within ourselves and try to help each other

stay responsible till we acclimate to our life changing experience.

If you know anyone else you might want to be accountable to, at

least one other person so that you don't become a lottery winner. Talk to them am make a pack to be honest with one another.

God Bless

Ajob

[saphire]

There is something uniquely human about the way many of us mishandle money, particularly when it's received unexpectedly. Whether it's a bequest, a court settlement, or a sweepstakes winning, suddenly coming into cash can unhinge any of us. Every day the media reports the misery befalling citizens who previously struck it lucky, but then fell on hard times. We chuckle over poor Joe Slidebuck who pocketed a $3.8 million lottery winning just two years ago and is now filing bankruptcy. Of course, we breathe a collective sigh of relief that the misfortune is not ours, while wondering if we might have fared better under similar circumstances. For various reasons, many persons can't handle a windfall. Let's analyze the mistakes made.

1. An urge to spend. Perhaps the single greatest weakness of mankind, and womankind, is an inability to resist purchasing things. The late English historian C. Northcote Parkinson summed it up in his 1960 masterpiece The Law and the Profits: "Expenditures invariably rise to meet and exceed available income." It's this impulse to spend whatever is available that's the undoing of many otherwise rational individuals. It's not necessarily human nature. Rather, it's a learned reflex that must be unlearned if you hope to remain solvent. If not held in check, spontaneous spending is a recipe for disaster.
2. Voices out of the past. It's amazing how many people you knew that you no longer see, that is until your name appears in the paper. Within days cousin Calvin phones to remind you how his current misfortune can be resolved if you can just see your way clear to assisting him. And don't forget your former classmate Ernie, with whom you stopped exchanging Christmas cards a decade ago. His email extols the close camaraderie you two always shared, adding that the technology IPO his brokerage firm is underwriting is certain to be right up your alley. If you fail to fend off these moochers and hangers-on, you'll find yourself in deep trouble.
3. Take care with those who are closest. With newfound prosperity, relations with friends and relatives begin to change as you are viewed as something apart. It seems that admiration and envy are opposite sides of the same coin, and you will be the recipient of both emotions. Your advice and assistance will be solicited, and although you may at first welcome the attention as a novelty, you will eventually find it more burdensome than complimentary. The pressures to be placed upon you can become overwhelming. If you don't take a step backward, life can become most unpleasant.
4. Loss of anonymity. You are now a known and recognized commodity in your community and as such a natural target. You may expect requests for contributions. Invitations to attend various functions will be forthcoming. You may even find yourself offered honorary positions or encouraged to become involved in activities for which you have no real interest. The toughest job of all will be to say "no."
5. The investment trap. For those without prior investment expertise, coming into money can be an intimidating experience. No one is born with an ability to astutely manage assets. This is a talent that requires knowledge and practice. Perhaps the safest procedure is to refrain from any investment decisions for a full year, while any windfall is parked in non-risk vehicles such as certificates of deposit, government insured savings accounts, and treasury notes. During that period of time, educate yourself. If you attempt to become involved before you acquire an appreciation of the risks and rewards, you are fair game for the thieves and charlatans who regularly prey upon moneyed novices.
6. Charity is often uncharitable. Unfortunately, there is not enough money in the world to satisfy the myriad of organizations with outstretched hands. Charitable institutions that are carefully selected and effectively monitored can be an excellent way to share your good fortune in a meaningful way, but simply pouring out dollars in a spastic impulse is no way to accomplish any good.
7. Beware of yourself. I've saved for the last the most potentially insidious mistake of all. A malevolent effect of sudden prosperity can be your relationship with yourself. Despite the personal unpleasantness of lack of money, it imposes no demands on the ego. Affluence is another matter entirely, and the pressures it creates can be formidable. It is fulfilling the mundane requirements needed to meet daily financial obligations that keeps many people in balance. When this necessity is removed, the balance often goes with it. If you then add to that the ability to acquire unneeded possessions, exert unwanted influence on others, and seek unwarranted involvement, the potential for impairment is unlimited. One thing is certain: You must come to terms with yourself or you will surely live to regret it.

I Pray that non of us will squander this opportunity. God give us all wisdom and virtue with this blessing

Fabulous -----thank you

[ReturnToGod]

Thanks, ajob; all outstanding reads and great advice which I will print and place in view every morning I wake up going forward.

All good advice....but, funny how people who manage to keep their new riches are never in the news.....thats the stay anonymous part...lol

Well said; cris! This waiting game has given me (and I would guess many others on this site) the time to think through our reaction to the final day when the RV arrives and to make appropriate plans. Stay cool, don't make a spectacle of yourself, and stay below the radar of others (although no one can completely avoid the radar of the IRS).

[saphire]

There is something uniquely human about the way many of us mishandle money, particularly when it's received unexpectedly. Whether it's a bequest, a court settlement, or a sweepstakes winning, suddenly coming into cash can unhinge any of us. Every day the media reports the misery befalling citizens who previously struck it lucky, but then fell on hard times. We chuckle over poor Joe Slidebuck who pocketed a $3.8 million lottery winning just two years ago and is now filing bankruptcy. Of course, we breathe a collective sigh of relief that the misfortune is not ours, while wondering if we might have fared better under similar circumstances. For various reasons, many persons can't handle a windfall. Let's analyze the mistakes made.

1. An urge to spend. Perhaps the single greatest weakness of mankind, and womankind, is an inability to resist purchasing things. The late English historian C. Northcote Parkinson summed it up in his 1960 masterpiece The Law and the Profits: "Expenditures invariably rise to meet and exceed available income." It's this impulse to spend whatever is available that's the undoing of many otherwise rational individuals. It's not necessarily human nature. Rather, it's a learned reflex that must be unlearned if you hope to remain solvent. If not held in check, spontaneous spending is a recipe for disaster.
2. Voices out of the past. It's amazing how many people you knew that you no longer see, that is until your name appears in the paper. Within days cousin Calvin phones to remind you how his current misfortune can be resolved if you can just see your way clear to assisting him. And don't forget your former classmate Ernie, with whom you stopped exchanging Christmas cards a decade ago. His email extols the close camaraderie you two always shared, adding that the technology IPO his brokerage firm is underwriting is certain to be right up your alley. If you fail to fend off these moochers and hangers-on, you'll find yourself in deep trouble.
3. Take care with those who are closest. With newfound prosperity, relations with friends and relatives begin to change as you are viewed as something apart. It seems that admiration and envy are opposite sides of the same coin, and you will be the recipient of both emotions. Your advice and assistance will be solicited, and although you may at first welcome the attention as a novelty, you will eventually find it more burdensome than complimentary. The pressures to be placed upon you can become overwhelming. If you don't take a step backward, life can become most unpleasant.
4. Loss of anonymity. You are now a known and recognized commodity in your community and as such a natural target. You may expect requests for contributions. Invitations to attend various functions will be forthcoming. You may even find yourself offered honorary positions or encouraged to become involved in activities for which you have no real interest. The toughest job of all will be to say "no."
5. The investment trap. For those without prior investment expertise, coming into money can be an intimidating experience. No one is born with an ability to astutely manage assets. This is a talent that requires knowledge and practice. Perhaps the safest procedure is to refrain from any investment decisions for a full year, while any windfall is parked in non-risk vehicles such as certificates of deposit, government insured savings accounts, and treasury notes. During that period of time, educate yourself. If you attempt to become involved before you acquire an appreciation of the risks and rewards, you are fair game for the thieves and charlatans who regularly prey upon moneyed novices.
6. Charity is often uncharitable. Unfortunately, there is not enough money in the world to satisfy the myriad of organizations with outstretched hands. Charitable institutions that are carefully selected and effectively monitored can be an excellent way to share your good fortune in a meaningful way, but simply pouring out dollars in a spastic impulse is no way to accomplish any good.
7. Beware of yourself. I've saved for the last the most potentially insidious mistake of all. A malevolent effect of sudden prosperity can be your relationship with yourself. Despite the personal unpleasantness of lack of money, it imposes no demands on the ego. Affluence is another matter entirely, and the pressures it creates can be formidable. It is fulfilling the mundane requirements needed to meet daily financial obligations that keeps many people in balance. When this necessity is removed, the balance often goes with it. If you then add to that the ability to acquire unneeded possessions, exert unwanted influence on others, and seek unwarranted involvement, the potential for impairment is unlimited. One thing is certain: You must come to terms with yourself or you will surely live to regret it.

I Pray that non of us will squander this opportunity. God give us all wisdom and virtue with this blessing

Fabulous -----thank you

Here is the link if anyone wants some more information

http://www.maxoutsavings.com/handling_sudden_wealth.html

Thanks again

[ajob]

Bump..................Get ready!!!!

[Orv]

In our house the kids dont come around. As for family they dont come around--WHY--because when i went broke before --they all split. When we were sick no-one--So we figured it this way- If you dont want to be there when the BAD times roll in - SCREW YOU--- . when the good times hit- you aint involved. It really does save on XMAS cards. What i will do is buy a good guitar and get the car my wife wants, and from there --WE will step back and take a look at a brandnew picture. In it I see my wife and me and our old house. YUP i will stay here . I have a friend who has oil on his property and for for those who dont know him dont know about the oil. He wears bib-overalls and drives a brandnew second had pickup truck cause when you buy a new one the price dives when it rolls off of the lot. So i will follow a true mentor in that area. Yup i do own Bib-overalls and i got boots to. Good post. I pray that all take the advice. This advice can cost you alot if your in trouble better to get it this way so your path is free.Also we are called to be good Stewards of what we have and have been GIVEN-- May GOD Bless you all and your houses. Yup WE serve HIM to. --Orv

Edited October 14, 2010 by Orv

[OhioTom]

Thank you for posting this....

Tom