Are you familiar with the term “Sudden Wealth Syndrome”? According to a 2024 article by James Chen of Investopedia, sudden wealth syndrome is “a type of distress that afflicts individuals who suddenly come into large sums of money.” The syndrome causes anxiety, guilt, fear and may cause an identity crisis.
Sudden or newly acquired wealth may result from an inheritance, an insurance payout, a legal settlement, or the sale of a business. Your newfound wealth could be the result of a career that has taken off, causing your salary to climb from five to seven figures. Whether you saw this sudden wealth coming or not, your life is certain to change.
How quickly you react to the accumulation of sudden wealth will play a part in your long-term financial health and well-being. Avoid the negative effects of sudden wealth syndrome and learn to confidently navigate your newfound wealth with these five action steps:
- Build a team. Now more than ever, you need to surround yourself with an expert team of finance professionals, like private bankers, wealth planners, attorneys, and accountants. Rely on their expertise and insight to help you create and implement a strategy for your long-term financial success. Remember to monitor your household expenses consistently. Consider adding a Personal CFO to your team. They can help you manage the day-to-day details of your personal finances and keep you on track for success.
- Set boundaries. Be prepared to say “No,” even if you feel pressured to say “Yes.” Protect yourself and your relationships by establishing firm guidelines as to how you will (or will not) share your wealth with others. Remember to set boundaries for yourself, too. Avoid reckless spending by setting limits. Consult your financial team before investing, no matter the size of the investment. Ask your Personal CFO to hold you accountable to your spending limits.
- Become a student of wealth. Replace the fear that can come from sudden wealth with confidence by equipping yourself with knowledge. The importance of financial literacy translates across all levels of wealth. The more informed you are about your options, the more likely you are to avoid financial pitfalls. Seek opportunities to gain experience in all aspects of successful money management, and ask questions.
- Know your money mindset. Money mindset is defined as a “manifestation of your attitudes and beliefs about money.” (source: The Motley Fool.) Everyone carries generational, circumstantial, or learned beliefs about money that influences their interactions with it. If you find that your money mindset is an obstacle, find a money mindset coach who will help you address limiting beliefs about wealth.
- Uphold your values and set goals. With wealth comes great responsibility. Make it a priority to set short-term and long-term financial goals that align with your values. You may want to give more, travel more, start a foundation, or invest in businesses. Make your plans known to the members of your financial team so they can develop a wealth plan that will help turn those goals into reality.
The sooner you implement these action steps, the more confident you will be in managing your newfound wealth. Interested to know how a Personal CFO can help you preserve your wealth and save time? Schedule a complementary call today: https://calendly.com/forecastlefinancial/complimentary-consultation.
