Ever felt jealous of people winning the lottery or experiencing a sudden windfall that elevates their financial state to an unimaginably wealthy status? Well, the grass is never greener on the other side, and life always tends to pose problems to people in almost every state of financial status. The poor and the rich both have their own set of issues to deal with. People who experience sudden windfalls like winning the lottery jackpot or inheriting an enormous amount of money out of the blue are usually envied for their luck, but the newly rich have notoriously exhibited problems with adapting to life after receiving their newly found wealth.
Sudden Wealth Syndrome (SWS) is a term given by psychologist Stephen Goldbart that explains the adjustment problems that the newly rich experience after they have received their surprise windfall. A sudden influx of wealth can cause a person to experience high amounts of stress and other unpleasant issues like feeling isolated from family and friends, fear of losing all the wealth and having guilt about being rich.
There are real-life examples of SWS and the devastating chaos it can cause to the lives it touches. For example, in 2014, Roger and Lara Griffiths won $2.76 million in a lottery jackpot, making them rich beyond their wildest dreams. Theirs should have been a story with a happy ending, but instead, the couple found their lives torn apart. They spent their windfall on luxurious cars, trips and homes but in 2010 a freak accident of fire destroyed their home which was not insured for the full amount. They had to bear the exorbitant costs of repairing their luxurious home and shortly after the disaster, the couple split up due to accusations of adultery from Lara. Their 14-year marriage ended with a sour note and with much less money.
A method to deal with Sudden Wealth Syndrome is to develop and grow your financial literacy consciously. Financial literacy is basically acquiring knowledge and the know-how to be well informed and to make the right financial decisions regardless of your financial situation. Possessing good financial literacy can help you regardless if you are poor or super-rich. Having the discipline and wisdom to deal with financial situations can bring you a long way regardless of your socioeconomic status.
In the case of Roger and Lara, if they would have made sound financial decisions like insuring their house for the proper amount, they could have saved money on the restoration and it would have also helped their personal relationship as having a sudden dip in resources after being used to having money to spend for anything can be stressful and it impacts the emotional well-being of both parties. Financial literacy calls for the individual to step away from spending money on their every whim and instead, to use it wisely when dealing with the expenditure of such wealth.
Being self-sufficient financially is an important part of establishing financial stability, and a sudden windfall should add strength and resolve to your financial literacy instead of weakening it. Windfalls tend to give rise to the desires of the individual, subtly encouraging reckless spending as the sheer number of pennies from heaven gives a false sense of security that the money will last forever. If a person has strict views and does not budge on making well-informed financial decisions, then there is a good chance that SWS can be avoided.
Another example of how Sudden Wealth Syndrome can change lives for the worse is the story of Michael Carroll, who won £9.7 million in 2002 when he was just 19 years of age. The garbageman then spent it all on fancy cars, drugs, women and parties. There’s nothing left of Michael’s winnings of £9.7 million and to not have saved any amount from the winnings is almost too crazy to imagine. In his case, financial literacy would have helped his life and future tremendously as that amount of money could have changed his and his family’s life for the better. If he would have invested in property, investment plans and perhaps even started his own business his life would have been very different and the windfall he received could have borne fruit and grown to benefit his future generations.
If you are financially conscious, one of the first things to do when you get a windfall is to seek professional financial advice to make legitimate investment decisions and to manage your large amount of funds in the right way. It’s never too early to set money aside for a rainy day and having a safety net is important because life can pull out the rug from under your legs any day.
To get started, or if you know you need help navigating through this maze to reach your financial goals, talk to one of our friendly financial advisers and don’t forget to subscribe to this blog and our Facebook and Instagram page for all the latest articles on financial wealth planning and management.
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