What to Do When You Are Suddenly Rich?
Inheriting a fortune or winning the lottery is not the same as building wealth over a long period. When you suddenly become rich, feeling confused and overwhelmed is normal. It’s also normal to start spending money on anything you want without considering the consequences.
And this is precisely why many people who suddenly become wealthy will just as quickly lose their money. When you’ve never had to manage a large sum of money, you simply don’t know how to do it because you’ve never had a chance to learn.
So, if you’re wondering what to do when you are suddenly rich, these nine tips will help you stay in control of your new wealth.
Don’t tell everyone you know right away
While you might be excited about inheriting or winning a lot of money, it’s best to refrain from telling everyone you know about it immediately. At least wait until you figure out what to do with your money before letting your loved ones know you became rich.
The last thing you need is envious friends or relatives who haven’t spoken to you in years to suddenly come asking for money.
Start by paying off your debt
Before you buy a new house or car with your new wealth, you should pay off your debt, if you have any.
Only when you have no more debt can you truly consider yourself wealthy? To avoid spending all your money and going back to being broke, be careful about creating new debt in the future.
Try to only buy what you can afford.
Resist the temptation to quit your job
It’s not a good idea to quit your job and stop working so you can enjoy an opulent lifestyle.
It might be fun for some time, but doing this is the best way to spend all your money and return to where you were before suddenly becoming rich.
However, if your goal is to quit your day job to start a business, be sure you have a clear business plan before moving ahead.
Take some time to think about your new situation
Once you have paid your debt, there is no need to rush. You should simply let the money sit in your bank account while you take the time to figure out what you want to do with it.
Whether you fully realize it or not, being rich will change your life. You will stay the same person but with more means to invest in yourself and your family or do good in your community if you want to.
Work on improving your financial literacy
What else should you do when you are suddenly rich? You should improve your financial literacy.
Educate yourself about money, how it works, and how to grow it. You can read books or blog articles on the topic, listen to podcasts about building wealth, or ask a trusted professional for advice.
Don’t look for a new financial advisor or family office
If you inherited money from a rich relative, they probably had a financial advisor or family office. Don’t look for a new one. Family offices and financial advisors know what they’re doing, and the fact that you inherited a fortune proves that your relative’s money has been well managed.
On the other hand, if you’ve won the lottery and don’t have a financial advisor, start looking for a reliable one.
Invest some of your money wisely
Money doesn’t last forever. But if you invest your new money wisely, you could be able to enjoy it for years to come.
Instead of spending all your wealth, invest a good portion of it. Ideally, your investments should generate a high enough annual return to live comfortably without ever having to touch your initial investment.
A professional can advise you on how to invest wisely.
Don’t change your entire lifestyle overnight
Just because you suddenly became rich doesn’t mean you must change your lifestyle. You don’t need to live in a mansion in a wealthy neighbourhood, and you probably don’t need to buy a new car for each family member.
Instead, focus on living a comfortable and enjoyable life without getting into debt or taking reckless risks with your money.
Don’t give or lend money to everyone you know
When your loved ones finally learn about your wealth, resist the temptation to give or lend money to everyone you know. Many ask you to help them pay off their debt or invest in their new business venture.
Say no. They might resent you for it, but you will resent it even more if you lose all your money to be kind and generous.