Financial Planning | Personal Finance | Article

Can You Handle Becoming Rich Overnight?

by The Simple Sum | 14 Apr 2021 | 3 mins read

Fortunes can change overnight. From receiving a sudden inheritance or a 6-month performance bonus at work, you may have just had a huge windfall. It’s time to live your best life and get on a yacht!

Not so fast, though. Managing a huge sum of money is harder than it sounds — and if one is unprepared, the entire experience can be psychologically and emotionally taxing.

According to this report, people are prone to experiencing a lot of fear, anxiety, and distrust once they come into a huge amount of money all of a sudden. And that’s perfectly normal, especially if your inheritance or performance bonuses are staggering. It’s a sudden change after all — and you’re not the only one who will react to it.

It might seem like a blessing that can magically wipe your problems clean, but we need to remember that it may cause more trouble as well without preparation. If it’s a huge inheritance, then you may never have to work again, but only if you manage your wealth instead of spending it all away impulsively.

Here are three ways for you to handle this large sum of money:

Don’t tell everyone

It’s not going to go down well if you blast your good fortune on Instagram for the world to see. Expect to receive endless unsolicited messages asking for handouts from your long lost schoolmates from a bygone time. Which is why it’s best to only inform the following people (and in this order):

  • Financial advisors and professionals who know how to manage wealth
  • Spouse and/or immediate family members
  • Trusted friends

Stash your money

And no, we don’t mean stuffing cash into a cookie tin and hiding it under the bed. Consider putting your money to work, either by investing, or building up the rest of your much-needed emergency fund.

You can also make voluntary contributions to your TAP and enjoy a bonus interest rate on your future retirement funds, so compound interest can make your money work that much harder for you in the long term!

Set aside a sum for fun

But we’re not asking you to be your own fun police. After all, not everyone gets a windfall like this every other day. Just remember not to splurge and live way too luxuriously without keeping an eye on that number in the bank.

What you can do, then, is to allocate a portion, such as 10% of the money, just to treat yourself and nothing more.

Control your sudden urges and desires to go all Gatsby on your lifestyle. Yes, coming into a huge amount of money for any reason at all can be thrilling and exhilarating, but financial prudence and a good sense of impulse control will truly go a long way. Now, enjoy your windfall!