For many people, the dream of becoming rich will remain just that: a dream. We don’t have the financial backing necessary, the business acumen, rich family members or the luckiest winning numbers. However, it’s not unheard of for normal people to amass a fortune in a very short space of time, sometimes overnight. Inheritances from wealthy relatives, lottery wins, company buyouts, and winnings from gambling can drop a huge windfall into your lap in the space of a few hours. In these cases, it’s important to know how to approach your new-found wealth, especially if you don’t have experience with large amounts of money.
Spending Habits Are A Killer
First and foremost, it’s imperative that you pay attention to your spending habits. If you’re the type of person who spends the last week of the month eating dry cereal because you splurged your wages on unnecessary expenses, suddenly having money won’t change your bad budgeting skills.
On the other hand, maybe you are indeed frugal with your cash, but now that you have the money, you don’t see the problem with splashing out and buying whatever catches your eye. A new sports car, expensive jewelery, lavish parties and even property and businesses all seem like reasonable purchases now that the price tags are supposedly within your reach. Don’t do it!
This is a dangerous pitfall, as bills and purchases can get out of hand if you don’t feel like you have to worry about the cost anymore. Apart from any vital, immediate needs – rent or mortgage on your current home, regular bills and debts, taxes – keep your spending and impulse buying to a minimum, at least for the first few months until you get a handle on things. Bad purchases, especially early on, can come back to haunt you.
Keep A Low Profile… Get Everything Together
As mentioned above, it might be tempting to break out the checkbook and show off your new found wealth with some expensive items and big parties. You might not see the problem with sharing your new-found wealth with friends and family. While some celebrations might indeed be in order – and information about some windfalls might be publicly available, like lottery winnings and wills – it’s better to try to keep your new financial position as quiet as possible.
Apart from the horror stories of people being murdered or cheated out of their money by relatives, friends or strangers, there are other more common problems associated with broadcasting the news about your wealth. Acquaintances might suddenly have new business ideas that need some financial backing. Friends could appear asking for a short-term loan, and will berate you for refusing them, straining your relationships. It’s better to avoid all these hardships if at all possible, but if not, there are other steps you can take.
Hire A Legal Professional
If you look at the lives of wealthy people, chances are you might not immediately see the people working behind the curtain to keep them safe, both financially and otherwise. Nevertheless, they are an essential part of their lives as affluent people. The key is finding a team of professionals who can take care of the aspects of your life that you are unfamiliar with.
Some key hires would include a competent tax accountant and an estate lawyer. They will keep everything above board and legal, as well as ensure that you don’t lose money or time dealing with unpaid taxes or tied up in court unnecessarily. Another good idea is to seek out a reputable financial planner/advisor to help you with your budget and expenditure, as well as a tax advisor. This will make it easier to refuse those people who wish to borrow money, as you can ask them to deal directly with your financial staff in regards to their requests. If you have a substantial net worth and it’s public knowledge, a reputable security firm would also be a sound investment.
For those of you who might be planning on making investments, especially on the stock market, one tip is to contract a broker that asks for a flat fee as opposed to a percentage of the earnings. Brokers who receive fees wish to maintain their reputation as good investment advisors and will strive to get you the best, honest stock advice, while those operating on percentages might be tempted to take more risks to boost their earning potential.
Stay Grounded… Keep It Together
This is more of a personality issue than a financial one but is still important. Keep a level head with regards to your new position, especially in your dealings with other people. Maintain good relationships with loved ones and honest friends, and make sure to remember to treat everyone with respect. Money can’t buy happiness, but it can put you in a position to make things easier, not just for yourself but for people in need of help. Make sure that you don’t forget what it was like to be less financially comfortable, and act appropriately.
Getting rich usually isn’t easy, either in achieving that wealth or keeping it. Aside from the financial aspect, your personal and family life will also be affected, which can be a positive or a negative depending on your actions. If you pay attention and make smart decisions, you will then be able to enjoy all the freedoms and benefits that come with large amounts of money.