Thursday, February 6, 2014

Sudden Wealth and Mindfulness


What would you do if you won the lottery? Or a jackpot? Or, a more likely scenario, received an inheritance?

The statistics surrounding sudden wealth are remarkable:

  •  Family money rarely survives three generation, with 70% evaporated by the end of the second generation and by the end of the third generation, 90% of the wealth is gone.
  • Those who receive inheritances in their 20s, 30s and 40s only save about half of the inherited money. The other half is either spent, given away or lost investing.
  • Lottery winners in one large study in Florida were found to be twice as likely to have declared bankruptcy within five years of their win than those who hadn't won a lottery.
In my years of working with clients around money issues, I've worked with those who have received large inheritances, small inheritances, large jackpots, and significant insurance settlements.

The first sudden wealth client I ever had, I must admit, I was not yet experienced enough to be guiding them. It was early in my career, but at the time I reasoned that they were refusing to go to anyone else; they trusted me because of a mutual friend. I led with what I knew to be sage advice: don’t make any sudden decisions. Carve out a small percentage for mad money, and then let’s look at the long term choices and implications. By the time I got them back on the phone later that month, they’d spent, loaned and gifted half of their winnings. It doesn't take a rocket scientist to figure out what their trajectory was going to be. They were one of the above statistics.

As I've gained more experience, and spent more time learning about our behaviors with money, my experiences with clients have become much richer. Some of my most rewarding experiences have been working with clients who came to me with a goal of “honoring their inheritance” that was received from a cherished and loving family member.

Some have honored their sudden wealth by being good stewards of the money, carving out an amount they were committed to saving, and not touching it. Others have honored the money by choosing something really special to spend it on. Still others used their sudden wealth to wipe their slate clean on debt that had been weighing them down.

Of the clients that I've worked with that looked back and felt good about their decisions, they had one thing in common: mindfulness.

They thought about and talked about what they wanted to do, they made a plan, they looked back from time to time to see if they were sticking to the plan, and they were honest with themselves (and me) about areas that they veered from their plan.

If you've found yourself in a place of sudden wealth, here’s my advice:

  • Become a student – read a book on inherited wealth or lottery winnings;
  • Hire a trusted and certified professional – it will be well worth the investment;
  • Start a journal – write or draw your intentions for the money;
  • Set look-back milestones – monthly at first, and then quarterly, look back and see if you are using the money within the intentions you set.
The spiritual axiom “how we do one thing is how we do everything” can become our crystal ball. If in the first few months of your sudden wealth, the money was spent outside of your intentions, it’s time for some truth-telling. Draw, or spreadsheet, or however you are able to see into a crystal ball what the path will be of your money. It will likely look very much like it did in those first few months because, how we do one thing is how we do everything.

More than anything, though, I urge you to bring mindfulness into your financial life. Five, ten, twenty, even forty years from now you’ll look back on the decisions that you made. If you practiced mindfulness with the money, you’ll feel good about your decisions, no matter what those decisions were.

-Stacey Powell


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