What to do when suddenly rich?

Wealth through inheritance, career advancement or winning the lottery can change many people's fortunes. But according to some studies, this group of people is prone to stress, anxiety, and even life failure if they do not know how to spend wisely.

One of the tragedies of sudden wealth is the sudden wealth syndrome (SWS). This term was coined by psychologist Stephen Goldbart, co-founder of the Institute for Money, Meaning and Choice (USA), to describe a type of mental illness of individuals who suddenly own a large amount of money. Symptoms of SWS include feeling isolated from friends, feeling guilty about having a good fortune, fear of losing money and self-harm.

Take professional athletes, for example. A 2015 study by the National Bureau of Economic Research found that nearly 15% of NFL players filed for bankruptcy within 12 years of retirement, even though many of them were worth millions of dollars.

Or a 2010 study published in the American Journal of Economics and Statistics that surveyed nearly 35,000 lottery winners of between $50,000 and $150,000. The results found that within five years of winning, more than 1,900 had filed for bankruptcy. Many lottery winners around the world have admitted to regretting their wasteful spending, leading to debt, divorce, relationship problems, poor health, or murder.

Explaining why people who suddenly become rich often encounter unexpected events, experts say that it is because each individual is not prepared to deal with changes. In addition, some objective factors can be mentioned such as the jealousy of those around them and many people plotting to seize assets.

Goldbart, who often works with the super-rich, said in an interview with the siteWenMDthat the newly rich often face an “identity crisis” – especially the young.

“That’s because when they get rich, they no longer have to work for a living, they lose their social connections. They’re not sure how to see themselves as ‘retired’ when their working lives have barely begun. In contrast, wealthy people in their 50s and 60s often handle it better, in part because it’s normal to accumulate wealth as they age,” Goldbart said.

To avoid falling into crisis, Dr. James Royal, an investor and asset manager in the US, recommends you do 3 things.

Set financial goals

The common mentality when owning a large amount of assets is to buy many valuable items such as houses, supercars, yachts. However, according to experts, the first thing you should do is find a good financial management advisor to be able to preserve assets for a long time.

To put it simply, as soon as you become wealthy, you need to pay taxes and work with a financial advisor to create a list of goals you want to achieve, such as paying for your children's education, paying off debt, saving for retirement, investing, setting up a trust fund or donating to charity. Because only an experienced wealth advisor can help you create a plan to use your money most effectively.

Don't rush into a decision.

American financial expert Susan Bradley, author of the bookSudden Money: Managing a Financial Windfall(Sudden Money: Managing a Financial Pool),I recommend that you "lie low" for the first few weeks to think things through. This gives you time to process your emotions before making any decisions.

"Don't rush to spend money without a clear management plan," the expert said.

Keep your luck secret

American financial planner Robert Pagliarini once shared withForbes: "When it comes to sudden wealth, the less people know about it, the better."

Experts advise that keeping your fortune a secret can help the newly wealthy avoid pressure from friends, businesses and charities. Because when someone knows you earn a lot of money, they will be jealous, intend to take advantage or ask for help.

In fact, many lottery winners have decided to only share information about their assets with their financial advisors because they are required to keep the information confidential.