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CNBC: Sudden Wealth Leaves Most People Broke

By    |   Wednesday, 01 October 2014 03:00 PM

Most of us have dreamed about being wealthy and a living a life of luxury. But in many cases, sudden wealth doesn't last and often results in misery instead of happiness.

Sudden wealth can come from the lottery, pension payouts, insurance settlements or inheritance.

Regardless of the source, 70 percent of people who suddenly come into money are broke within a few years, according to data from the National Endowment for Financial Education cited by CNBC.

A common mistake is people who were used to living within certain boundaries get a lump sum of money and forget they still have limitations. Instead they indulge their long list of desires, Susan Bradley, founder of the Sudden Money Institute, told CNBC.

Add a pile of money and "It can look like that bucket doesn't have a bottom, but it does," warns Candace Bahr, co-founder of Bahr Investment Group.

Family and friends can also create a problem because they have a tendency to want help or to plead for assistance, especially when they are in financial stress, Gary Foreman, founder of the Dollar Stretcher website, wrote in an article for U.S. News & World Report.

Unless the lump sum ranges into the millions, it's not enough to help everyone. And if you do decide to assist your loved ones, limit the aid to your regular income, he advised.

Bradley advocates "the decision-free zone," a period where you sort and organize instead of actually doing anything with the money.

This will help avoid detrimental impulsive decisions, she explained.

Foreman urged the suddenly wealthy to avoid losing sight of who they are, noting that money tends to change people and those changes can be a quick way to lose one's wealth.

Wealth-driven changes also commonly lead to depression, says author and certified financial planner Robert Pagliarini, who has a master's degree in clinical psychology.

"We take ourselves from what feels comfortable . . . and put ourselves in a brand new environment," he told CNBC.

Upgrading one's lifestyle means you'll be doing things you're normal circle of associates cannot afford to do or even leaving a community where you have ties.

"It's really hard to keep those relationships," Pagliarini said.

Anyone who suddenly gets wealthy but doesn't want to go broke must recognize the need for careful consideration.

Planning should begin before you receive the money, Foreman argued. Work out details such as how much is going to each bank and investment account, and have a plan for when and how the money will be invested.

And don't rely on skills you don't have. For best results employ the assistance of the necessary professionals, which may include a tax expert, a lawyer and an investment professional, according to CNBC.

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Most of us have dreamed about being wealthy and a living a life of luxury. But in many cases, sudden wealth doesn't last and often results in misery instead of happiness.
wealth, sudden, money, broke
Wednesday, 01 October 2014 03:00 PM
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