NDSU Extension Service - Ramsey County

Accessibility


| Share

When Fortune Finds You

 

When Fortune Finds You

 

            What would most Americans do if they were the recipient of an unexpected windfall of cold, hard cash?  Forget fantasies of designer clothes and luxury cars — most Americans say they have more modest plans should they ever join the ranks of millionaires.

            Nearly nine in 10 consumers say if they were to suddenly earn or receive "millions," they would save or invest at least a portion of that money, according to a forthcoming TD Ameritrade survey.  Of those hopeful wealth-builders, 66 percent say they would save or invest at least half of their new wealth.

            What people would do with "millions?"

 

Invest or save - 86%

Donate to charity - 33%

Go on a trip - 28%

Buy a new home - 26%

Buy practical things for parents/grandparents - 23%

Buy fun things for spouse/kids - 17%

Buy a car - 8%

Buy fun things for parents/grandparents - 6%

Take friends on a trip/out to eat/to a concert or sports event - 5%

 

            Unfortunately, sometimes what we say and what we do are two different things.  There's plenty of evidence that responsible money management can fly out the window in the face of a sudden influx of cash.

            A 2012 study in the Journal of Family and Economic Issues, for example, found that 34.9 percent of inheritors – no matter the amount they inherited! -saw their net worth either decline or hold steady — indicating they didn't save the money or use it to pay down debt. Along with individual tales of lottery winner financial woes, a 2010 Vanderbilt Law and Economics paper found that financially distressed Florida lottery winners were only able to postpone — not avoid — bankruptcy.

            While your odds of a big lottery win or NFL contract may be slim, sudden money isn't just limited to those kinds of extreme or unexpected windfalls. Selling a business, inheriting money, receiving an insurance settlement or a big bonus at work or even retirement — when all your savings suddenly become available to tap — all entail receiving a big sum of cash at once.

            Ideally, consumers faced with instant wealth should take time to consider their financial and life goals before they do anything with the money,

            A great many emotions can be attached to sudden wealth depending on where the money comes from.  We need to address the emotions first. Otherwise, we are extremely likely to make some very bad financial decisions.  If you acquire a large sum of money, a basic first step is to take a break from making major money decisions.  That break can range from a couple of months to a year. The important thing is for the newness to wear off, so you can tackle financial planning with a clear head.

 

Creative Commons License
Feel free to use and share this content, but please do so under the conditions of our Creative Commons license and our Rules for Use. Thanks.