Sudden Money Syndrome

You’re suddenly rich? Bummer.

Who doesn’t dream of landing a windfall someday — of winning the lottery, inheriting $3 million from a long-lost aunt, finding a suitcase full of unmarked bills on the bus — or a genie in a bottle? Me, I’m not terribly picky about where the millions come from, because the cash alone will solve all my problems.

At least that’s the fantasy. The reality of life after a windfall isn’t nearly as rosy. In fact, being flooded with a sudden fortune, whether earned or inherited, can be highly stressful and sometimes even traumatizing, say a new breed of financial experts who call themselves “wealth counselors.”

I know. You look a little dubious. Skeptical, even. And who can blame you (or me) for raising an eyebrow (or snorting) at the idea that an enormous truckload of cash would be hard to handle? Sure, I’d give my left arm for it, and that would be a little painful. Of course. But I’d adapt.

But sudden money has a dark side. Most of us idealize what life would be like with Big Money. It’s easy to forget that, like any drug, money can have a strangely distorting affect on our lives — especially when taken in large quantities.

A windfall “changes all the parameters of how you live,” says Dennis Pearne, Ed.D., author of “The Challenges of Wealth” and a pioneer in this odd little corner of financial management (see link at left under “Related Sites”). “It changes what you can do, what you no longer have to do, where you can live, how much you can travel. So much changes so fast that it can be terribly overwhelming, and some people go into money shock.”

We should all have such problems

I desperately want a taste of that money shock. Which is part of the reason I am ridiculously fascinated by the phenomenon.

I mean, observing wealth and those who have it is has always been one of the most compelling spectator sports. Why do the British still keep that stuffy monarchy around — except to watch them live their impossibly affluent lives? Why are Americans addicted to the most brainless publication on earth, “InStyle”?

It’s not enough to envy those who are wealthy. We want to press our noses up against their rich-and-famous lifestyles to better tally all the things They Have, and all the things We Don’t Have, because we think what They Have is better.

In fact, we think we’d just love to be afflicted with Sudden Money Syndrome . . . although Susan Bradley, a financial planner and founder of The Sudden Money Institute in Palm Beach Gardens, Fla. would tell you to be careful what you wish for.

Bradley focuses on strategies to help people cope with the swirl of confusing emotions and impulses that come with sudden money. In fact, she wrote a book about it, “Sudden Money: Managing a Financial Windfall.” But after her book was published in 2000, she says, “I started hearing more about Sudden Loss.”

Here’s what she found: Sudden loss and sudden wealth have quite a bit in common. Bradley found that the techniques she used with clients suffering from sudden wealth were just as useful for those plummeting toward a dot-com bottom. “That’s when I realized that it’s not about the sudden increase in income, it’s about the sudden shift,” Bradley said.

Abrupt changes, emotional bombshells

All this may be more relevant to your own life than you think. PowerBall or no, any of us could experience a sudden financial shift. That’s painfully true for the many Americans who have lost their jobs in the past few years.

Meanwhile, thousands of workers who were on the verge of retirement saw their retirement money shrivel with the stock market, or simply stop growing. They’ve had to swerve back into the job market, a very sudden shift in their life plans.

On the plus side, some of us may indeed get to experience some sort of windfall in our lifetimes. The Social Welfare Resource Institute at Boston College estimates that as the older generation dies, some $41 trillion will be passed on to following generations.

With all those lives in flux, it is emotional bombshells that people are ill-equipped to handle, experts say. If you are going through a sudden financial change, it’s critical to navigate through the emotional maze to avoid making unwise decisions and destabilizing your financial situation even further.

What? No sympathy?

Dennis Pearne tells the story of one client, a software developer, who had a wildly successful IPO and netted about $24 million overnight. Within a matter of months, his life was a mess and he had lost every dime in risky, overseas investments. Was the anxiety of wealth so great he needed to blow it? Did he feel on some level he didn’t deserve it?

Pearne says that this software developer experienced a number of emotional factors in his life that reached a crescendo — insecurity, shame, a bit of paranoia — which is what many people experience after a sudden money shift. As his inner compass went spinning, he made faulty decisions. You might not think that fear and shame and guilt and anger and anxiety would be your first response to a major cash infusion, but it’s very common.

Another problem: Who can possibly understand your woes? “Isolation can be a big factor,” says Thayer Willis, author of the book, “Navigating the Dark Side of Wealth.”

“People who are dealing with these challenges of wealth know that most people won’t sympathize or empathize. Their attitude is: I should have your problems,” Willis says.

And that’s just one way that sudden money, or lack of it, can skew personal relationships. More than Money, a nonprofit based in Arlington, Mass., offers peer counseling for the recently rich that it says is free of “sales, fees, solicitations, scorn or envy.”

There can be other emotional fallout. If the wealth arrives due to someone’s death, recipients can feel tremendous amounts of anger and resentment. “Maybe the money comes from someone you didn’t have a good relationship with,” Willis adds. “Or maybe the fortune was created in a way the recipient doesn’t like or disapproves of. Some people feel, ‘I don’t want anything to do with this money!’ ”

Then there’s the shock factor. “Quite often, families keep trusts and inheritances a secret from their children,” Pearne says. “We have clients who arrived at their 21st birthdays and had millions handed to them, and they have no way, emotionally or technically, to cope with it. That is traumatizing.”

5 strategies for coping with a money shift

These practical measures can be helpful whether you’ve suddenly hit the jackpot or lost it all.

1.  Take a timeout. “The first rule is to park the money,” says Pearne. Don’t do anything with it, and don’t make any major decisions about your finances for at least three months, he advises. That allows time to get one’s bearings and make plans.

2.  Get organized. While it’s not a time to make decisions, you need to figure out what the decisions will be, says Susan Bradley, and that requires getting organized. Go through your assets and debts; pay any taxes and high-interest debt. Review your insurance coverage. Think about how you’re going to live while you’re in this planning stage.

3.  Figure out your bottom line. Pearne asks people to research their situation until they know the answers to these five questions:

– What is your net worth?

– What is your income?

– What are your fixed expenses?

– What is your tax obligation?

– How much is left over?

4.  Know your priorities. The money moratorium is an opportunity to engage in what Bradley calls “a touchstone exercise.” Basically, you keep asking yourself questions about what you want to do, how you want to live, and what is important to you. Do you want to live in a cabin in Montana? Do you want to pay for all your children’s educations? Do you want to engage in more philanthropy? Wait it out, get your bearings, pin down your priorities.

5.  Assemble a financial team. When the emotions have subsided and you’ve given yourself some time to fully grasp your new financial situation, then it’s time to enlist the help of an adviser. For the suddenly wealthy, that can mean an accountant, a financial planner, an investment adviser and an estate attorney. “On the soft side,” says Pearne, “you may want a counselor or wealth psychologist.”