A young tech employee recently wrote an article in New York Magazine about her experience becoming a multi-millionaire after her company went public (see https://nymag.com/intelligencer/2021/04/confessions-overnight-tech-millionaire.html.) Not surprisingly it involved equal measures of anxiety and jubilation as she movingly described how both large and small aspects of her life have uncontrollably changed. Psychologist & author Stephen Goldbart came up with a name for this: Sudden Wealth Syndrome. It is likely to affect many people who find themselves in possession of an unexpectedly large amount of money.   

Being wealthy is less a function of the size of your investment portfolio or real estate holdings than it is a state of mind. Certainly everyone needs to have enough savings to cover the costs of the things they want to do, especially after they’re no longer able to work. We call that financial independence. But seeing your account balance on a spreadsheet or statement is not the same as feeling comfortable that you’re well off.

I’m reminded of a line from one of Bob Dylan’s songs: “When you’ve got nothing you’ve got nothing to lose.” The responsibility of taking care of an amount of money significantly larger than what you’re used to can be one source of discomfort. If you make mistakes the financial consequences could be an order of magnitude greater. You might also experience feelings of guilt, as in “there are others that really deserve this money more than I do.” Goldbart also identifies potential symptoms of identity confusion as you begin to rethink your relationships with family & friends, with your work, and even with your involvement in your community as a “wealthy” person.

Although the magazine article is about a twenty- or thirty-something millennial striking it rich through an IPO, the same feelings can arise from any source: winning a lottery, inheriting cash or property, acquiring control of assets through divorce, even receiving a lump sum as a result of a lawsuit.

What should you do if you find yourself in this situation? The first thing is to create a plan for your future including your goals for yourself, for friends and family, for your community, and – if you have enough money and inclination – to improve the world. If you are unable to do this yourself, get help from a financial planner. The author said she’d approached several money managers but was dissatisfied with all of them. That’s very unfortunate because the right financial planner can bring a steadying hand to the management and maintenance of wealth, helping ensure that you do not make self-destructive financial decisions. The combination of a financial plan and someone to help guide you through it as you move forward with your new life is likely to vastly improve your comfort with your newfound wealth.

In addition to the financial planner, a team consisting of a tax accountant, estate attorney, and possibly even a psychologist or counselor can help improve the ease of making those important financial decisions. Such a team can also help instill the discipline needed with managing your wealth and your cash flow, both of which will be critical to your ongoing success and happiness.

If you’ve acquired more money than you need to support your financial goals, you should now feel free to do whatever you want with the excess. Build a pound for stray animals. Buy a Maserati. Join a safari in Africa. Just make sure to keep it separate from the funding needed for your plan. Even Bill Gates has a plan for his wealth, and you can bet he manages it very carefully.