“CONGRATULATIONS! YOU WON 1 MILLION PESOS”
Imagine you were to actually win 1 million pesos, either from a raffle, the lotto, or whatever lucky reason. What would be the first thing that comes to your mind? It’s hard to admit, but many of us will initially start thinking of all the things we can buy. Oftentimes, the money will be spent on luxuries or even extravagant vacations. For others, winning a lump sum of cash is seen as a solution to problems.
While winning any amount of cash will induce a feeling of happiness, studies have shown that the reverse happens in reality. Results show that lottery winners often go broke in a few years. While a significant amount of the population will still stay afloat, generally lottery winners don’t experience an overall improvement in their finances. As this pattern frequently occurs, the term “sudden wealth syndrome” was created.
What is the Sudden Wealth Syndrome?
This is a term used to describe the psychological and emotional challenges that can arise when individuals come into a significant and sudden amount of wealth, such as winning the lottery or receiving a large inheritance. This syndrome is not officially recognized as a medical or psychological disorder. But, it is often used colloquially to highlight the common issues faced by people who experience such windfalls.
There are a lot of reasons why this frequently happens. However, one common culprit is often lifestyle inflation. The temptation to upgrade one’s lifestyle often leads to financial problems and potential depletion of wealth. It’s similar to how corporate workers have trouble saving and investing even after promotions and salary raises. The saying “money moves from those who do not manage it to those who do” stands true.
How to Keep the Money
Not all benefactors of sudden wealth fail to improve their finances. There are some who are able to make good use of the money. Here are some of the advice financial experts suggest when facing these situations:
Save and Invest: Make sure to prioritize saving and investing. Sudden wealth can quickly disappear if you focus on spending it. However, the reverse is also true. When correctly done, saving and investing a big portion of the money received can significantly boost your wealth with the help of compound interest.
Seek Professional Guidance: Engage with professionals that can help you manage your savings and investments. Especially if you have little to no experience in investing, having trustworthy people helping you will make sure that you’re not just gambling away your money.
Manage Expectations: Whenever large sums of money are won, people often overestimate how far it can go. Always make sure to manage your expectations and to think of the long-term.
Can we apply these to ourselves?
Not everyone can win the lottery or suddenly receive a huge inheritance. Most of us probably won’t encounter the sudden wealth syndrome. However, most of us will encounter instances such as receiving bonuses, salary increases, or promotions. The same mentality can still be applied – invest as much as you can and let your money work for you.
You may not feel the repercussions now, but your future self will undoubtedly thank you!
