15 IMPORTANT Things To Do If You Get Rich Suddenly

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15 IMPORTANT Things To Do If You Get Rich Suddenly
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Here’s another excellent inspirational video from Alux. This one discusses the topic of what to do (and what not to do) if you acquire sudden wealth.

It’s been proven through research that the majority of people who get rich suddenly get this compleley wrong – and the consequences can be disastrous. Here’s the list of 15 important things to do if you get rich suddenly, with our commentary:

1. Do Not Let Anyone Know

Resist that overwhelming urge to announce that you are now wealthy, or should I say, that you are now a loaded galleon, ripe for the plunder. Yes, that’s how many people will see you. All I can say is, you would be amazed and shocked. Some people will make no secret of their envy. Others might start being extremely nice to you all of a sudden. Others still might move in stealth against you.

It’s best that they simply don’t know.

Only your accountant, lawyer and perhaps next of kin (if they can be trusted totally with the information) should know. Accountants and lawyers are bound by client confidentiality laws and typically trained not to disclose details the financial affairs of others. Everyone else is a high risk!

It’s also a sad fact of the modern world that knowledge of your wealth puts you at actual risk for being held up or worse. There are only a few places in the world that can be considered as “safe” places to display wealth – for example Monaco. London? Absolutely forget it!

2. Pay All Your Debt

This, of course, makes perfect sense. Your debt is most likely costing you more in interest than most investments would bring in! Paying down that debt immediately “pays a return” equivalent to investing at that same rate of interest. Paying all your debt includes any outstanding bills and personal debts. Again, no need to announce where you got the money and in fact it might be best to state that you have ‘just enough’ to cover it. Nobody needs to know otherwise.

3. Do Not Quit Your Job – Yet

Although quitting your job and “sticking it to the man” might seem like the day you have been dreaming of for years, there are a few reasons why this will not be to your advantage. 1) Why not keep bringing money in? As soon as you stop earning, it starts dwindling. 2) Going from being productive to being entirely unproductive suddenly has strong psychological consequences. Sudden wealth can turn your life completely upside-down – and so keeping some things “just the same” in your life, while at first seeming counterintuitive, will help mitigate this effect and keep you on an even keel.

4. Secure The Money And Let It Sit For A While

Once you have paid your immediate debt and the money is clear in your bank account, just hold your horses and let it sit for a while. This enables you to process the great change that has happened in your life and think things through. Six months of not touching the money is typically recommended. You will find that during that time, your plans will change. Many impulsive actions and lavish purchases will be avoided, leaving more carefully thought out plans in place.

5. Make Investment In YOURSELF A Priority – You Need To Learn Before You Invest!

You need to become financially literate. Most people who achieve sudden wealth are totally inexperienced in managing the money and are truly astonished that it disappears – fast. It really does. Everything thinks that this is something that “only happens to stupid people” and that they are above that. Classic error. It is well known that 80% of lottery winners lose ALL the money within five years. The cash will increase the speed at which money flows, but not its direction. So if you are not already a ‘profitable person’, you need to learn to become one – otherwise, the money will turn that trickle of loss you typically experience into a tidal wave that washes you away. Learn how money works before you start moving it around.

6. Do Not Switch Financial Advisors

This is an excellent tip. If for example you just received a large inheritance, adopt the financial advisor of the person who bequeathed the money to you. The proof of their quality is in the amount you just inherited. The money was in good enough hands to make it to you, so keep it there.

7. Get Comfortable, But Not “Rich” Comfortable

A lavish lifestyle, for example a luxury home, comes with an additional layer of recurring expense. Most people completely underestimate the exponential increase in additional overheads (aka. burn rate) that comes along with acquiring expensive items. Increased bills, property taxes, maintenance costs – suddenly your monthly bills went up through the roof – causing your wealth to disappear at a far higher rate than before. Even if you budget for it, you will very probably taken completely by surprise at how your overheads went into vertical takeoff mode. Your lifestyle should not exceed the amount of money you have coming in… otherwise, you are getting poorer.

8. Do Not Invest In Your Friends’ Business Or Lend Them Money

At some point, the word will get out. You’re rich. And at that point… the begging will begin.

Your friends will approach you with their (usually awful) business ideas, hoping that their friendship has secured them a slice of your wealth. You will be emotionally manipulated. How cruel of you not to be their savior! Nope. Don’t do it. YOUR money belongs in YOUR pocket, not theirs. Most of those ‘friend loans’ will never be seen again. And what a shock when their idea failed!

Are you really surprised? If what they have done so far in life has led them to being broke, is your money realistically going to be the thing that turns everything around? Probably not.

9. Do Not Start / Fund A Business Immediately

Another classic impulse decision that many people make. Most people think that all business needs in order to succeed is a cash injection. Absolutely false. If their business was already robust, it would already be profitable and they would already be able to secure the cash. Money should not be used as an economic bailout for untested or flawed ideas. It’s like putting water into a bucket with holes; it doesn’t fix the bucket. All the water pours out – and the more you put in, the faster it flows away.

10. Prepare For Change

You think that money is going to solve all your problems? Not true. The more wealth you have, the more likely you are to face lawsuits, scams, emotional manipulation and other new risks. Money solves some problems, but other (often more complex) problems will appear.

11. Focus On Getting Healthier

Now this is something that you can and absolutely should use your money for. Start with a full medical checkup and make a commitment to start taking the best care of yourself you can. You want to be around and healthy to enjoy your wealth.

12. The 5% Rule

This one is critically important. Your money will NOT last unless you invest it. Invest your money instead of spending it and make a 5% return your goal, spending only that 5% and not touching the principal. Think of your money as a “money tree”. You do not want to cut the tree down, but you want to protect it and keep it healthy so that it bears fruit year after year! Enjoy the fruit, protect the tree. A sum of $5M will yield $250,000 per year for the remainder of your life if you invest it at 5% return.

13. Protect Your Kids From The Money

Similarly, the smart rich create trusts to give their kids an allowance without allowing the original sum to be touched. This both prevents the children’s lives from being turned upside down and protects the money for the future.

14. Do Not Cheat On Your Partner

Having wealth could lead to all kinds of new temptations (and propositions!). Divorce could cost 50% plus child support, not to mention the emotional turmoil which creates further risk.

15. Play It Safe

Why put your money into shady ventures when all you have to do in order to provide a lasting benefit to your entire family is to play it safe.

For a more in-depth tutorial on what to do if you get sudden wealth, I recommend Robert Pagliarini’s excellent book “The Sudden Wealth Solution” (sponsored link). This book has been called “The Bible of sudden wealth”.