Beware of Coming Into Money

Al Jacobs

There is something uniquely human about the way many of us mishandle money, particularly when it’s received unexpectedly. Whether it’s a bequest from a long-forgotten uncle, an unexpected court settlement, or a sweepstakes winning, suddenly coming into a stash of cash can unhinge any of us. Every day the media reports the misery befalling citizens who previously struck it lucky, but then fell on hard times. We chuckle over poor Joe Slidebuck who pocketed a $3.8 million lottery winning just two years ago and is now filing in bankruptcy. We also shed a crocodile tear for Suzy Highstep whose palimony settlement a few years back slipped a cool bundle into her savings account, but whose Jaguar is now being repossessed. Of course, we breathe a collective sigh of relief the misfortune is not ours, while wondering if we might have fared better under similar circumstances. For various reasons, many persons can’t handle a windfall. Let’s analyze the seven basic mistakes many people make when they’re confronted with an unexpected bonanza.

1. An urge to spend. Perhaps the single greatest weakness of mankind – and womankind – is an inability to resist purchasing things. The late English historian C. Northcote Parkinson summed it up in his 1960 masterpiece The Law and the Profits: “Expenditures invariably rise to meet and exceed available income.” This impulse to spend whatever is available often proves to be the undoing of many otherwise rational individuals. It’s not necessarily human nature. Rather, it’s a learned reflex which must be unlearned if you hope to remain solvent. If not held in check, spontaneous spending is a recipe for disaster.

2.  Voices out of the past.  It’s amazing how many people you knew that you no longer see  ̶  until your name appears in the paper as the sole beneficiary in rich old Aunt Emma’s will. Within a few days long lost cousin Calvin phones to remind you how much he always admired you, and how his current misfortune can be resolved if you can just see your way clear to assisting him. And don’t forget your former classmate Ernie, with whom you stopped exchanging Christmas cards a decade ago. His email extols the close camaraderie you two always shared, adding that the technology IPO his brokerage firm is underwriting is certain to be right up your alley – just like the good old days. If you fail to fend off these moochers and hangers-on, you’ll find yourself in deep trouble.

3.  Take care with those who are closest.  With newfound prosperity, relations with friends and relatives begin to change as you’re viewed as something apart. It seems admiration and envy are opposite sides of the same coin, and you’ll be the recipient of both emotions. Your advice and assistance will be solicited, and although you may at first welcome the attention as a novelty, you’ll eventually find it more burdensome than complimentary. The pressures to be placed upon you can become overwhelming. You may soon become convinced fame and fortune constitute a mixed blessing. If you don’t take a step backward, life can become most unpleasant.

4.  Loss of Anonymity. Although it may seem sudden prosperity is a cure-all for whatever troubles us, it doesn’t work that way. Perhaps the problems of meeting the mortgage and financing the children’s schooling may no longer exist, but other problems move in to take their place. You’re now a known and recognized commodity in your community and as such, a natural target. You may expect requests for contributions to presumably worthwhile groups. Invitations to attend various functions will be forthcoming. You may even find yourself offered honorary positions or encouraged to become involved in activities of no real interest to you. The toughest job of all will be to say “no.” Unless you learn to diplomatically turn a deaf ear to the entreaties, you’ll experience no peace.

5.  The investment trap. For those without prior investment expertise, coming into money can be an intimidating experience. No one is born with an ability to astutely manage assets. This is a talent requiring knowledge and practice. Perhaps the safest procedure is to refrain from any investment decisions for a full year, while any windfall is parked in non-risk vehicles such as certificates of deposit, government insured savings accounts, and treasury notes. It’s during this period you’ll seek to educate yourself. By selective reading, attendance in legitimate instructional courses, and guidance from those persons you trust, you can hope to gain an understanding of what it means to prudently invest. If you attempt to become involved before you acquire an appreciation of the risks and rewards, you’re fair game for the thieves and charlatans who regularly prey upon moneyed novices.

6.  Charity is often uncharitable. Rarely does a day go by where the media fails to interview someone who has come – often blundered – into money.  Invariably the declaration is blurted out: “I’m gonna’ give leventy thousand dollars to the Zilch Foundation ‘cause I care about feedin’ the leprechauns.” Unfortunately, there’s not enough money in the world to satisfy the myriad of organizations with outstretched hands. Charitable institutions that are carefully selected and effectively monitored can be an excellent way to share your good fortune in a meaningful way, but simply pouring out dollars in a spastic impulse is no way to accomplish any good.

7.  Beware of yourself. I’ve saved for the last the most potentially insidious mistake of all. A malevolent result of sudden prosperity can be your relationship with yourself. Despite the personal unpleasantness of possessing little or nothing, it imposes no demands on the ego. Affluence is another matter entirely, and the pressures it creates can be formidable. It’s simply fulfilling the mundane requirements needed to meet daily financial obligations which keep many people in balance. When this necessity is removed, the balance often goes with it. If you then add the ability to acquire unneeded possessions, exert unwanted influence on others, and seek unwarranted involvement, the potential for impairment is unlimited. One thing is certain: You must come to terms with yourself or you will surely live to regret it.

I’ll conclude with a final thought. How I’ve just cautioned you on the risks you face when coming into money unexpectedly applies to the next generation as well. If you’ve spent your years accumulating assets and are now reasonably well-heeled, it’s likely you’ll leave a bundle to your next of kin. I’m suggesting you make arrangements so your offspring don’t one day find themselves in the uncomfortable situation I’ve just warned you to be wary of.  Exactly how you set this up will take some thought and planning, but it’s among the most important things you’ll do before you conclude your visit to this small planet.

Al Jacobs, a professional investor for nearly a half-century, distributes a monthly newsletter in which he shares his financial knowledge and experience. You may view it on



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