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Suddenly coming into money isn’t all it’s cracked up to be, according to a financial expert who helps people cope with unexpected windfalls of cash.
“It comes with lots of positive dreams and aspirations, but actually the reality of it can be quite different,” says Nick Crawford, financial advisor and author of Sudden Money And How To Handle It.
Crawford specialises in working with people who have unexpectedly come into a substantial sum of money, such as a lottery win, or more commonly, an inheritance or the sale of a business.
He told Nights that coping with sudden money is as much about emotional capability as it is about financial literacy.
“I consistently saw people who've come into money and instead of them being energised and excited about the future, they're often quite worried and stressed and unsure about what to do next.”
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The advice he gives depends on the person, Crawford says.
“A lot of the job that we do is more on the emotional side of money,” he says.
“It's really just talking about goals and objectives and how well prepared they are or otherwise to handle that sort of money.
“The type of person you are is an important factor and that's one of the things that you can spend a bit of time thinking about, if you just put the money away for a few months.”
A lot of our feelings about handling money are influenced by how our parents dealt with it, Crawford says, which is why suddenly having a lot of it can throw up a huge array of questions.
People without strong family or support networks often really struggle to know who they can trust and where to get help with decision-making, he says. Those who are naturally very open and comfortable with talking to others about what’s going on in their lives find it very hard to keep a lottery win or similar windfall a secret.
“Other people, they live quite a closed life and they keep their affairs quiet. It’s not the sort of thing they normally talk about, so for those people [not talking about it] is a more successful strategy.”
His own inclination would be to keep it quiet.
“However, if you've got a few close family and friends, and people that you really do trust, then having some support along this journey is a really, really beneficial thing to have if you can find the right people.”
Crawford has worked with people who’ve received financial compensation after a life-changing accident. That group is particularly often very ill-prepared to cope with suddenly having a large sum of money, he says.
“They’d often have a lot of hangers-on who would be there to take them down to the pub and take them away on holiday and get them into sort of hare-brained business ideas. And it was those ones where it was the most common for it to go wrong.”
He says the Kāpiti couple who won $37 million in a Lotto Powerball jackpot last week should put the windfall on a term deposit for six months while they consider their next move.
“Interest rates are higher now, which makes that decision an even better one than it was maybe this time last year when interest rates were very low.
“They’re going to need a bit of time because it is a huge, a huge thing to happen to anyone, even if you've got a bit of experience of money.”