By Michael Torney, Moneta Partner
Sudden wealth can change relationships.
Navigating the financial, legal, and tax nuances is easy by comparison. There’s often a clear path forward – or at least a few objectively good options.
There’s no clear roadmap with personal relationships. Families can be complicated. The same can be said for friendships. Abruptly changing your economic context through sudden wealth often makes these relationships more challenging, not less.
What should you do if your sibling asks for help with their daughter’s medical bills? Or, if your in-law finds themselves between jobs? Even if you can certainly afford to help, should you?
What if you’re invited to a restaurant by some friends – do you pay for everyone?
A friend is starting a business and asks you for a loan – how do you evaluate it and should you even consider it?
These are just a few of the many examples of how life can become increasingly complex and challenging with sudden wealth.
Sudden wealth can make you feel isolated. Most people in your circle cannot relate to your new situation and the dilemmas you face. To them, it seems like all your worries should be taken care of by your money. Friends and family can become envious of your sudden wealth, especially if it came from something like a lottery or inheritance.
All this makes it harder to have candid conversations because the people who used to be your support circle may no longer relate to your life’s context; it seems to them like you shouldn’t have any financial cares in the world, so what is there to complain about?
Belonging is a key component to human nature. When you start to feel those close to you can’t connect with you any longer, it can feel lonely. That need for belonging can lead many people to use their new money to solve other people’s problems. Or, often, it can lead you to find different places to belong. You might find yourself around new people who can relate to your situation, which could make your old relationships feel abandoned.
There are a few things you can do to address these issues. First, try and limit the number of people you confide in. Think of who is most supportive of your life and start with them. Also, think about giving your friends a proactive message about your new situation: a small summary of why you will be busy for a little while as you try to sort things out, and that you’ll be in touch soon.
Don’t give in to the pressure to “fit in” and use your money to solve everyone else’s problems. Let your advisory team help you identify what you can afford first; then figure out how you would like to help your friends and family.
A silver lining is that your new wealth will likely create more options for how you spend your time. You can be an even stronger friend and family member, by having more time to be present, to listen, to engage, and to experience. You can do all those things without giving your friends and family money.
Understand that at times you will need to say no and set boundaries. Requests for money are part of your life now. Learn how to handle them gracefully. The person asking for money probably doesn’t know the full extent of your finances. They might think their request is financially meaningless to you – like asking for a spare pen.
Be consistent in how you handle requests. Consistency is what you can fall back on to make it less challenging to say no to someone you love. A consistent process can slow things down, allow emotions to cool, help you analyze the request financially, and give you a process to let people down as gently as possible. It also puts people on notice that you have a process for evaluating things, which means that individual might not ask you twice after going through the process once.
Your financial planner can help you come up with a standardized answer you give to allow a more objective evaluation of requests to unfold. You can even have your advisor be the one to evaluate the opportunity and give the good or bad news to the requestor.
© 2024 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment adviser does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified.
Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
