According to a number of recent studies, an increase in income can actually lead to more stress and less happiness. Winning the lottery doesn’t appear to create the perfect life any more predictably than earning a higher salary, either. In fact, getting rich quick can leave people suffering from something called sudden wealth syndrome.
Before you start playing the world’s smallest violin for people out of feigned sympathy, you might want to consider the negative ways that a windfall could impact your life.
Why would someone who won a $315 million lottery have been quoted as saying “I wish that we had torn the ticket up”? The reason is that, for all the problems that money can solve, it is also very capable of creating a lot of new ones that are hard to even imagine before it happens to you.
Sudden wealth syndrome is a psychological condition (though not technically a psychological diagnosis) that can happen when someone comes into a large sum of money in a short period of time.
While many of us assume that having a surprise windfall would be the best thing that could ever happen, there are a number of potentially negative side effects that you should be aware of. A big influx of cash or assets can be shocking even when you’ve been expecting it, but it can really shake up your world if you had no idea that the wealth was heading your way.
When you have access to wealth all of a sudden, it can create a bunch of overwhelming pressures in your life. Even the most level-headed person can start making decisions they normally wouldn’t when their bank account blooms overnight, and it’s hard to anticipate how you would act if your net worth suddenly puts you in the “rich” category.
You might think that a ton of money is the answer to all of your problems. In reality, though, it can lead to extreme psychological outcomes like:
Understanding sudden wealth syndrome is essential for anyone who is working to build wealth. While some people might have a hard time feeling sympathy for someone that has money to burn, you never know with certainty how you would react to a windfall unless it happened to you.
A quick trip on the rags-to-riches roller-coaster can leave you experiencing a tremendous amount of stress and other negative psychological symptoms. It’s one thing to steadily and systematically build wealth over many decades, where you have time to adjust to your increasing net worth in small bites. Of course, people who get rich slowly can certainly fall prey to the same side effects as people who receive a windfall, but it’s particularly notable when a fortune is received in a short period of time.
Whether you know an inheritance is on its way, you expect that your side hustle might blow up and make you rich, or you have no expectation of experiencing sudden wealth, it’s a good idea to familiarize yourself with the potential symptoms of sudden wealth syndrome.
Guilt is often described as a self-conscious emotion because it involves self-reflection. In its healthiest iteration, guilt can help us learn to not repeat mistakes we’ve made. However, it’s all too common for people to feel guilty in ways that are out of proportion to the supposed error or are even completely disconnected from any actual harm to themselves or others.
This is the case with the guilt that comes along with sudden wealth syndrome.
There are a lot of reasons why you might feel guilty after a windfall. One familiar example is if you received an inheritance after the death of a loved one. This can create mixed emotions, such as feeling like you can’t be happy to have the money because that would imply that you’re glad your relative passed away.
People who come into wealth suddenly can also feel guilty because they don’t believe they deserve the money. They look around and see other people that seem to be working harder or that appear to need the money more. Why did you get rich all of a sudden, while these other people that are seemingly more worthy of a windfall have to keep struggling? This is particularly common for people who grew up poor, but it can happen to people of all tax brackets.
There’s also a pervasive cultural concept that money is bad and so are people who have it. Someone who was wandering around complaining about the 1% just a few months ago might be overcome with incredible guilt when they find themselves a lot closer to that category.
What would you do if you found out you were about to receive an inheritance of $100k? How about $500k? What about $5 million?
Your first instinct might be to celebrate. After all, why wouldn’t you call your buddies, your parents, and your girlfriend of six months to tell them the good news? Heck, you’re rich now– it’s time to party!
Unfortunately, money can complicate even the strongest relationships, and the actual emotions you experience might be a lot different if you experienced a windfall than you think they would be.
Coming into a lot of money all of a sudden can compel people to isolate themselves from the people they know. Because getting a bunch of money can trigger a lot of self-critical emotions, you might separate yourself from others due to depressive moods or other unpleasant mental states.
If the people in your social circle aren’t well off, you might feel uncomfortable being around them with your new wealth and lifestyle. Similarly, your friends and family might create separation through envy, resentment, or jealousy.
Sudden wealth can, in short, leave you feeling really alone.
If isolation as a symptom of sudden wealth syndrome doesn’t make you nervous, perhaps this one will. Becoming rich all of a sudden can lead to paranoia in its own right, but paranoia can also result from social isolation.
People who suffer from SWS might worry, for example, that their fortune will disappear as quickly as it showed up. They also might become paranoid in regard to their relationships. The changing dynamic of their social world can create paranoia– whether their fears are real or imagined, the newly rich person might feel that their friends and family members are always trying to get a piece of the action.
Both paranoia and isolation can lead to a number of other health issues, such as insomnia, depression, or anxiety disorders.
Receiving a windfall can also leave you in a state of shock. Even if the money can seriously change your life for the better– allowing you to get out of debt, start saving for retirement, invest in new business ideas, and follow your dreams, the experience of getting a bunch of money can be shocking on just about every level.
Becoming suddenly rich can leave you feeling paralyzed. You might not have the slightest idea what to do with the money. Even the smallest spending decisions can become completely overwhelming.
Feeling numb from sudden wealth often results, at least in part, from being emotionally unprepared for all the changes that money can create. Things like the new lifestyle you can afford, increased responsibility, and the ways money changes your relationship can leave you feel shocked and dissociated.
You could also find yourself ridden with feelings of confusion and uncertainty. Regardless of how good your new wealth could be for you and your family, it’s can be downright impossible to wrap your mind around.
How you respond to a sudden fortune can depend on your background. If you grew up in a wealthy family but didn’t have access to much money until your recent windfall, you might have a place to put the experience in your mind. However, if you grew up in a family that was always living paycheck-to-paycheck, the realities of wealth might be so new and unknown that you end up resorting to self-destructive coping mechanisms.
People afflicted with SWS might start spending money excessively, make financial promises to their friends and family, or make risky investments. This, of course, can happen to people who grew up in wealthy families as well. Regardless of background, and influx of charities and other organizations giving you their attention can leave you feeling suspicious and paralyzed.
As you might imagine from all of the symptoms we’ve discussed so far, increased anxiety or even panic attacks can result from the sudden change of becoming wealthy. All of these potential psychological consequences of an overnight fortune are deeply interconnected and interrelated. For example, anxiety about the money vanishing could lead to social isolation and paranoia, or the shock of being rich can start making even the most level-headed person anxious.
Panic attacks occur when a person is overcome with unreasonable feelings of anxiety and fear that manifest themselves in physical symptoms like fast breathing, a racing heart, and excessive sweating. If you’re truly overwhelmed by your new wealth and don’t know what to do, you can also find yourself experiencing these intense waves of fear.
A play on the phrase sticker shock, ticker shock refers to a state where a person watches the stock market obsessively and experiences cycles of anxiety and depression in response to market volatility. If you invested your windfall in the stock market (or made your money that way,) it’s a little too easy to be constantly checking in on your investments.
No matter how much money you have, it’s important to never exceed your risk tolerance when investing. If you invest money that you can’t afford to lose, you’ll find yourself flinching every time there’s a slight dip in the market.
All of these other symptoms can leave you suffering from insomnia or other sleep problems. You’d think that being rich would mean you can sleep like a baby every night, but all of the new responsibilities and other related issues can leave you staring at the ceiling until the wee hours of the morning.
One of the most drastic symptoms of sudden wealth syndrome is the potential it creates for an identity crisis.
I dealt with this myself when I went from being broke and in debt to a multi-millionaire over the course of eighteen months. Even though I’d been putting my all into the projects I was working on, I was left in a state of deep confusion about who I was when one of them actually panned out in a big way.
While we might not realize it, we tend to factor our financial situation into our sense of identity. On top of that, humans typically settle into a comfort zone where they can feel in control and everything is familiar.
When you get rich quickly, it can make you question who you are and what matters to you. If it was a part of your identity that you’re working class, for example, what does it mean about who you are when your bank account says otherwise?
Even though everyone thinks they want more money than they have, having your net worth skyrocket can put you way out of your comfort zone. This can be incredibly stressful, confusing, and overwhelming.
You might think that you’d be clicking your heels and shouting from the rooftops if you got news of a $10 million inheritance, but it’s actually not that uncommon for sudden wealth to leave people with feelings of depression.
This might appear on its own or it can result from guilt, isolation, paranoia, anxiety, or any of the other symptoms of SWS.
We’ll talk about why rich people can get depressed a little later in the article. But, in short, receiving a ton of money can actually leave people feeling empty and low energy. This might be for a number of reasons, including the realization that money simply can’t fix all your problems or provide meaning in life on its own.
Money can make people start acting strange. Even if you manage to keep your cool after striking it rich, unfortunately, your friends, family, and coworkers might not be as emotionally mature.
Sudden wealth can make you isolate yourself from others, make others isolate themselves from you, or both. You might find your best friend is all of a sudden so envious of you that your relationship falls apart. Your mother might demand that you give her a chunk of your winnings. Childhood friends can start coming out of the woodwork with sob stories about medical bills and sick kids.
It really is sad but true. The reality is that an experience like this can teach you who your true friends are. That can be a pretty hard pill to swallow if you come to find that you have a lot fewer friends than you used to think.
Similarly, it can make you suspect of every new person you meet. This is particularly the case if your wealth is known to the general public.
Let’s say, for example, that you made a killing trading crypto. You didn’t think to hide this about yourself, and you jumped at the opportunity to be interviewed about your new fortune for stories that appear in the Wall Street Journal, Buzzfeed, and on NPR. In your hometown, news travels fast and everyone from your high school drama teacher to your middle school girlfriend now knows that you’re a multi-millionaire.
Maybe the attention feels good for a while, but chances are you’ll start wondering whether your popularity is resulting from the fact that everyone is hoping for a handout. You might get tangled up in the dangerous gray area between reasonable and unreasonable paranoia.
As you can see, there are a lot of ways that getting wealthy can mess up the relationships you already have in life and jeopardize your ability to make new relationships in the future.
So, now that we know what can happen to people who become suddenly wealthy, let’s take a look at some of the most common ways that a regular Joe can find themselves with deep pockets practically overnight. Remember, there are many types of wealth, but the type we're talking about here is purely financial wealth.
Even if you know that an inheritance is coming down the road, it can still be hard to grasp how it’s going to change your life if you don’t consider it carefully ahead of time. Sometimes, individuals might receive news of an inheritance that they had no idea about, which makes them ripe candidates for the symptoms of SWS.
People talk about winning the lottery as if it would solve all of their problems and change their lives for the better. However, the actual experience can be so shocking for a person that is unprepared for wealth that it can lead to a number of horrible consequences.
There are a lot of examples of lottery winners whose lives seemed to take a turn for the worse as soon as they became rich.
Take Billy Bob Harrell Jr., for example. He won $31 million dollars from the Texas Jackpot after unsuccessfully attempting to become a minister. With his winnings, he helped out his family, his church, and his parishioners. No matter how much money he gave, though, people always seemed to be asking for more.
His family life fell apart as well, with the constant demands plus some bad investments eventually leading to divorce and general family turmoil.
“Winning the lottery was the worst thing that ever happened to me.” – Billy Bob Harrell Jr.
Sadly, less than two years after Harrell had become a multi-millionaire, he committed suicide.
You can spend hours going down the rabbit hole of the sometimes tragic lives of lottery winners. If you’re interested in learning more about how destructive sudden wealth syndrome can be, there are, unfortunately, countless extreme examples out there.
The median salary for all NFL players is $860,000, which is a pretty healthy income if you ask me. For the biggest names in the game, players can receive contracts that include yearly salaries in the tens of millions of dollars.
You’d expect that, from these numbers, NFL players would be set for life.
However, statistics suggest that, within just two years of retirement, 78% of NFL players fall into severe financial distress or go bankrupt.
You can find examples of this same type of situation in the world of celebrity as a whole. People as rich and successful as Michael Jackson, Nicolas Cage, Mike Tyson, and Kim Basinger have had to file for bankruptcy.
When people start making huge amounts of money every year, it can leave them with the expectation that their bank account is bottomless. They can lose site of smart money management and fall into self-destructive (and sometimes very expensive) habits.
Other types of gambling beyond playing the lottery can also leave people with more money than they know what to do with. This is also a particularly dangerous way to become suddenly wealthy, because people can end up putting their money back into games where the odds are against them.
Sometimes people can end up with a big chunk of cash if they’ve sued someone for medical malpractice, wrongful death, or some other legal proceeding. Unfortunately, a lot of people aren’t aware of the necessary steps that should be taken to manage and protect wealth, and suffer from the symptoms of sudden wealth syndrome when they get a big payout from a lawsuit.
Whether you take investing very seriously or you engage in r/wallstreetbets style gambling, having a big win in the stock market or crypto can change your life incredibly fast. Take a look at this story from the New York Post, for example, about people who’re rich thanks to crypto. While I hope everything works out for these new millionaires, getting rich from crypto or stocks doesn’t always go well in the long run.
Of course, the symptoms of sudden wealth syndrome shouldn’t be enough to keep you from trying to systematically build wealth. However, you should learn how to avoid SWS so you don’t become another tragic story recounted on a blog.
If you come into a bunch of money, the first thing you should do is nothing.
Before you buy a new house, pay off your parents debt, or put it all into a risky investment, slow down. I mean way down.
The most important thing is to avoid making quick decisions. All those zeroes can do weird things to your brain, and even the most level-headed person can start acting erratically with new-found wealth. Put the money somewhere safe (like an insured savings account, for example) and don’t touch it until you’ve created a solid plan.
I get it. You’ve struck it rich and you want to tell everyone you know. It’s essential that you resist this urge and keep it to yourself as much as possible.
If you don’t, your friends, family, and colleagues might start acting differently when they learn you’re rich. Whether they’re giving you investing tips, asking for money, or just acting strange, letting people know about your wealth can cause a lot of problems. If you do tell the people in your inner circle about your windfall, make sure you can trust them and be sure to set clear boundaries.
Instead of telling your coworkers about your major gains, talk to an experienced financial planner. They’ll help you make a plan that protects your wealth.
To learn more about how to keep your wealth a secret, check out this article on stealth wealth.
Sometimes you can’t plan ahead for sudden wealth, but in other instances, (like an inheritance you know about,) you can. Regardless of whether or not you were able to prepare for your fortune, if you slow down and keep it quiet, you can make a plan with the help of a financial advisor.
Make sure you are keeping the big picture in mind when you make a long-term plan. Your windfall could change your life for the better if you’re smart about it, but it could also vanish if you have too narrow of a focus on how the money changes your life right now.
Discipline is key for navigating the obstacles of sudden wealth. Work on being self-aware (i.e. keep an eye on ideas that crop up about impulsive purchases or risky investments) and don’t do anything until you make a solid plan.
Once you create a plan, trust it. Don’t stray from it unless you have a very good reason to and it supports your long-term purposes.
This one is simple. If you get a windfall and you don’t have any experience as an investor, now isn’t the time to learn just how risky it can be. Don’t let your coworker talk you into putting your money into the latest meme stock– while it could work out, it could also leave you right back where you started.
Depending on how you made your money, you’re likely going to need to give some of it to Uncle Sam. You’ll want to learn about how your new fortune will be taxed so you can make sure you can foot the bill when it comes time to pay.
Regardless of whether or not you ever strike it rich overnight, educating yourself about personal finance is never a bad idea. The more you know about managing money, the more prepared you’ll be if you end up with a ton of it.
When you don’t have any money, it can feel like being rich would make all your troubles go away. If that was really the case, though, why are some rich people depressed?
There are a lot of different reasons for this, but a big one is that money is just a means and not an end in itself. While it can seriously expand your options in life, money alone won’t make life meaningful.
Having money can also lead you to:
Being rich can also leave people struggling with boredom and purposelessness. A regular person doesn’t have to question why they get out of bed and go to work in the morning– they have to in order to support themselves. For multi-millionaires or billionaires, though, motivation and purpose is necessary beyond putting food on the table.
Even though being short on cash can create a lot of tension in the family, having a high net worth isn’t necessarily a walk in the park either. Building generational wealth can be a blessing or a curse depending on how you navigate the situation, and the family turmoil it can lead to can certainly contribute to depression and other mood issues.
Then there’s also the treadmill effect to consider. Some people get caught in a cycle where the more the make, the more they spend. They are victims of lifestyle creep and rather than money being the solution to all their problems, it actually leaves them with a more complicated life.
A few of the other reasons that rich people can be depressed include:
Wealth guilt can come in a number of different forms. These include:
If you receive a windfall, you don’t have to fall prey to Sudden Wealth Syndrome. Here are some tips to help stay stable, sane, happy, and healthy in the face of sudden wealth:
Getting rich quickly can be really overwhelming, and I know that from first hand experience. If your net worth has dramatically increased and you’re feeling like you’re in over your head, feel free to reach out and I’d be happy to give you some pointers. Don’t worry, I don’t have an angle here and I’m not trying to sell you anything. I’m just all too aware of how isolating it can feel to jump up a few tax brackets practically overnight.
Simply understanding the potential pitfalls of sudden wealth can go a long way in avoiding the risks associated with a windfall. I feel motivated to share what I’ve learned over the years in the hopes that others will be able to avoid the mistakes that I made along the way.