A British Study using a control group and winners of their lottery were studied for 7 years (1991 - 1998). They were asked the following 12 questions to see if the age old saying "Money Can Buy Happiness" seem to be true for those getting a windfall of money.
Been able to concentrate on whatever you are doing?
Lost much sleep over worry?
Felt that you are playing a useful part in things?
Felt capable of making decisions about things?
Felt constantly under strain?
Felt you could not overcome your difficulties?
Been able to enjoy your normal day-to-day activities?
Been able to face up to your problems?
Been feeling unhappy and depressed?
Been losing confidence in yourself?
Been thinking of yourself as a worthless person?
Been feeling reasonably happy all things considered?
The results may not be surprising. With few exceptions the windfall money did bring happiness. At least it can bring reduced stress, which can feel very nice. Other studies have found that people living within their means are also happier overall than those who have financial problems.
The real key is in how you handle the windfalls. Some advice on skirting some of the pitfalls follows.
What is a windfall?
We all like to think of a huge win in the lottery a windfall is any unexpected financial good fortune, otherwise known as a windfall. That windfall could arrive as any unexpected amount:
An unexpected inheritance.
An unexpected money gift.
Holding the lucky numbers and actually winning the lottery.
That one-armed bandit in Vegas actually pays off.
Aunt Susan’s old chair is REALLY worth something.
An investment in an initial public offering pays off.
A big company buys your invention.
You work for a company that has a hot IPO and your stock options pay off.
An unexpected bonus.
A personal-injury settlement.
First Things First
Here's what the experts recommend you should do once you know the cash is yours:
Don't do anything rash. Don't make any promises.
Get out of the house. Better yet, get out of town. The media coverage will be intense. Check into a hotel or stay for a while at the home of a friend or relative. Get an unlisted phone number. If you already have an unlisted number, change it. Talk to an accountant or tax attorney (or both) to figure out what your tax options are and to know how much money you will end up with after taxes. Make sure your tax adviser finds out what your payment options are, and discuss those options in depth before you pick one.
After you choose your payment option and you know how much you'll get after taxes, hire a financial adviser to craft an overall investment and financial plan. Find that well-trained financial adviser through accredited agencies such as the Certified Financial Planner Board or the National Association of Personal Financial Advisers. Experts are emphatic about the order in which you do these: first the tax expert, then the financial adviser.
Even when they get good advice, people who get windfalls make goofs.
Most people think short-term. Instead the money should be seen as funding three goals, now, in retirement or sometime in between, or example, when the kids go to college.
Another common mistake is carelessness.
Most folks consider a windfall, found money, and for some reason they care less about paying a penalty for making a mistake. (sort of easy come – easy go) A recipient of a windfall might lose 30 percent of an investment and not really mind.
Imprudence is often a mistake of youth. Adults over 40 tend to invest windfalls carefully, but younger people often want to live large and buy boats, fast cars and big houses. When the bills come in, it becomes increasing difficult to make ends meet.
Perhaps the hardest thing to do is to practice moderation when immoderate amounts of money come into your life. Of course you shouldn't blow all the money quickly, but neither should you feel guilty for having a little fun. So, go ahead, blow some of it.
Beware The Sudden Wealth Syndrome
Most of us can't imagine anything but bliss when we come into a cool million. But, believe it or not, money does not automatically buy happiness.
The American dream myth, the assumption that money can, should and does buy happiness. Just the opposite can happen. Coming into a lot of money can lead to feelings of guilt, fear and isolation. It is related to survivor's guilt. They wonder if they deserve what they got. For some there is a feeling of almost being a fraud.
You're grappling with your own feelings about the money and what you're going to do with it, you also have to deal with other people's attitudes toward money and their attitudes toward you now that you have it.
Will your friends be insulted if you offer to pay for dinner? Or will they think you're a cheapskate if you don't? It can be awkward for everyone involved. Some new money people end up pulling away from family and friends to avoid these kinds of situations.
So, what can you do to find happiness should you be struck down with this sudden wealth syndrome?
Try to find out what motivates you? That's not an overnight thing. When a person comes into money, it amplifies their basic personality, their basic self. If they tend to be curious, they can travel the world. If they're intellectual, they can go to school for the rest of their lives. If they're hypochondriacs they can be fabulous hypochondriacs. Good people do good things and rich flawed people are destructive people.
So, depending on how big the windfall what do you do… First, don't tell anybody, if it's not already public knowledge. Second, put most of the money into a good money-market fund until the emotional "charge" passes. If the windfall is huge and public knowledge, hire a strong and diplomatic person to handle all the pleas for financial help. Pleas will come from relatives, friends and charities. If they don't get help on this, it could screw up their lives for a long time. When called asking for money, simply say, "Oh, there's no way we could handle all the money, so we put in trust with so and so. Feel free to call them, if you like."
Having taken these steps, there should be time to put together a good plan for the money. This plan should address all short and long-term needs. You'll need to determine whether there is any kind of tax due on your windfall. The next issue is paying off all "destructive" debt. This includes credit cards and other consumer debt. Depending on the size of the windfall it may or may not be appropriate to pay off a mortgage. An effective plan will include cash flow planning, tax planning, an investment strategy, a retirement strategy, and estate and insurance issues.
How long will the money last? The answer depends on two things: The percentage of the investments that is spent each year, and the return received on investments, including dividends, interest and capital gains.
