What is sudden wealth syndrome?

Sudden wealth syndrome (SWS), also referred to as ‘Lottery curse’ or ‘windfall predicament’, is the abrupt and unexpected influx of wealth that can turn the lives of those affected upside down.

This might seem like a strange concept to begin with – who hasn’t at some point dreamt inheriting a sum from a long-lost relative, or receiving an unexpected payout? Getting that long-awaited business exit? Surely the feeling of being able to settle debts, pay off the mortgage or buy that longed-for treat can only be positive?

Well, for the people who come into money or wealth without warning or planning, or sometimes even with warning (business exit), being able to make their financial dreams come true can be a psychological and emotional rollercoaster. The inability to handle such a sudden change can cause stress, anxiety and confusion.

And yet – in the case of inherited wealth – more and more people are likely to experience receiving a significant windfall in their lifetime. The Institute of Fiscal Studies states that the parents of those born in the 1980s hold 40% more wealth than the parents of those born in the 1970s held at the same age, which means more people could be vulnerable to the condition.

Those with SWS may experience a wide range of issues and symptoms:

Heightened sense of guilt – people may weighed down by the idea that they don’t deserve their windfall, especially if it has come through inheritance.

Feelings of isolation – they may feel alienated from those around them, or think that their friends, family, or colleagues will treat them differently due to their new-found wealth.

Fear of spending – though it can be tempting to immediately invest in new luxury items, those with SWS may fear spending recklessly and losing their newfound financial security.

Stress and worry – new possibilities and expectations can be overwhelming, making it difficult for those with sudden wealth to relax and enjoy the experience.

Paranoia and anxiety – a sudden influx of money can cause people to worry that their newfound wealth may be taken away from them.

Excessive spending – on the opposite side, those who fall victim to SWS may also find themselves overspending or taking on too much debt in order to maintain their lifestyle.

Pressure from others - those receiving a large chunk of money can often find themselves suddenly inundated with requests from friends and family who may assume that there’s an endless supply.

Tips to help

There’s no doubt that sudden wealth syndrome can be overwhelming, but there are some strategies that can help.

First, it’s important to seek the advice from professionals – and of course we would say here that financial advisers can help in multiple ways: not only in terms of helping you to strategise your wealth, but in terms of helping you become clear about what you really want to do with your life – and your money. They’ll help you to feel confident about making long-term decisions and explain all the options clearly and simply.

Very good advisers won’t pressure you into making decision immediately; they should give you the space and time to adjust first.

In fact we, as advisers, would recommend avoid making any major decisions right away. Having a sudden influx of money can be overwhelming and can lead to decisions that aren’t in your financial or emotional best interests. Taking some time to think your decisions through can help you avoid having any regrets down the road.

Budget setting and relationship building

It’s also a good idea to create a budget based on realistic and attainable spending that reflects your current financial situation. This helps to control the immediate use of your wealth, as well as clarify future spending patterns.

Finally, be sure to maintain relationships that are important to you. You probably won't want to go through this new experience alone. Having a wide support system of people you trust and who will listen to you can make a world of difference.

If the psychological distress is too much, seeking additional professional help might be a good idea. Counsellors and therapists can provide guidance on how to adjust to these dramatic changes in your life.

In conclusion, SWS is a real condition and its symptoms can have a profound effect – both in positive and negative ways. It's important for those who are lucky enough to experience an unexpected windfall to take the steps necessary to ensure their well-being and handle their newfound wealth responsibly.

With the right support, the odds of managing newfound wealth in the best way possible become much greater. Many people can use their windfall as an opportunity to grow, create positive change, and climb to heights they never thought possible.