Sudden Wealth Case Study

Do you dream of waking up one morning to realise that you are rich with sudden wealth?

If you just sold your business, received a substantial inheritance, or obtained a hefty legal settlement, you are now in a position envied by millions. Regardless if your wealth is a newfound friend or an old pal, any of the above events is likely to create certain impulses. Should you buy a second home? What about a new BMW? Or perhaps large diamonds are what make you smile? Ostentatious splurges may not be your thing, but there will certainly be some indulgences. Go ahead, enjoy your toys. The amount of money you have can certainly withstand a few rounds at the buffet table of luxury goods and services. However, once you get past these fanciful urges, what do you do then? This money needs to last you a long time, and the lifestyle you want to maintain should be protected.

Cut to the story of John Brown, a homeless man living under a bridge.  He begins by describing an average day of “survival” for him, which consists of collecting cans and bottles for recycling in order to eat and buy cigarettes and beer for the day. He informs you that an average day brings in about £25, while a good day might see as much as £35. John reflects on the better days of his life, when his mother (a former alcoholic) and sisters accepted him. He is shown placing a reverse-charges call to his mother, ultimately having the charges denied. John blames his homelessness and lack of family support on their prejudice against him for being homeless and an undesirable childhood. John describes his mother as a “pub whore” who often brought strange men home from the pub on the weekends and that at the age of 12, he was given his first beer by his mother at one of her many social gatherings.

His ability to “do as he pleases” by not having to answer to any authority figures, keeps him on the streets. John informs you that he takes a lot of pride in his bike and is shown washing it at a car wash, although it has been over three months since he had a “real” shower. Through his recycling, John has befriended an Irishman named Michael, who works at the recycling plant.

John’s story takes a twist when he finds a briefcase amongst the rubbish. John stops to brush it off and opens it up slowly and finds that it is stuffed with cash. A note atop the money reads “What would a homeless person do if he were given £250,000?” Shocked and in tears, John comes to the realisation that he is the recipient of a major amount of cash. What he doesn’t realise, however, is that his life may never be the same.

John almost immediately buys a new bike, rents a hotel room and takes his buddy Mike on a drinking spree. The word gets out among the homeless community and, before you know it, John, who once couldn’t find a girlfriend due to his poor dental hygiene, now enjoys female companionship in his hotel room. As soon as John notifies his mother and sisters of his attainment of sudden wealth, they begin to take his calls and his mother invites him to stay with her until he finds his own residence. Cut to the family discussing how concerned they are for John’s welfare.

A week after finding the money, and having spent over £10,000, John is still in the motel and is asked to speak with an advocate for the homeless. The counselor asks John what he thinks about having all of this money, to which John replies that he really hasn’t thought about it much and that he has too much time on his hands now since he no longer has to recycle. John makes plans to leave for London to stay with his mother, but before leaving, he buys Mike a car and promises to fly his lady friend to London once he gets there and settled.

The following weeks find John frequenting the local pub, his spending now averages £20,000 a week. He purchases a £45,000 Mercedes and a caravan for one of his recently acquired girlfriends, rents a flat and buys furniture.

At this point John is advised to meet with a financial planner. John meets with him, but firmly announces to him that he has no intentions of working and wishes not to plan ahead as he is only concerned with today.

His sisters repeatedly try to convince John to seek employment, although he still believes he is “set for life.” By this time, John has become resentful, twelve months after finding the money, John refuses to disclose his latest bank balance; however, his sisters fear that it is less than £10,000.

Later, John confirms that none of the money remains, he is back homeless and content with his current circumstances.

Sudden wealth, by simple definition, happens without warning.

Foot Notes:

Duncan Glassey, founder of Wealthflow LLP and the Sudden Wealthflow Programme, works with recipients advising on how best to handle their money, both psychologically and financially.

“There is often an unbalanced relationship with money which can manifest itself as: shame, guilt, anger, fear, rampant materialism, hoarding and/or all manner of addictive/compulsive behaviour.” Glassey states.

“For some this results in a painful inability to identify real needs and longings or to connect with meaningful work or occupation. Others find it difficult to establish authentic and trusting friendships.”

Glassey’s work with sudden wealth began in the mid-90s whilst working with UK lottery winners and has subsequently increased across a range of ‘financial events’ such as, inheritance, sale of property, business or share options, insurance settlements, divorce, and most recently working with successful athletes and entertainers.

He explains that many recipients are ill-prepared for the consequences of sudden wealth. It has been found through survey that 35% of lottery winners turn out to be bankrupts within a span of ten years. “People who receive sudden wealth often suffer great frustration over how to deal with such a large amount of money.  Money is the single most transformational substance in our society. It is seductive, alluring, fascinating, and perceived as greatly desirable. It is everyone’s dream but you must be mentally prepared,” advises Glassey.

 

Duncan R Glassey
Senior Partner – Wealthflow LLP

duncan.glassey@wealthflow.com

This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated. Errors and omissions excepted.