Coping with sudden wealth: What to expect if you win $30 million Lotto prize

Wednesday, 22 July 2020

This article was originally published on July 22 but has been republished ahead of Saturday night’s $30m Lotto jackpot draw.

Lotto has jackpotted to $30 million, but whoever wins it faces an emotional rollercoaster ride, says Auckland financial adviser Nick Crawford, author of Sudden Money and How to Handle it.

Crawford has made a career out of giving financial advice to people who find themselves possessed of sudden wealth, from British lottery winners to people hurt in accidents who received large amounts of compensation.

That's because fear of the money itself, worry that friends will be lost, guilt over sudden affluence, and the discomfort of lying to loved ones can erode the happiness of people who become suddenly wealthy.

“Once the initial euphoria wears off, other less glowing emotions can surface; anxiety, loneliness, confusion and even guilt about having these feelings,” says Crawford, who co-owns The Private Office, a fee-based financial advisory company which only takes clients with $1​ million or more to invest, and whose average client has $3.8m​ invested with it.

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Crawford has seen sudden wealth arrive in people’s lives from five principle events: The sale of a farm or business, the receipt of an inheritance, winning a big compensation payout, a divorce settlement, and a lottery win.

And nearly every recipient of sudden wealth finds themselves struggling to know what to do with the money, including whether to keep it secret, how much to give away, and how to invest it, Crawford says.

LIVING WITH LYING

Sudden wealth can also put strain on preserve family relationships and friendships, says Crawford.

“You may fear being no longer seen as the person you are, but rather as ‘the person who won Lotto’,” he says.

“You may fear attracting a lot of unwanted or unscrupulous attention.”

Many people opt for secrecy, and come up with a cover story to explain sudden lifestyle changes, including giving up work, or working less, or moving to a nicer house, says Crawford.

But lying to loved ones can be very unsettling for people, says Crawford.

Crawford worked with one British woman who won £12m.​ She and her husband told only her parents. She kept it secret from her children, fearing they would become spoilt, if they knew.

She hated the constant fear people might find out, Crawford says. “Things grew to the point where she couldn’t bear to even say or hear the word lottery.'

The bigger the win, the harder it is to hide, Crawford says.

Crawford suggests people take their time to decide who to tell, and when.

HOW MUCH TO GIVE AWAY

“In my experience, only a small percentage of sudden wealth recipients give any money to friends and family,” he says.

That isn’t as a result of meanness, he says. It’s a by-product of the desire to keep their wealth secret.

“For many, the most important objective is that their loved ones never find out about the money,” he says.

But even people who want to share their riches can struggle to understand how much they can give away without finding their long-term goals jeopardised, Crawford says.

He gave the example of a British woman he gave advice to who was left significant wealth by her businessman husband. He had managed the money while he was alive, and she was financially inexperienced.

She was very generous with the money, feeling it was more important to maintain good relationships than to keep her wealth intact.

She did not have a good grasp of how much she was worth, or what she would need for the future.

When she came to him for advice, Crawford says she had already spent £1m​ in the 18​ months since her husband’s death.

People with sudden wealth who develop a financial plan to achieve their long-term goals can then see much more clearly how much they can afford to give away, Crawford says.

FINDING A NEW PURPOSE

For some secrecy is not an option, including those who achieve their wealth when they sell a business.

The Private Office is co-owned by Laetitia Peterson, who achieved wealth after selling the New Zealand-based Liontamer funds management business to a Belgian bank in 2007.

The sale made headlines, but while she enjoyed the money, she never intended to stop working.

“I like to do new things. I need to be challenged. I like to be creative,” she says.

“Your identity is wrapped up in what you do,” she says.

She also achieved wealth in her 30s, and so doing nothing would have meant something like 60 years of leisure.

“Was I going to do nothing? To become a vegetable? I have a problem with that.”

So she launched The Private Office to invest others’ wealth as she was investing her own.

The ability to pay off the mortgage, and own a debt-free holiday home, is immediately life changing.

“The feeling of paying off your mortgage is very liberating,” she says.

But, she says: “Money doesn’t change you. It doesn’t make you happier.”

CHOICES CONFUSION

“It’s been my experience that people’s thoughts and feelings about what they’d like to do with the money change significantly in the first six to 12 months,” Crawford says.

Crawford advises winners to take their time to make decisions like revealing their wealth, though in his experience, most lottery winners tend to keep their wins secret.

“I can’t stress enough the importance of a cooling down period,” he said.

He advises people put off making big decisions in the first weeks of their wins, and instead to give themselves time and space to think about what they want from the rest of their lives, while enjoying the freedom from worries about making ends meet ever again.

TENSION IN COUPLES

Crawford has seen couples put at loggerheads over managing and spending sudden wealth, particularly if one takes the lead on managing the money.

“When I meet new clients who are couples, I’m always extremely mindful to include the non-financial person in everything,” Crawford says.

Couples who are not willing to engage with each other in frank and direct communications can find sudden wealth a big challenge.

WEALTH DENIAL

Some people may struggle with new-found wealth so much they act as though nothing has changed.

”Some winners … try to revert to their normal lives as a way of avoiding the madness and the magnitude of what’s happened,” he says.

”It’s a kind of reverse escapism.

”Instead of fantasising about the freedom more money would bring, they dream about getting back to their old lives when things made sense.

”This is a bit like the famous celebrities who dream of being able to walk to the local pub, or go to the supermarket without being hounded by fans or paparazzi.”

FEAR OF LOSING WEALTH

Many wealthy people have a legion of advisers, says Crawford, helping them with tax, legal matters and investment.

Around the world lottery companies and commissions routinely offer to match-make winners with financial advisers, Crawford says.

This is both to help them make sound investment choices, but also to protect them from the emotional turmoil caused by wasting their wealth.

Even business people who get sudden wealth can find they do not know how to invest their millions, and avoid being sucked into highly-risky investments or speculative ventures.

“They have a strong entrepreneurial spirit and they enjoy getting things done,” says Crawford. “They thrive on the thrill of the deal.”

But, he says: “Many successful businesspeople have made a fortune only to lose it by making new investments in areas they don’t understand.”