When Dan Martell sold his start-up computer company in 2008, he became a millionaire at 28 – an age when most people's personal finances are barely taking off.
It wasn't long before the money leeches caught wind of his new-found fortune.
“A lot of people were approaching me and asking for money, especially on Facebook,” Mr. Martell says. The affable Moncton, N.B., native politely turned down the pesky requests. Instead, he splurged on a cottage, a boat and a hot tub, and spent the summer wakeboarding.
But in the fall when his buddies went back to work or school, Mr. Martell found himself in a slump. “I went through this depression where I would wake up and think, ‘No one cares if I get up in the morning,'” he says. “That is a weird feeling.”
It's difficult to feel badly for the filthy rich. Yet experts say that getting a financial windfall – whether the money is earned, inherited or won – is a life-changing experience that can be traumatic, isolating and stressful.
“It is not as easy as it looks from the outside,” says Susan Bradley, a financial planner who founded the Florida-based Sudden Money Institute.
It provides the newly rich with emotional, psychological and practical support. “Most people who get a windfall are sleep-deprived. They deal with trauma-like symptoms. Some get paranoid and suspicious. Others feel guilty or anxious. Change is stressful, and this is a prolonged personal change.”
The term sudden wealth syndrome was coined in the 1990s to describe the psychological reactions of newly affluent dot-com entrepreneurs of Silicon Valley. But there are many other paths to becoming an overnight millionaire: winning a lottery, inheriting an estate, signing a professional sports contract, getting a divorce or an insurance settlement, even retiring.
The suddenly wealthy have to rethink fundamental aspects of their lives, such as where they live and whether they will keep working, Ms. Bradley says. “We as human beings need purpose in our life, and frequently we get that through our careers. A lot of money opens up a bunch of possibilities, but initially, a whole part of your life ends. So you need a grieving process for the life you had.”
Relationships are affected as well. Ms. Bradley has seen previously happy couples torn apart by a windfall, while other people feel isolated from family and friends they are no longer sure they can trust.
Moira Somers, a professor of clinical psychology who runs Money, Mind and Meaning, a financial therapy and coaching business in Winnipeg, says most people function within a financial comfort zone. “We have a sense of ‘These are my people, this is my neighbourhood, and this is what I know.'” So what most people would regard as a lucky break can leave the recipient disoriented, she adds: “No matter how lovely the resources we are handed, it can be scary.”
In addition to counselling people with sudden fortunes, Dr. Somers trains financial professionals to work with clients who are going through major financial transitions. She believes accountants, financial planners and estate attorneys, among others, need proper training to deal with the emotional fallout associated with financial windfalls.
Some newly rich people go on a stereotypical spending spree. “They buy a car, they travel and they take their friends with them. They just do not slow down to understand that this is a windfall and it needs to last them for, in some cases, their lifetime,” says Mark Goodfield, a tax partner at Cunningham LLP in Toronto. He suggests that windfall recipients park their fortunes in safe, short-term investments for three to six months and let everyone know you cannot give, loan or invest it until it comes due – “You need to give yourself some breathing space.”
