Make It Last

Keeping Your Inheritance

We are each our own personal banking institution. Money, with a face value determined by the Treasury, enters our vaults where that value may then be subject to change. Money can be funny; quantity and value often enjoy an inverse relationship. If funds are low, it can feel like every dollar counts. As wealth increases, it can become easier to make larger purchases, leave significant tips, and part with greater amounts of cash without much thought. When an increase in wealth is sudden those behaviors can amplify, reducing once-impressive sums down to nothing – faster than many may think possible.

A large amount of money has a strange way of feeling infinite. Received all at once, a sudden windfall can easily overwhelm anyone, even seasoned investors. The shock can be especially severe when the amount far exceeds that for typical annual income. The thought of sudden wealth is an attractive one indeed, but it can also be a test – a test not everyone is fortunate enough to pass. We all say it wouldn’t happen to us but an inheritance, lottery winnings, or bonus can dry up fast. Very fast. Sound hard to believe? Ask the countless lottery winners now living destitute, cursing themselves for winning money in the first place.

A sudden windfall of wealth should be a dream come true, not a waking nightmare. An inheritance or other significant boost in wealth can be a chance to pursue personal goals, create a legacy, and live the life you want to live. It could also be the chance to learn a hard lesson about money and its finite nature. A wealth of time for reflecting on poor decisions is no substitute for real wealth, and not one many would willingly trade for. If you’re going to receive or have already received a large sum of money, aim to keep it.

It’s All In Your Head

The Mental Accounting Technique

What Is Mental Accounting?

Mental accounting is a financial planning technique for attributing resources to imaginary bank accounts. Typically based on personal goals, these accounts help to divide large sums of money into manageable – and finite – amounts. Mental accounting also helps to associate a real opportunity cost for unplanned expenses. Mental accounting is a concept borne of the 2017 winner of the Nobel Prize in Economics, Richard Thaler. Famous for his “nudge” concept, Thaler believes our decisions (in this case decisions about money) are heavily influenced by our perception.

How Should I Use It?

Rather than viewing an inheritance, bonus, or lottery winnings as a dollar amount, try to see the potential within the wealth.  Establishing clear goals can help create and build upon the right behaviors for preserving it.  For example, if your mental account for travel is already exhausted for the month, it may be easier to decline a spontaneous road trip.  The same techniques can apply to time management.  An inheritance can lead to drastic changes in demands on your time; developing techniques to balance these and other resources can be rewarding.


Those receiving inheritances, bonuses, or other large sums are placed at heightened risk far spending far too much, far too fast

Perception of wealth can be influenced by other factors as well. The value of ‘earned money’ versus ‘inherited/gifted money’ may be a matter of opinion, but the phrase “drive it like a rental” probably exists for a reason. There’s a tendency to place a higher value on items and experiences truly earned, and a diminished value on those given. Compounded with a tendency to view large sums of money as limitless pools of cash and those receiving inheritances, bonuses, or other large sums are placed at heightened risk for spending far too much, far too fast.

Protect Your MOney From Yourself

Forming A Plan

Where to begin? The good news is if you’re reading this article, you’re likely already thinking about preserving your sudden wealth. Battle the urges to go shopping and keep news of your success to yourself – most definitely keep it off social media. It is remarkable how many friends, relatives, and others can come looking for a loan, gift, or investment following news of your windfall. Start opening the checkbook and you could be investing in your own ruin. Unchecked generosity can lead to empty bank accounts – both mental and tangible – for little to no reward. Look instead toward building on your own future.

The size and makeup of your sudden wealth can impact your options but even a modest amount can offer benefits for years to come. Rather than viewing wealth as the “great intangible sum”, see it for the dollars and cents it’s made from. Give your money more value with tangible goals you can pursue through intelligent application. Your brain can play tricks on you; keep your eyes on the prize with a financial plan. For more on getting the most from your inheritance or sudden financial windfall, speak to a professional. Learn what your sudden wealth can do for you, and what you can do with your sudden wealth. Contact ProsperiFi today.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There can be no guarantee that strategies promoted will be successful.

This information is not intended to be suitable for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.