How does sudden money affect people ’ s psyches ?

S FOOTBALL SEASON IS NOW UNDERWAY , ADVISORS might be thinking less about fantasy leagues and more about the kind of money sports figures make : When the money comes , it ’ s usually sudden , and it isn ’ t always consistent . For that reason , even though many professional athletes may earn more in a year than what many people see in a lifetime , they can still end up in dire financial straits .

A National Bureau of Economic Research report showed 15.7 % of NFL players file for bankruptcy within 12 years of retiring , on average .

Athletes aren ’ t the only ones challenged by such a shock to the system . So are young professionals who get an IPO payday , as are heirs receiving an inheritance from a deceased relative , often while they ’ re still grieving .

The different financial windfall experiences run the gamut . The good news is that advisors can play the role of financial quarterback in helping these clients manage the emotional aspects of sudden wealth .

Take A Time-Out

Most people perceive a sudden money windfall as an inherently good thing . But it brings with it personal and financial challenges and requires decisions the newly affluent might find intimidating . That ’ s why experts at the Sudden Money Institute recommend that people take a time-out after they come into money — and during that time avoid decisions altogether so they can allow the emotional roller coaster of joy , guilt and euphoria to level out .

A National Bureau of Economic Research report showed 15.7 % of NFL players file for bankruptcy within 12 years of retiring , on average .

Let ’ s consider somebody who did it the right way : NFL legend Marshawn Lynch . The Portland , Ore ., newspaper The Oregonian has reported that before he retired , Lynch did not spend the millions he made from his league contracts . Instead , he lived off the substantial paychecks he received from endorsement deals and the sale of merchandise sold under his personal band , “ Beast Mode .” In 2020 , he famously offered young NFL players some financial advice : “ Take care of your chicken ,” in other words , money .

Happy Versus Unhappy Money

After a client has had that period to cool off after a windfall , you ’ ll need to watch for “ mental accounting ,” a concept associated with economist Richard Thaler . According to this idea , we assign subjective value to our money in ways that are often less than rational , by “ tagging ” money with different emotions according to the way we received it .

Consider “ pride-tagged ” money — such as the bonus you got from work . Also known as “ happy money ,” it is the reward for your efforts and feels more “ earned ” than other windfalls , and that influences what you do with it . Research shows we ’ re more likely continued on page 58

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