15 Things To Do If You Get Rich All of a Sudden

3 February 2019

What if you got rich all of sudden? Would you know what do to?

Although incredibly rare, it sometimes happen that people get a massive influx of capital. The most common way is by inheriting a fortune from a dead relative, the others are different forms of gambling like winning the lottery or similar.

But very few of these people are ready for the money and they’ll lose it as quickly as they get it.

Statistically speaking:

Over 70% of lottery winners are back to being broke after 3-5 years!

This happens because they have no idea what to do with the money, they’ve never had money, they’ve never built wealth and they are eager to spend it all.

That’s why having a plan is so important, it could mean the difference between this money being a blessing or a curse.

As always, here’s the video version of this article if you don’t feel like reading:

Here are 15 Things to do if you get rich all of a sudden:

Number 1: Do not let anyone know
This is your number one priority immediately after finding out. Shut your mouth.

The instinct is to share the good news with everyone you know, to shout it out of rooftops, to shove it in the faces of your enemies and burn the bridges with your new found cash.

That’s what broke people would do. You’re no longer broke, so privacy is your main concern. You’ll tell them when the time is right.

Number 2: Pay all your debt
This is the first and only expense you should undertake. It’s actually a must, because debt is what’s eating away at your life.

As soon as you can after the money hits your account, proceed to pay off any debt you have accrued so far and then stop.

You’ll feel like money is no longer an issue and new debts can be repaid immediately. That’s not true. Pay of your existing debt and do not create new debt.

Number 3: Do not quit your job – yet
Quitting your job immediately after getting money is the first domino in a series of events that will lead you to personal bankruptcy just a couple years later.

We are not wired to be non productive. No matter how lazy you are, you need something to do. If you’re not going to work, you’ll be out there chipping away at your good fortune.

Although the satisfaction of telling your boss to F-off would be enormous for some of you, you’ll realize that your feelings towards work have changed. The balance of power has shifted because now you have the power to walk away if it comes to it.

That said, keep your day job and go about your life in the same way you’ve done so far.

Number 4: Secure the money and let it sit for a while
Once the money reaches your bank account and you’ve paid of your immediate debt, let it sit for a while.

It’s not the money, it’s you who needs to process this. Your entire life is affected by this financial change, but you’re still the same person, with the urge of getting everything you’ve ever wanted. Don’t.

The best advice is to not touch the money for the first 6 months. It might sound like a lot, but it makes a massive difference into what impact the money will have on your life. Every day you’ll think about what to do with the money and you’ll see that in these 6 months plans will dramatically change, that’s why you should not be impulsive with your actions.

Number 5: Make investment in yourself a priority, you need to learn before you spend
If you want to keep the money, you need to start learning. You haven’t built wealth, because you don’t know how to grow money, this needs to change.

You need to become a person who is financially literate, who understand how money works before you start moving around. Not doing this will make you reckless or allow people to take advantage of you.

“a fool and his money are soon parted”

Is a very popular saying throughout the world, because it’s true. You don’t want to be a fool.

You have the luxury of time, now start investing in yourself. The average person who will inherit or win this much money isn’t a sophisticated investor, DO NOT TRY TO BE ONE. instead, we recommend you start with the basics.

If you’re in this position right now, the best book we can possibly recommend you is MONEY: MASTER THE GAME by Tony Robbins. This book will teach you everything you need to know about how a normal person can grow wealth throughout his life even without a big fortune to begin with. It’s one of those books that will be valuable for at least the next decade.
We believe the book is so valuable that if you go to alux.com/freebook and sign up, you can get the audiobook version for free, thanks to our friends at audible.

The second book recommendation would obviously be: Rich Dad Poor Dad by Robert Kiyosaki.

Links to everything in the description!

Number 6: Do not switch financial advisers
If you’ve inherited the money from a rich relative, it’s likely they had a financial advisor. The proof of his services is in the amount of money you’re inheriting. They know what they’re doing and your money is in the right hands.

Familiarize yourself with the relationship your relative had and the services they provided.

Good financial advisors usually work through referrals and only accept a limited number of select clients. They are expensive, because they know what they’re doing.

A big mistake new found wealth individuals make is that they move it to someone else who will dry them out.

Number 7: Get comfortable, but not “Rich” comfortable
Pay off your house, but don’t move to a rich people neighborhood. This is the most common mistake athletes make. They buy a really expensive home that comes with additional long term costs, like property tax, maintenance and so on. Not only you spent a bunch of money on it, you’ve just added a layer of recurring debt to your life.

Do not buy every person in the family a car, cars are liabilities, your money is wasting away in the driveway.

The goal is to fix your life, not to completely remodel it or switch it up for what you think your should live like.

Number 8: Do not invest in your friends business or lend them money
At some point the cat will be out of the bag and the information will leak. Everybody knows you’ve got money now, money that you didn’t earn yourself, which means they somehow believe their entitled to some of it.

Everybody will start asking you for money, money you’ll never see again if you give it away.

They all have new ventures, new projects, new ideas, new problems that your money can fix or light up, but this money is your safety net and putting holes in it no longer makes it safe.

That’s why the money is also a curse, your relationships are doomed. If you give them money, they’re gonna lose it and your relationship goes down the drain. If you don’t give them the money, they’ll resent you for it. At least in the later option your children still afford to go to college.

Number 9: Do not start a business immediately
We’ve all had the dream of being the boss, telling people what to do and looked at other businesses like: “I could easily do that myself”.

The truth is, 9 out of 10 businesses fail. You’ve already exhausted your luck getting the money in the first place, luck is not what’s going to make your venture successful.

Start small, talk to your financial adviser, run all you “investment decisions” by him. It’s easy to get caught up in the illusion of potential success when you’re just starting out. The same way this illusion will fade away, so will the funds you sink into it.

Number 10: Prepare for change
The more money you have, the bigger the target on your back, because now people have things to take away from you. You’re more likely to be sued, people will try to scam you or use emotional leverage to get money out of you.

Having money is a lot of work. You’d think life gets easier with money, but the truth is while some problems get solved, other more complex ones rise in their place.

If you’ve suddenly got money or are on your journey to creating wealth, there’s a really valuable video we made a while back called 15 Things That CHANGE Once You Get RICH.

It’s a great list of what to expect and it will serve you incredibly well to be aware of these before hand.

Number 11: Focus on getting healthier
You’ve got money, it’s time to enjoy it for as long as possible.

You can not afford to be a victim of your own bad choices at this points. Begin with a full medical check-up and then start taking care of yourself.

Pay more attention to what you consume and find ways to improve your health.

Number 12: The 5% rule
The greatest thing to wrap your head around is that the money you just received will not last forever, that is unless you are familiar with the 5% rule.

To put it simply, the money you have need to be wisely invested so they generate an annual return. If you only spend that return, in theory your money should last forever. You need to get as close to this as possible.

Think of this large sum of money as money tree, as long as you take care of it, it will bare fruit every year.. you can enjoy the fruits, but don’t go cutting the tree down as temporary fire wood.

That’s why we recommended Money: master the game earlier as well as rich dad poor dad earlier. You need to understand money.

The 5% rule comes as a result of average investment returns. If you’re smart about it and have your money in an index fund like the S&P or similar, once you adjust for inflation you should be left with a bit more than 5% returns per year.

Assuming you’ve got your hands on 5 million dollars, using the 5% rule, that’s a cool $250,000 dollars per year.. every year. Diversify that portfolio well and your set.

The problem is, once people see the millions they don’t refrain themselves from spending within the 5% rule.

The best book to convince you to change your spending habits is called the MILLIONAIRE NEXT DOOR. It’s a phenomenal book we can’t recommend enough. You’ll learn more about how millionaires grow and keep their money than you’d learn in any business school.

Go to alux.com/freebook and get the audiobook for free if you haven’t read it or listened to it by now.

Number 13: Protect your kids from the money
Not only your life could be turned upside down because of the money, your kids’ life will change as well.

This can be done with Trusts, where they get an allowance from the money without allowing for the original investment to be touched.

That’s how the rich are getting richer and how legacy wealth is created.

Number 14: Do not cheat on your partner
Once you’ve got money, people will want to be around you for their own personal motives.

Temptations will be big and mistakes will be expensive.

How expensive? Half of everything and child-support expensive. This money should straighten the bond between the members of the family, not drive them away.

Unfortunately not everyone is mature enough to look at the effects their actions will have on their lives and fall into easy traps.

Number 15: Play it safe
Why risk it? You find yourself in this incredibly fortunate position that can provide a lasting benefit to you and your entire family if you just play it safe. Do not put your money into shady businesses, do not try to push your luck and hope to double the investment quickly. Say thank you and play it safe.

The best thing to do is behave like this event never happened and somehow your debt and financial problems went away. Now live your life in accordance to this rule and you will be well off. The money will grow, you will be taken care of if you just don’t abuse it.

This was our cover of 15 Things to do if you get rich all of a sudden, hopefully you’ll find something valuable.

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