Most of our deep-seated beliefs about money, which we may or may not be aware of, are formed during childhood. Or they’re cultural norms we’ve swallowed whole, without even realizing we have.
The problem is, these oft-cited maxims aren’t always true. And believing them can do damage to your bottom line.
So we asked two financial experts for the truth about some of the common beliefs we all love to hold dear.
See which of these six you need to rethink—and which may still hold some truth.
By FRAN HAWTHORNE
SARA ROWBOTHAM CORNELL named her Boston-based digital media company in honor of her parents’ longtime vacation house, Blue Blinds, which she inherited. A watercolor of the 1870s-era New Hampshire farmhouse hangs in her own home.
With the tug of remembrance strong, it took her a couple of years “to be emotionally ready to sell the house,” recalled Ms. Cornell, 50. A calculation of the cost of upkeep, plus a visit to the empty homestead, finally convinced her. “I realized that by selling the house, I wasn’t selling my parents’ spirit, and I wasn’t selling my memories,” she said.
Heirs have been struggling with the impact of inheritance at least since Jacob bought the right to be recognized as firstborn from Esau in the Book of Genesis. But there have never been as many heirs with as much money as now, thanks to the intersection of two demographics: the 79 million baby boomers and the general thriftiness of their Depression-raised parents. The Center for Retirement Research at Boston College estimates that boomers will ultimately receive a total of $8.4 trillion, most of it by 2030.
By Judy Martel • Bankrate.com
Many people dream of inheriting a windfall, convinced it will light up the path to Easy Street. In fact, if you talk to inheritors and wealth counselors, they’ll say an inheritance often causes more trouble than it solves.
“Money is a magnifier and can enhance problems as well as good instincts,” says Vic Preisser, a founding director of Institute for Preparing Heirs. Unprepared or uneducated heirs are susceptible to all sorts of afflictions, including profligate spending, loss of identity and guilt over receiving money they didn’t earn. Read more
You’ve received an inheritance. That’s great. But it’s not as simple as just cashing the check.
How to handle a sudden windfall is an issue many of us may one day face, as some 30 percent of U.S. households will probably inherit wealth, according to the Bureau of Labor Statistics.
And this percentage may increase in the future. Nearly two-thirds of people over age 60 expect to leave an inheritance to their kids, according to personal-finance website Interest.com. Moreover, the Center for Retirement Research at Boston College has found that two-thirds of baby boomer households are likely to inherit a median amount of $64,000. Read More
Overcoming ‘Money Shock’ From An Inheritance Windfall
Northwestern Mutual Contributor, Northwestern Mutual
By Judy Martel
Chuck Collins, great-grandson of packaged-meat magnate Oscar Mayer, still recalls the day more than 30 years ago when his father informed him that he would inherit a substantial sum at age 21. “I remember feeling a little bit of dread,” the 53-year-old said. “Even though I knew my parents were affluent, I was mentally geared to work for a living.”
It’s not that Collins’ parents didn’t educate him about wealth; on the contrary, he said they did a pretty good job. “I got the ‘facts of life talk’ when I was 12 and the ‘facts of finance talk’ when I was 15 or 16.”. If you’re not worried about your finances, then it becomes even more emotional. Read More
A winning lottery ticket or unexpected inheritance is widely considered a life-altering stroke of luck. But psychologically, these lucky people are experiencing their windfall as if it were a traumatic event, according to Susan Bradley, founder of the Sudden Money Institute. Here, she chats with Managing Editor Lorie Konish on how advisors can best work with clients who hit the jackpot.
1. What do advisors typically see from clients who suddenly come into a large amount of money?
There’s one characteristic that many advisors see. We call it inconsistent behavior. One minute clients say, “I don’t want to take any risk.” And the next, they have all these grand ideas for opening businesses and investing. We see it as a sign of stress. These clients need to be doing something. Frequently, doing something, even if it’s wrong, lowers their stress level. It’s stabilizing. We train advisors to join clients in “doing” mode, but not by making sudden decisions. Instead, we teach them how to get clients to prepare to make decisions. Let’s say a client wants to buy a house. We want to know why. How does he think the house will make him feel? Then we help him determine what he wants in a house, and we make a checklist that he can use whenever he looks at property. Buying a house is an emotional thing. If you’re not worried about your finances, then it becomes even more emotional. Read More
CLIENT TRANSITION PLANNING
Synopsis: Most of the reasons why clients come to your door involve stressful changes in their money situations–and their lives. Here’s how you can help them with more than just their money.
Takeaways: The tools include a decision-free zone, a rich conversation about communication preferences, and a way to connect a client’s emotional desires with the technical aspects of a plan.
Every year, when the trade magazines come out with their “most influential” listings, they always leave out George Kinder, Carol Anderson and Mitch Anthony–the people who are doing truly influential and hugely important work: making the financial planning service relevant to clients’ lives. But I think today’s most interesting thinker on the topic, the person who provides the most cutting-edge training, is Susan Bradley of the Sudden Money Institute. Read More
Office managers should help advisors understand that the immediate needs of clients who suddenly come into riches have nothing to do with financial planning.
Manna from heaven is every advisor’s dream. Sudden wealth created in an instant, be it from inheritance, divorce, the sale of a family business that went far better than anyone expected, or even a lucky Powerball or Mega-Million-Dollar lottery.
While the odds may be against your teams’ clients winning a jackpot, there’s a good chance that some will find sudden wealth at some point in their lives. It’s the kind of event that can benefit the entire branch office, by bringing in more assets, more revenue and perhaps even a referral or two.
However, advisors need to know that sudden wealth recipients immediate concerns that have little to do with financial planning or investment strategies. read more…
When those exceedingly lucky people come forward to claim this week’s Powerball lottery jackpot, which swelled to $448 million on Wednesday, it’s hard not to think: Somebody is winning these things, right? It could be me.
This is exactly the sort of logic that, over the last year, led millions of people to spend $5.9 billion of their hard-earned dollars on Powerball alone. They spent nearly $69 billion on all lottery games in 2012, according to two lottery trade groups.
It is also precisely the kind of mental trap the Powerball people want you to fall in; they tweaked the game rules last year, doubling the price of tickets to $2 to raise more revenue and create more eye-catching jackpots.
May 19, 2013
Powerball Winner Faces a Radically Changed Life
By Andrew Abramson
Palm Beach Post Staff Writer
Someone is $590.5 million wealthier today after winning the largest single jackpot in Powerball history. Whoever has the winning ticket, purchased at a Publix Super Market in the tiny Tampa suburb of Zephyrhills, will face many challenges.
“It’s totally overwhelming,” said Susan Bradley, a certified financial planner and the founder of the Palm Beach Gardens-based Sudden Money Institute, which coaches people who suddenly come into large sums on handling their finances.
“It’s like you get instantly pushed into this new world and it never goes back. This person will never be the same.”
Across the nation Sunday, however, people said they’d be eager to give it a try. Many were trying to fathom the thought of winning such a large amount of money. The lump-sum payout alone is $370 million.