Recently a client of mine came into an inheritance, and I’m happy to say that he contacted me right away.
And in February, the Wall Street Journal ran an article [ http://blogs.wsj.com/experts/2016/02/05/the-sad-financial-future-that-awaits-many-nfl-players/ ] describing how many NFL players lose all their money within 12 years of ending their football careers, despite their high earnings.
How are these two apparently random facts connected? Well, both are about someone receiving a large sum of money over a relatively short period of time. In principle, this sounds as if it should be a great thing, wouldn’t you think?
However, the WSJ article illustrates that many football players find themselves back to square one within just a few years, and my experience has been that the same can happen with an inheritance. What I see in many cases is that people can be unprepared, and somehow the money trickles away. It’s as if it got put into a sieve. A few years later, it is gone, and the person can be in the same place that they were before, or possibly even worse off. (If they become accustomed to spending beyond their actual income level, then after the inheritance runs out, they can accumulate significant debt.)
So what’s missing here? What needs to be done? Well, certainly, there’s a need for information. It’s important to understand how to manage the new money, and how to use it in order to serve your goals. However, I believe that more than anything else, the missing piece is that we need to make an internal shift – there has to be a change in our relationship with money. A large lump sum can be a big shift in our financial position, and so it requires that we almost “become a different person” in order to accommodate that. Otherwise unexplored judgments about money, uncomfortable feelings, and unrealistic expectations can trip us up, and instinctively the situation will slide back to the old place that was comfortable to us.
So I’m very happy that my client is preparing for his inheritance. He is working with me to look at his long- and short-term goals, and to allocate the money so that it will support them. And most importantly, as he does this, he is exploring his relationship with money. It is not always easy. But as each uncomfortable piece comes up, he is working through it and getting the support that he needs.
Usually in this work, my approach is to help clients learn to take care of their own finances, and I tend to be a staunch advocate of DIY (do-it-yourself). However, an inheritance or other large influx of money is one situation where I would strongly recommend that you contact a professional. A financial planner can help you with information about investing, and a realistic sense of how to allocate the money; and a personal finance coach can support you in how you want to use it, and the emotional shifts that will allow you to accommodate it.
I have an opportunity coming up to explore your relationship with money, and learn how to take better care of your finances – no need to wait for an inheritance! For young professionals (approximately age 22 – 32), join my “Money 101 for Young Professionals” class starting September 14th. This class will cover the basics of personal finance, with a special focus on the needs of this stage. Topics include how to make and track your budget, managing student loans while still saving for the future, and intro to investing. The 6 weeks that we will spend together with give you enough time to create new habits in your own finances and practice them with support from me.
I am attaching the registration form here – use it yourself, or please forward it to a friend or relative! Notice that there is a 10% discount for early registration by September 1. If you have any questions at all, don’t hesitate to contact me.
And if you know someone who would like help sorting out their finances in one-on-one sessions, please do send them my way. I greatly appreciate your referrals.
Originally published August 2016