People who come into money, such as through an inheritance or winning Lotto, are often considered 'lucky'.
But unexpectedly finding themselves in charge of managing a lot of money doesn't always bring happiness. Along with the prospect of financial freedom, they may also inherit a range of new challenges, a financial expert says.
Janet Xuccoa, general legal counsel for Greenlion and lead at Black and White Trust Services, told Newshub many Kiwis have struck it big, only to be fearful and overwhelmed at the thought of managing their newfound wealth, resulting in missed opportunities.
For others, a lack of interest in money and not wanting to take responsibility for it have resulted in losses.
"Wealth doesn't necessarily equal happiness… it can make things easier but it takes a lot of managing and responsibility," Xuccoa says.
Drawing on her experience helping people structure their finances, Xuccoa shares three examples of life lessons from Kiwis who have encountered losses after coming into money.
1. Don't attach emotions (such as fear) to money
The first lesson is not to associate money with feelings such as fear, envy and jealousy.
These emotions are a barrier to financial success, and can mean people miss out on opportunities, Xuccoa says.
As an example, after receiving a $1.1m inheritance (a half-share in two houses and $400,000 in cash), a 49-year-old woman felt a mixture of "grief" of her loss, and "relief" that she would no longer have to live payday to payday.
But once realised she didn't know how to manage the houses - or where to put the money - those feelings quickly turned to panic.
The houses were rented out, which eventually enabled the woman to buy out her sibling. She now has a small mortgage on one of them, and some money in cash.
The woman's "disinterest in money" and "fear of losing the money she inherited" created a roadblock to bettering her financial position. For example, to use the $400,000 cash, along with her equity in the existing two properties, to buy a third property.
2. Be aware of personality traits that may get in the way
A second lesson is to be aware of any personality traits that get in the way of taking responsibility for managing money.
In another example, a mid 40s man described as "frivolous" and "carefree" unexpectedly received $185,000 as a cash gift.
Upon receiving it, he was generally "apathetic" and used it to pay off some of his joint mortgage. Shortly after, he separated from his wife, when the assets were halved.
Although he then took on a "sizable" mortgage on his new home (while paying university fees for his son), the man gave $50,000 to a girlfriend, to repay her credit card debt.
While it's important to set aside money for 'fun', Xuccoa suggests that people retain a healthy dose of self-discipline. It may also require setting financial boundaries in relationships.
3. Use discretion and boundaries
A third lesson involves using discretion and being firm with family members who may feel entitled to what they feel is their share of another's win.
In this example, a woman who won several million dollars shared some of her winnings with other family members. Described as feeling "fearful" and "overwhelmed", the woman continued to work as a cleaner for around two years.
After receiving help to invest money in four properties, she eventually moved to a more upmarket suburb and paid for a private school. She was advised not to distribute any more to family members, which caused relationships to sour.
"No money has been lost, but the family fights have meant loss of family ties," Xuccoa says.
In this case, if the family had been willing to work together to improve their financial knowledge, their disagreements could be avoided, she adds.
Kiwis who unexpectedly come into a large sum of money are advised to "sit with the knowledge of the money" before deciding what to do with it, ideally for six months.
As a first step, Xuccoa suggests getting professional advice from a lawyer and an accountant.
"Set a plan for investing the money: why you are investing, what you're investing in, how long you will invest [and] the money investment rules you will adhere to."
As knowledge reduces fear, people wanting to make wise financial decisions are urged to "keep learning about money" throughout their lifetime.
This can be gained through reading, podcasts, newsletters and talking to a wide range of people, including professionals, many of whom are happy to share knowledge for free.
