How To Keep The Riches And Avoid The Rags


We’ve all heard those crazy stories about sudden wealth.  A guy hits the lottery and shoots off to Vegas with a brief case full of cash. One weekend later and he’s lost it all. Most of us think we could never make that mistake, but it may be a lot easier than you think.

I had a chance to connect with Larry Cheng, founder of the growth equity firm Volition Capital and he was kind enough to share some of his expertise here on EvenMinds.   There’s a wealth of information for the entrepreneur and business owners out there who’ve recently experienced that explosive growth, and those who are on its heels.


What To Do With Sudden Wealth

Your company just went public and the lock-up period is over.  Your company got acquired and your share of the proceeds just hit the bank account.  (Or, your wealth managers from Greenwich, CT, and you just won the lottery.)  For some fortunate folks, any one of these events can lead to a sudden influx of sometimes substantial wealth.  What you’ve been thinking of as paper wealth for months and years, is now real.  So, what do you do?  This question was posed to me recently, and I thought I’d share my thoughts as I’ve seen this scenario play out for many individuals through the years.

My general guidance is pretty simple: Try not doing much of anything different for one year.  Stick the money in your bank in some cash-like instrument and forget about it for a year.

Some ideas of things not to do in that first year:

  • Go on a shopping spree and buy new cars, homes, planes, gadgets, clothes, etc.
  • Give the money to any number of money managers calling you offering their assistance to “manage” the money.
  • Get into financial arrangements with family and friends.
  • Quit your job because you’re rich.
  • Hire personal staff.
  • Buy a country club membership.
  • Change how you travel or vacation.
  • Become an angel investor.
  • Go to Vegas.
  • Change your friends or social circle.

The point of raising these items is not to make an implicit value judgment on any of them.  What I do think is valuable, though, is letting there be some breathing room from the time your new found wealth hits your account, and the time you start engaging with it.  Any number of these items you can still pursue just the same one year later if it’s still important to you.

What’s the value of the year “waiting period”?  You remove yourself from the pressures, expectations, and emotions of the moment.  That dynamic can often lead down a road where wealth is lost, relationships are injured, and a positive experience turns into a bad one.  So many bad decisions are made in that first year when you and your wealth are most vulnerable due to the confluence of so many factors.  There’s a reason so many lottery winners end up unhappy.  There’s a reason professional athletes end up bankrupt at alarming rates.  While accruing wealth from a successful start-up is a different process than winning the lottery or being an athlete –  some of the pressures and dynamics of sudden wealth remain the same and unfortunately some of the end results are the same as well.

A few important caveats.  I’m not making a suggestion on whether you should sell your stock if that’s the currency of your wealth.  That’s a personal decision and perhaps a topic for another post.  But, whether you choose to sell your stock or hold on, these suggestions remain largely the same.  Additionally, two things I’d consider doing in that first year, if it didn’t open the floodgates on items listed above, are: (1) pay down debt and (2) give to charity.

Is this incredibly boring advice?  Yes, guilty as charged.  Is it unnecessarily ascetic?  It definitely comes off that way, but I’m hardly an ascetic person.  I just view pursuing such a path as a lot of upside and no downside, while doing the reverse is a lot of downside without much upside.  What you do in that first year of having new wealth may ultimately be the most important investment decision you make.

Tap into Larry’s expertise here.  The result of securing your financial future can give you the means to afford the luxuries.  However,  luxuries are a symptom of playing it smart.  What do you think?  Have you experienced a rapid flood of money and the pressures that go with it?  Do you think you could handle it or exercise the patience needed?  Leave your comments below and let me know. 


Photo by Damian Morys Foto


17 thoughts on “How To Keep The Riches And Avoid The Rags

  1. Jason Anthony Post author

    A special thanks to Larry for sharing his insights! I think another key principle to building wealth is making a habit of spending less than you earn 🙂

  2. Hector Avellaneda

    I think it all comes down to your mindset towards money and wealth. It’s hard for me to say because I have not come upon a large sum of money (as of yet) but I pretty confident that when I do I, my personal finance education and wealth building mindset will be what holds me be back from splurging and just being another story for the newspapers of wealth ill-spent.

    Of course, I think some things wold instantly change. I would keep my friends and associations but I would not mind spending a little on me. After all, it’s alway good to celebrate your successes now matter how small they are. To me, making sur e I celebrate my successes is what motivates me to take the next step and accomplishing something even bigger and better because I know once that goal is met or my reward be that much better.

    Just my perspective but I definitely agree with you that having the right mindset and even preparing mentally for something like this is extremely important.

    1. Jason Anthony Post author

      Mindset and having the knowledge, know-how, and skill set to deal with a financial windfall is crucial. And there is absolutely nothing wrong with a little celebration and victory dance 🙂

  3. Jeanne

    As hard as we try to convince someone how they should spend their sudden wealth, they’re more likely to be guided (or misguided) by a belief system handed down by their parents. While I may have rebelled against the way my father was tight with his wallet, ultimately that has influenced the way I view money … in a good way: that money should be valued for the luxuries and conveniences it affords us. So, I’m pretty sure I can handle the heavy responsibility and pressure that comes with sudden wealth.

    However, for someone who comes from a household where “wealth” (however small) never stayed around long enough to provide a true sense of security, sudden wealth can quickly become sudden poverty.

    1. Jason Anthony Post author

      Thanks, Jeanne! A lot will ride on a persons belief structure and views towards wealth. Has it always been labeled as ever-so-ellusive, or something of great abundance? The variation between the two (and even middle ground) can make a world of difference.

  4. Jackie


    I find it fascinating the behavior that comes to the fore when large sums of money are involved, whether that windfall comes by way of assets, inheritance or pure luck.

    I agree with Jeanne that our belief systems will dictate to our decisions. Whether we like it or not.

    There are decisions that would be made in a heartbeat, like payoff debt and maybe go on a holiday, but there is nothing to be gained in urgent decisions simply because you have the money at your fingertips…Whats there today will still be there a year from now, and maybe even better than it is now.

    I wonder how the guys at Instagram will deal with their new found fortune?

    1. Jason Anthony Post author

      Yes, coming into a cool billion is certainly a game changer. I’d like to believe that most out there who are already in a business mindset tend to make the smart decisions with their wealth (though its certainly not always the case).

  5. Jason "J-Ryze" Fonceca

    Hehe…. Nice, J, nice. (The instagram finish is gold)

    I generally expect circumstances, situations, and events to deliver me extra spikes of cash on top of my regular streams, and that’s happened.

    I’ve been able to smoothly handle my life on a shoe-string, bare-minimum, while homeless and also with large sums coming in, and though I didn’t consciously think about it, but I applied most of your tips 🙂

    P.S. I really like T. Harv Eker’s “Jars” system of money-management, if you know it.

    1. Jason Anthony Post author

      Thanks! Will have to check out Ekers system, there are a lot of great systems and strategies out there. I recently had the chance to connect with a financial and wealth mentor, he’s got some great strategies and philosophies that are practical and make a lot of sense – Future write up on that coming soon 🙂

  6. Ryan Hanley

    Always take the lump sum!

    My first job out of college was for a Structured Settlement company (I know not my proudest moment)… Always take the lump sum!


    Ryan H.

  7. Steve Baines

    Hey Jason,

    That’s definitely some good advice. Advice that is much needed in those circumstances. Hopefully one day I will be able to put all of your advice here into use 🙂

  8. Mike Garner

    Boring advice yes, but hey, that’s what sensible people do! I’ve often wondered what would happen if I won the lottery. Yes, I would keep working (we all have to have reason to get up in the morning) and I would have holiday but just two weeks because I feel really tired. The bottom line for me is that the money has to do something. it would be very easy just to party and eat your way though it, but what if it could do something positive, make an impact on other people’s lives?

  9. Denise Butchko

    “sudden wealth” is taking me years to achieve 🙂 But I’ll not move too quickly with any big decisions, investments or sprees until I know I’ve got my bases covered.


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