A lot of people think there would be nothing resembling a one-way ticket to an easy life like inheriting a bunch of money, but statistics prove that even if money is passed down from an upper generation, it usually does not last. As a matter of fact, 70 percent of families with a lot of money see their wealth gone by the second generation. Even more alarming, 90 percent of wealthy families have no money left by the time the funds are handed down to the third generation. Therefore, if you are inheriting money because you are an heir in a wealthy family, the odds are already stacked against you. Take a look at these two big mistakes heirs make with a large inheritance that can lead to the loss of the family funds.
Mistake: Not having enough knowledge about wealth to make wise spending decisions.
Why? For most people who spend the most of their life with a regular income and then come into a large sum of money, the first thing they start thinking about is what they will buy. Will they get this lavish home or that, will they buy that awesome car they've always wanted, or finally get that boat. However, the first thing that newfound wealth should come with is wealth education. Most people don't fully understand the value of the money they have or even how long it will last with certain expenses, such as property taxes or maintenance fees. For this reason, it is wise to hire a wealth management firm or at least a financial advisor right from the start, before you spend much at all.
Mistake: Not understanding the emotional impact a lot of money can have on you.
Why? While many people look at money as something that can solve everything, in some situations, suddenly having a lot of money can affect your personal outlook on life. Some heirs begin to feel remorse once the money is theirs, sometimes even hastily spending it to get rid of it or donating it all to charity because they feel undeserving or unaccomplished. Money can exacerbate problems that already exist, such as a gambling or drug addiction or problems with your spouse. Additionally, inheriting a lot of money at a young age can interrupt the usual path of finding your professional purpose. It is always a good idea to study the psychological effects money can have on you so you do not find yourself struggling.
When my card was declined at the grocery store a few months ago, I realized my financial situation had hit rock bottom. Instead of ignoring the problem, I decided to meet with a financial counselor to see what I could do to make things better. I talked with him about how to handle unplanned expenses and how to budget for my day-to-day life. It was incredible to learn more about money, and now I can proudly say I am living within my means. I decided to make this blog for anyone that struggles with financial planning so that you can turn things around.