Spending New Money…wisely and otherwise-ly

An article in the New York Times caught my attention today. It was about how some folks in India are spending  their new found wealth (from selling land) to show off with lavish weddings (and Land Rovers, and Lexuses). This brings up another question- should there be courses and counseling on how to spend new wealth wisely?

Naya Paisa

People can come into new money in many different ways- they could sell their company, sell land, win a lottery, inheritance, and stock market movement on that lucky stock. Whatever the source, this money didn’t come with a manual on “How to spend this money wisely”. Consequently, most people are likely to blow a large part of this money away before they know it’s gone.

A Fool and his Money are soon parted, goes the old saying, and it’s right. Not knowing whether this bounty is going to be repeated in the future, a wise man would try to invest this money into something that would give lifelong returns, or bring happiness to the society at large. A less prepared man, however, is likely to spend this money on signs of new wealth, or conspicuous consumption that would bring some small happiness in the short term, but leave a permanent lease on a lifetime of regret.

Happens all the time. There is very little material available around us to help people figure out how to keep this sudden wealth. Here are a couple of US based articles that examined this phenomenon more carefully (and agreed with my observations).

Article 1,

But winners are handed a check and shown the door, even though gaining sudden wealth is usually a dramatic, life-altering experience.

and Article 2.

A shockingly large number of lottery winners end up in financial ruin. National statistics show that about one-third of lottery win-ners ultimately file for bankruptcy. Often, that’s just the initial symptom of good fortune gone bad

What can be done? Unlike a lottery, winnings from land or stock sale happen at a time of the receiver’s choosing. That means that courses and counseling sessions could be created for people to attend BEFORE they get the big check. This way, they are aware of the ephemeral nature of their good fortune, and are better prepared to convert this fortune into a life-long income.