Nouveau Riche’s biggest challenge: The unsustainable lifestyle
The challenges that face "New Money" are legion, but by far the most dangerous is the creation of an ‘unsustainable lifestyle’.
Article contribution by Byron Tully
Photo: Bling Empire©Netflix
When an unexpected windfall, dramatic increase in income, or sharp, upward change in circumstances of any financial sort hits, it can be intoxicating and disorienting. It’s called being New Money (Nouveau Riche), and the symptoms are predictable.
Good judgment is often the first thing that suffers. The challenges that face New Money are legion, but by far the most dangerous is the creation of an ‘unsustainable lifestyle’.
What do I mean by that term? I mean the creation of financial obligations which can not be maintained over the long term without doing irreparable damage to a person’s net worth. Irreparable damage includes not just losing all the money you’ve recently come into. It may also mean going bankrupt, and perhaps being worse off than you were before you got rich.
How do you avoid creating an unsustainable lifestyle? First, you have to get some perspective. You’re now rich. Fine, dandy, I’m happy for you. Just know that millions of people have experienced what you’re experiencing. Millions more have watched this experience happen to others, with sadly predictable results, i.e., the less-than-pretty behavior that often accompanies financial windfalls.
So you’re not unique. You’re not special. Plenty of people have much more money than you now have, and they’ve had it much longer than you have. You may want to learn from them and listen to them before making some big, permanent mistakes.
This is not a license for you to buy everything you’ve ever wanted in order to prove a point to others or compensate for your own insecurities. This is an opportunity to be financially independent and live a richer life, if you handle it right.
How do you get it right? Go to a certified public accountant. Explain your situation. Know what tax liabilities you’ll be facing in the coming months and years. Then take about 1% of your windfall and go blow it.
What?!?! That’s right. That’s what I said. If you’ve just been handed a million bucks, take ten grand and go to town. Rent a limousine and make reservations at the fanciest restaurant in town. Buy a new pair of shoes and a new outfit. Go to Las Vegas. This is your first taste of what it means to be rich: “I can buy all this stuff!”
And 48 hours later, when you’re ten grand is gone, sit down over a cup of coffee and take stock: how was that? Do you have anything to show for that ten grand? Will you ever see that ten grand again? Can you replace it immediately, without going into your $1 million principal?
You should sober up at this point and realize how little money $1 million really is. Better keep your job. Better invest your money conservatively. Better be smart, because the odds of another million dropping in your lap in this lifetime may be slim to none. This is, you guessed it, your second taste of what it means to be rich: “Wow. This isn’t as much money as I thought it was.”
But let’s say you still go off the rails. You can’t help yourself and you keep spending. I’ll try to help you by encouraging you spend it this way, so you don’t create an unsustainable lifestyle.
First, buy clothes. You probably have limited closet space where you’re living right now, and only one body to hang them on. So there will be some inherent limits on how many clothes you can buy. Clothes can be expensive, but they don’t cost much to maintain. You may be out some cash up front, but not for the long haul. If you’re a guy and you’re going this route, I would say the essential things you must have are a new pair of expensive sunglasses and a suit that reflects light.