Home Money Saving Managing a Financial Windfall: The Approach of Young Individuals

Managing a Financial Windfall: The Approach of Young Individuals

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Managing a Financial Windfall: The Approach of Young Individuals

Mattea Roach still relies on the Toronto subway for transportation. Despite having more than enough money to purchase a house in a city where tear-down bungalows can fetch up to $1 million, Ms. Roach, who prefers they/them pronouns, continues to share an apartment with their brother. Winning $560,983 as the youngest ever “Jeopardy” super-champion hasn’t significantly changed their daily life. They haven’t splurged on a car or extravagant purchases, opting instead for new clothes and occasional trips to the record store.

Contrary to popular belief, a sudden financial windfall, whether from a game-show victory, inheritance, or lawsuit settlement, doesn’t guarantee a radical change in a young person’s life. While some individuals are able to buy homes or travel the world at a young age with newfound wealth, others may feel overwhelmed by the responsibility of managing large sums of money after experiencing the loss of a loved one or navigating unfamiliar financial territory.

Ms. Roach, who originally intended to attend law school, is currently engaged in public speaking and podcasting. They recognize that while education is important, opportunities like these won’t last forever. The clarity they once had regarding their life path has been replaced with a sense of uncertainty and unease since their “Jeopardy” win.

The money from “Jeopardy” provides Ms. Roach with a sense of relief and the freedom to make new and potentially more fulfilling choices. They still experience guilt when spending money, but having a six-figure bank balance serves as a safety net in case of illness, inability to work, or the need to support their mother. Ms. Roach’s father unexpectedly passed away while they were competing on the show, adding an extra layer of complexity to their financial journey.

For Alexandra Merullo Steffgen, winning a $10,000 fellowship at the age of 18 was a life-changing experience. As a scholarship student at an elite preparatory school, Merullo Steffgen often felt unable to keep up with her wealthier peers. She applied for two fellowships that would provide the financial freedom to take a gap year and travel. Winning the fellowship allowed her to volunteer in Italy, hike in Spain, and embark on other meaningful experiences. The money gave her permission to indulge in experiences she hadn’t previously allowed herself. It was a precious gift that allowed her to prioritize her own enjoyment rather than constantly worrying about others.

Receiving a windfall in your 20s or 30s can offer newfound freedom while also creating a sense of disorientation. It can be challenging to relate to peers who are still building their careers, burdened with student debt, and cannot grasp the sudden responsibility of managing a large sum of money. Nicholas Freda, for example, received a $100,000 inheritance from his grandmother at the age of 26. Initially, he struggled to comprehend the magnitude of the inheritance and felt discomfort with the newfound wealth. Following advice, he decided to invest in a house rather than making unnecessary extravagant purchases. However, it was difficult for him to discuss his financial decisions with colleagues who earned significantly more and owned multimillion-dollar properties.

Gina Knox, a financial coach, received two windfalls in her 20s: $15,000 at 22 and $100,000 at 28. The first windfall came as a surprise, causing her to initially feel paralyzed with indecision. With the second windfall, however, she had gained confidence in managing money, thanks to her father’s guidance. Knox emphasizes that if individuals are unsure how to handle a windfall, it’s important to do nothing and seek advice from trusted family members or financial advisors. She advises taking time to envision the life you want before making any drastic decisions.

For individuals from lower-income families, integrating a windfall into their lives can be even more challenging. Managing large sums of money is a new skill that needs to be developed. Financial therapist Steven M. Hughes stresses the importance of acknowledging the emotions tied to money. Windfalls can evoke fear, shame, and guilt, as well as feelings of survivor’s remorse for having more money than one’s family or community. Hughes advises seeking guidance from someone skilled in money management and suggests waiting until one has established themselves financially before providing financial support to others.

The key to navigating a windfall is to seek advice, establish a support system, and take the time to determine what kind of life you want. Each individual’s experience with newfound wealth will be unique, but planning, careful decision-making, and seeking the help of experts can help ensure a more successful financial journey.

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