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The Windfall That Wasn’t

During more than two decades working in financial services, I’ve met no fewer than four lottery winners. Their wins weren’t small; the least was $2 million, and the greatest was $8 million. But today, all four families are broke – and worse off financially than before their big wins. They took varying amounts of time to work through their windfalls of cash, but all managed to blow it eventually.

I often share this story with the participants in my planning workshops, and they typically react with wonder and disbelief. The wonder increases to amazement when I tell them about a study by an American psychologist, who found that life satisfaction among lottery winners is generally below that of quadriplegics.

The disbelief fades, though, when people start to think about the situation of instant wealth. We’ve all read stories about sports legends who command multi-million-dollar salaries or prize purses, but still declare bankruptcy when their careers end. Even family wealth (arguably the most stable kind there is) often survives only a few generations, as sons and grandsons burn through the wealth that’s passed on to them.

All these people – lottery winners, sports legends and fourth-generation inheritors – face the same problem: lack of knowledge of how to successfully manage wealth. It doesn’t really matter how much money you have or make, if you don’t have the financial stewardship skills to prevent it from leaving your hands. In the case of those lottery winners, for instance, their financial falls had nothing to do with the investments they selected.

If you’re wondering now about your own skills, consider these questions:

Did you make more money than you spent in the last month? How about in the last year?

Do you have financial goals for your life? If you have a partner, does he/she know your goals? Do you know your partner’s goals?

Do you know exactly what you pay for your financial services?

That last point is a particularly important one: many service fees are hidden, and they can add up. Over the long haul, they can remove up to 60% of your earnings.

Creating wealth – through your own efforts, rather than by just being lucky – requires one set of skills; but managing that wealth calls for very different talents. A huge amount of attention is generally given to investment selection; yet picking the right investments is only a small part of managing wealth.

So take some time to build a written management framework for your family assets. It should include details about cash flow, financial goals, appropriate time frames, and an overall investment discipline.

That way, if you’re ever lucky enough to win the lottery, you can be sure you’ll manage your windfall wealth better than those other unlucky souls.

If you are serious about getting your financial house in order, check out our recent book “The Copperjar System, Your Blueprint for Financial Fitness”, available at or on

Alan MacDonald is an investment advisor with Richardson GMP Limited. Alan helps investors with over $500,000. of assets make smart decisions about money. He is the co-author of “The Copperjar System, Your Blueprint for Financial Fitness” available on Amazon.

For more information please visit or email Alan at

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates.

Richardson GMP Limited, Member CIPF

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.