Suddenly seeing more zeros in your bank account can be an exhilarating experience. Whether it’s a big raise, a windfall, or finally hitting your stride in business, coming into significant wealth can feel like a dream come true. However, if you’re not careful, that dream can quickly turn into a financial mess.
“Getting rich in a hurry feels exciting, like winning a huge prize at the fair, but the rush can also make people trip over their own wallets,” said Andrew Gosselin, CPA, personal finance expert and senior contributor. From lifestyle inflation to “helping” everyone you know, the newly wealthy often fall into the same money traps. Here are some of the most common pitfalls to watch out for, according to experts:
The first stumble, according to Gosselin, occurs when spending rises as quickly as income.
A solid car might suddenly look old next to a shiny sports model, and a cozy house may feel small beside a mansion. Gosselin recommends taking a deep breath before making big purchases.
“Waiting one full day before any big purchase gives your brain time to ask whether this thing brings real joy or just a quick sparkle. Saving that cash instead lets it grow into even bigger choices later,” he said.
Michael Foguth, founder of Foguth Financial Group, had similar advice. “One of the first things I tell clients who’ve just come into wealth — whether through inheritance, a business sale, or a windfall — is to take a step back and make a plan.”
A second trap is forgetting to draw a map for the money.
When dollars arrive without a plan, Gosselin says they tend to wander off into risky deals or sit in a low-interest account, doing nothing. Writing a clear goal list helps every coin know where to go. He suggests working with a trusted professional who prioritizes your interests to polish that map, ensuring low taxes and secure investments.
Avoiding common spending traps
“Spending a little on good advice keeps you from making costly mistakes,” he said. The thrill of wealth often whispers that you can double it fast, according to Gosselin.
Shiny offers promise huge profits with almost no risk, yet most of these offers hide danger. Before investing in any deal, he advises studying it until you can explain it in simple terms to a friend. “If it still sounds perfect, share the idea with your advisor and use only the money you can afford to lose. Putting savings in a mix of safe bonds, broad stock funds, and maybe a small slice of daring ideas keeps a fall in one area from squashing the whole pile,” he said.
“Family and friends may ask for loans because they know you have extra,” Gosselin says. “While helping feels good, mixing money and love can end up twisting both.”
Instead, decide in advance how much you are willing to give without needing it back. If you choose to lend, put every promise in writing with specific dates for repayment. “Some people start paying for every dinner and vacation once their bank account swells,” Gosselin said.
While picking up the bill occasionally is a kind gesture, doing it every time can make you appear like a walking wallet and may make others feel awkward. What should you do instead? Invite friends to split the costs or choose fun activities that won’t break the bank.
“True friends care more about shared time than fancy price tags,” he said. By avoiding these common pitfalls, the newly wealthy can ensure their financial windfall remains a blessing, not a burden.
