Gen X Financial Planning and Sudden Wealth
Date: February 12, 2024

Gen X Financial Planning and Sudden Wealth

Currently, U.S. households own approximately $159 trillion in assets (including investments, real estate, retirement funds, pensions, the value of goods owned, the value of businesses owned, and more). Of that, Baby Boomers own half – nearly $80 trillion. Gen X currently owns far less, at about $47 trillion.

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But that is about to change. Baby Boomers control most of the wealth, but Baby Boomers are also older. The oldest Boomers are in their mid to late 70s. The U.S. average lifespan is in the early 80s. When Baby Boomers pass away, Gen X will be the primary heir to Baby Boomer wealth. For many Gen Xers, this will lead to – sudden wealth.


What Is Sudden Wealth?

“Sudden wealth” is defined as a sudden influx of money beyond the norm of the average wealth of the person receiving it. Inheritance is not the only means of sudden wealth: people can get sudden wealth through large bonuses and winning the lottery as well.

Sudden wealth may sound like a dream come true. And it certainly does have immense benefits! But the fact is, many people who receive sudden wealth end up having no wealth. We’ve likely all heard about lottery ticket winners who spend big for a while, only to end up bankrupt.

Why? Well, because recipients of sudden wealth don’t often plan for it. Because it’s a large amount, it may seem limitless. Trips to Vegas, large-screen TVs, helping family and friends, expensive jewelry…before you know it, the money is gone.

It also can seem very exciting, and sensible principles might be jettisoned for a while. When these types of sudden wealth recipients come back down to earth, they don’t have the wealth anymore.

Ultimately, approximately 90 percent of inheritances are spent by the third generation, so that no wealth transfers to the following generation. In other words, if Gen X spends its inheritance from the Boomers, it won’t pass on to Millennials and Gen Z.

But given the amount of wealth that will transfer and the amount of time Gen X has, Gen X may be the generation that breaks the cycle of squandered inheritance.


Sudden Wealth and You: What To Do

If your parents or older relatives and friends plan to bequeath assets to you, such as investments or a house, you may be in line to receive sudden wealth. It can change your life and the lives of your children. But the situation needs to be handled well if you want to enjoy it and pass it on.

You need to get your financial house in order and prepare yourself to receive an inheritance. 

Here’s some time-tested advice.

1. Don’t make sudden decisions

Financial advisors are unanimous about the first move. Don’t make any sudden decisions. It’s a good idea to let sudden wealth sit for six months or so. 

Sudden, unaccustomed wealth can make you giddy. It feels like it will last forever. The impulse to spend a lot of it may be very strong, especially on things you’ve always wanted. If you’ve dreamed about a getaway home on a mountain lake, getting it might be your first thought. 

But if you decide on an impulse to get it because you have the money, it may not be a good move financially. The key words here are “impulse” and “sudden.” It’s not that you can’t have that house by a mountain lake if that’s what you most want. But the best way is to wait until you’re calm enough to make the best decisions about it.

2. Get a professional team in place

Don’t try to manage your inheritance yourself. A CERTIFIED FINANCIAL PLANNER™ Professional can help you maximize your goals and dreams, optimize your decisions financially, and help you make plans for the passing on of the wealth to the next generation.

The financial industry has tens of thousands of “advisors”, but not all of them are working in your best interests.  Sadly, a 2016 government report found that “conflicted advice” costs Americans $17 billion per year.  Conflicted advice happens when an advisor steers you to an investment that is “suitable” for you but may cost you more than other options that pay him or her less commission. 

At Sapiat Asset Management we are fee-only fiduciary financial advisors, who always put your interests first.

(It may also be advisable to work with an accountant, as sudden wealth can have tax implications. You don’t want to pay more tax on the inheritance than is necessary.)

3. Work toward your goals

The purpose of any financial plan is to achieve your life goals. Sudden wealth may mean that you are now able to achieve many more of your goals or even different ones.

Take the time to think deeply about what goals you want to achieve with your inheritance. A mountain lake house? Travel? A long-deferred business dream? Charitable giving? An earlier retirement than would have been possible without it? College educations for children and grandchildren?

Discuss your goals with a financial advisor in Greeneville, TN. We can make plans to achieve them with your input.


4. Diversify your sudden wealth

Diversification is always a sound financial principle in finance. Simply put, it means don’t put all your money in one place. Eggs all in one basket are in danger if that basket gets crushed.

Financial advisors can help you diversify all your assets so that you are well-balanced between risk and reward. 


5. Make your sudden wealth part of a comprehensive financial plan

The best way to achieve your goals is to have a comprehensive financial plan. That’s true at any level of assets or income.

What’s a comprehensive financial plan? Well, it includes cash management of your expenses versus assets and income. It includes diversified investments so that your portfolio will weather all market conditions. 

It includes Gen X retirement savings that will ensure comfortable golden years financially. It includes higher education planning for your children and perhaps grandchildren. It includes insurance for your assets against loss. It includes estate planning, such as wills, trusts, and powers of attorney.


Contact a Greeneville, Tennessee Financial Advisor 

Sapiat Asset Management is a fee-only, fiduciary, financial advisory firm located in Greeneville, TN that specializes in helping Gen X with all aspects of financial planning. We will work with you to help you realize your financial goals.


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Steve Dick