Some lottery winners go broke. Some athletes and entertainers amass millions and go bankrupt.
Regular people every day squander inheritances, court settlements and salary bonuses. Why? Because it's hard to spend money well. And spending a windfall well is even harder.
Windfalls, especially sizable ones, can be life-altering. They could provide a more comfortable lifestyle or blaze a path to self-destruction.
Up to 70 percent of people who receive a large lump sum of money blow it in a few years, according to the National Endowment for Financial Education.
One recent story involves the wife of a victim in the Sept. 11, 2001, terrorist attacks. Kathy Trant, whose husband, Dan, was a trader in the World Trade Center, went public, saying she burned through nearly all the $5 million she received after his death. She bought half a million dollars' worth of designer shoes, took exotic trips, obsessively gave gifts to friends and strangers, and spent $1.5 million on luxurious additions to her Long Island home - all in an attempt to allay her grief. By the time her spending ended, she had $500,000 remaining.
"The first rule is to not lose the money. The second rule is to obey the first rule," said Bill Staton, co-author of Worry-Free Family Finances: Three Steps to Building and Maintaining Your Family's Financial Well-Being.
Here are some tips:
Unless you're on the verge of bankruptcy, don't do anything with the money for a while - at least three months, preferably six. Don't quit your job. Park the money somewhere safe, such as a savings or money market account.
Give yourself time to adjust to your new financial boundaries.
Develop relationships with professionals who can help you. These might include contacting people for advice on insurance, tax and estate planning.
"If you're already working 50 or 60 hours a week and you get a lump sum of money, it's hard to be a do-it-yourself investment professional," Staton said.
Dream a little.
Here you play the daydream game everyone has tried. "If only I had more money, I could. ... " Besides home improvements and spending on luxuries, force yourself to add to the list meaningful and long-lasting uses, such as continuing your education, saving for retirement or starting a business.
Make a plan.
Tops on your list should be paying off debt, except possibly a mortgage, and creating a cash cushion of three to six months' living expenses. Eye long-term spending goals, such as children's college costs, retirement and perhaps a vacation home, and invest to reach those goals.
Sharing money, whether with family members or charities, brings a special joy. But giving is also a type of spending so it, too, requires diligence.
Gregory Karp writes for The Morning Call in Allentown, Pa.