In An Era Of Financial Windfalls, Avoid This Mistake

Published Wednesday, August 11, 2021 at: 3:20 PM EDT

In this era of economic and investment volatility, fortunes are being made -- and lost!

Whether you just won the lottery or earned a huge bonus for performing more procedures than any of your partners last year, here’s important information about what to do next.

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If you’re fortunate enough to come into a windfall, it’s important be aware of a mental accounting mistake known in behavioral finance as the “house money effect.” 

After a lucky roll of the dice, gamblers fall victim to the “house money effect,” thinking of winnings as a separate pile of cash that could afford to be lost, when that “funny money” is really no different  than any other assets.  

Whether you received an inheritance, took an employee buyout, won a lawsuit settlement, or sold your business, home, or yacht, you don’t want to make this mental accounting mistake by treating a windfall cavalierly.

Before you do anything foolish, stop; take a breath, and think strategically by creating a plan to build on the opportunity by making a strategic plan.


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This article was written by a professional financial journalist for Davis & Wehrle, LLC and is not intended as legal or investment advice.

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