In 2010, NBA player Lorenzen Wright was shot to death and his decomposed body was found in the woods southeast of Memphis. His ex, Sherra Robinson Wright, who had just divorced the NBA player and was a suspect at one point, received a $1 million life insurance settlement 14 months after his death. According to the Memphis Commercial Appeal, she has spent $973,000 of that in 10 months, reports Black America Web. Here’s how she burned through a cool mil: $32,000 for a Cadillac Escalade; $26,000 for a Lexus; $69,000 on furniture; $11,750 for a New York trip; $339,000 for purchase and improvement to a new home: $7,100 for a pool deposit: $5,000 for lawn equipment; and $34,000 on legal fees. You can’t do anything about legal fees, but that $7,100 doesn’t even cover the whole cost of the pool!
She’s not the first person to waste a large lump sum of money fast. Don McNay, blogging on The Huffington Post, quotes a National Endowment for Financial Education report that found that 70 percent of those who receive a lump sum, from any source, run through it in a few years.
Need another example? New York Knicks center Eddy Curry, who found himself in debt though he had a $60 million contract. He spent $6,000 per month for a chef, $16,000 a month for an allowance that he set aside for friends and family, and had a $570,000 personal loan he was paying off that carried an incredible 85 percent interest rate, says the Sports Fan Journal.
“Lump sum windfalls come in many forms: a legal settlement, insurance payout, or an inheritance. Instead of spending frivolously, use a lump sum to improve your family’s financial future,” says Toni Husbands of Debt Free Divas, financial coaches helping men and women address common money struggles.
Here are nine tips on how to manage a financial windfall.