Imagine yourself winning the lottery. Actually, you’ve probably already done it a thousand times. We all have. Death and taxes might be inevitable, but so is dreaming of seeing your lotto numbers pop up on the TV screen. Even if you think a three-legged horse has more chance of winning the Kentucky Derby than you’ve got of winning the lottery, you’ve probably still fantasized of walking into work with your winning ticket in hand and pulling a Johnny Paycheck. But what should you do if that fantasy becomes reality? For a start, don’t start spending it before you’ve got it. Don’t tell your boss to shove it quite yet either. After that, it’s simply a case of putting a plan together, dodging the requests for handouts, and following these top 10 ten tips on what to do if you win the lottery.
1. Wait to claim the money
As fyotar.com recommends, don’t rush to claim the money. Tempting though it is, give yourself time to process what’s happened and prepare for what comes next. Put your ticket somewhere safe, relax, take a breath, and put an action plan in place. Winning a vast amount of money is amazing, but it’s also hugely stressful. Most of us have limited experience in handling that kind of money, so it’s important to put in place a plan and get financial planning assistance before you even think of collecting the check.
2. Stay anonymous
As Forbes notes, the moment people find out you’ve won the lottery, they’ll start badgering you for handouts. Charities you’ve never heard of will start writing pleading letters, long-lost relatives will emerge from the woodwork, high school buddies you haven’t seen in 20 years will start calling. The easiest way to avoid the stress is to simply not tell anyone. State rules regarding anonymity vary, so check the situation as soon as you can. In the meantime, avoid updating your Facebook status to ‘minted.’
3. Hire competent advisers
As wisebread.com says, even though you might have experience in managing your regular income, managing the kind of money that comes with a lottery win is a whole other ballgame. To make sure you don’t end up doing something regrettable, build the right team around you. That means an attorney, an accountant, and a reputable financial adviser. Ideally, organize a meeting with everyone in the same room so they can work out the best strategy to manage your prize money in the long term.
4. Pay off your debts
Investing money is great, but ultimately, there’s no way of knowing whether the money you invest will grow or shrink. So before you start gambling on the stock market, pay off your debts. Regardless of whether it’s a mortgage or a credit card, the less you owe, the less risky your financial future will be.
5. Hold onto your job
We’re all guilty of imagining the moment we tell our bosses to shove it, but for now, bite your lip and keep on as normal. Tempting though it is to walk out of the office and never go back, don’t do anything rash until the check has cleared. Even when it does, be polite, serve your notice, and don’t burn any bridges that can’t be repaired… if you get bored of early retirement or if your financial planning goes awry, you might be glad of a good reference in the future.
6. Don’t assume the upfront cash payment is better
The one-time payment might be the most tempting option, but for most people, the option to spread the payment over 30 years is actually better. As Daily Waffle says, taking all the money and investing it comes with all kinds of risks and problems. It takes time to learn how investments work and time to learn how to handle such a vast amount of money. The annuity option might seem boring, but it’s also the safest way to ensure you don’t lose a huge chunk of your money through mismanagement.
7. Pay the taxes on your winnings
There’s one thing no one can avoid after a lottery win: taxes. The IRS will automatically take 25 percent of your win before you even get your hands on the money, but it doesn’t end there. The prize money is likely to bump you to the top income tax bracket, and it will be your responsibility to make sure you pay the difference. Do it as soon as you get the money. There’s no getting around it, and once it’s done, you can move on and start enjoying what’s left of your winnings.
8. Plan for the future
Winning the lottery doesn’t guarantee your future is secure. Not if you don’t plan for it anyway. Quit your job, take a few fancy holidays, buy a car, and flash the cash at Dior, and suddenly, you could be in a worse state than you started. To avoid staring down the face of a long, poverty-ridden old age, stash away enough of your winnings (aim for around 50 percent) in a retirement-focused investment account to make sure you have a safety net if something goes wrong.
9. Create a budget
Winning the lottery doesn’t mean you can throw the budget out the window. It might mean you can make some changes to it, but it still needs to be there and it still needs to be stuck to. If it’s not, you run the risk of becoming yet another lottery winner who ends up bankrupt by failing to have a proper structure in place. Work out how much you need for monthly expenses, how much you should save, and have much you can have fun with. It might not sound exciting, but it’s the sure-fire way to stay rich.
10. Take a holiday
We all dream of winning the lottery even if we don’t actually play it. But dreams can sometimes be very different from reality. Quitting your job, dodging endless begging requests, dealing with financial advisors, hiring an attorney… all of this is stressful, and if you’re not careful, it can easily sap the joy of your windfall. So take a break. Book a far-flung destination to somewhere exotic, turn off your phone, and relax. The money will still be there when you get back. For now, just breathe.
About The Author
Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.