You hear all the time that you have better odds of being struck by lightning—perhaps even twice!—than winning the lottery. Where most major lotteries are concerned that’s true, but it’s also true that someone has to win these things. And shockingly often, those lucky winners seem to collect their winnings with no plan whatsoever as to how to enjoy them responsibly or make them last! If you haven’t heard the stories, you might want to read through Business Insider’s horrifying list of 21 lottery winners who lost it all. Some of the tales of loss and stupidity really are astounding.
“But I’d be smarter with it.” That’s probably what you think when you hear about lottery winners (or any millionaires for that matter) blowing fortunes. And perhaps you’re right. Then again, this is a pretty unique situation that you can’t really prepare for with any other scenario. Odds are most lottery winners don’t assume they’re going to blow their fortunes when they’re collecting them. And yet, it happens.
To avoid letting it happen to you—in the event you’re one of the lucky few who wins one of these things—consider the following basic but crucial tips for what to do and what not to do when you win the lottery.
What To Do
- Buy Something You Want – Most careful, conservative financial experts probably wouldn’t recommend making purchases right off the bat. But what dooms a lot of lottery winners is the need to spend and find gratification in high-end purchases. You’re probably going to feel this need the first time you see your newly inflated bank account—so go ahead and satisfy it! Just don’t go overboard. A single major purchase, whether it’s a new car or even just an extravagant meal out, can get it out of your system and help you to think more practically about the bulk of the fortune.
- Find Advisors – This is such a vital tip for lucky winners that Lottoland even included it in an article aimed at the people who win its prizes. The piece specifically recommends finding advisors on financial and legal issues, to help with some of the immediate concerns that will arise regarding the management of your new fortune. That financial advisor will be your new best friend.
- Hide The Money From Yourself – That may be a bit of a dramatic way of phrasing it, but the idea is still very important. Basically, you want to de-liquify the bulk of your winnings, so that they’re not necessarily accessible for you to spend on a whim. This, particularly in the first year or so, will save you from being reckless. Ideally, you’ll stash the funds in strategic, low-risk investments worked out with your financial advisor or a professional portfolio manager.
What Not To Do
- Go On A Spending Spree – This is the most obvious tip, but also the most crucial. Yes, you should treat yourself with a purchase or two to satisfy your immediate desire to put your winnings to use. But moderation is of the utmost importance. If you end up on an early spending spree, you may put a far larger dent in your new bank account than you meant to.
- Give Out Money – This sounds a little bit cold, particularly when considering friends and family. Interestingly enough, however, when the U.S. Powerball topped $1.5 billion not long ago, this was Mark Cuban’s advice to the winner. As he put it, you already know who needs help, and helping at your own discretion is fine. But people who come asking can quickly start to add up, and getting in the habit of doling out cash sets a bad precedent.
- Invest On Your Own – Unless you happen to have a background in investment, or you decide to take the opportunity to learn it, you absolutely shouldn’t trust yourself with managing your new fortune. Investing is absolutely a smart idea, at least for a portion of the fortune, but you can hire a professional to do it. Investing your own fortune is generally an arrogant idea that won’t get you anywhere, and that includes pumping funds into a friend’s startup business or something of the like. Always remain objective.
There’s plenty more to consider, but these basic tips should help you to avoid becoming another embarrassing horror story of a lottery winner who lost it all. Now you just have to hope you’re lucky enough to be struck by lightning!