When we think of the lottery, we dream of a carefree and purposeful life. And, in a way, that’s true: winning the lottery can give you enough of a financial cushion so you don’t have to work for the rest of your life and can indulge in all the treats you’ve always wanted. But like everything else in life, even winning the lottery is not all roses: there are many things to consider before we start spending money like there’s no tomorrow.
Surely, we have all heard stories of people who won the lottery and were left bankrupt after spending all their money, or who were harassed by the claims of their friends and relatives. Unfortunately, some of these things happen when the first thing we do when we win the lottery is to get carried away.
But there are also great success stories after winning the lottery. For example, the case of Cynthia Stafford, who, after struggling with the difficulties of taking care of her brother’s 5 children and her father, started playing the Mega Millions lottery and, finally, 3 years later won a prize of 112 million dollars, with which she founded her own film production company, managing to carry out several acclaimed productions. Or the case of Neal Wanless, a cowboy from South Dakota who, after finding himself broke and living with his family in a trailer, bought a Powerball ticket at a gas station and won a prize of 232.1 million dollars. He managed to effectively invest that money and buy a new ranch that, today, has a market value of $41 million!
Winning the lottery is not an achievement that many people accomplish. However, if you are among the lucky few, we have some simple financial tips and advice to help you navigate your new life. There are particular courses of action and many wonderful things that a lottery winner can do, so this guide explores the do’s and don’ts for lottery winners.
What to Do After Winning the Lottery
First, the most important thing before taking any action: if you win a large sum, you should immediately contact a lawyer to explain how to effectively claim your winnings and what to do with them. If you win more than $1 million, you should consult an accountant, a financial advisor and a lawyer to properly manage the size of the pot and calculate how much tax you need to pay.
Once you have done this, other vital things to do if you win the jackpot are:
- Make financial decisions before claiming the prize.
After winning the lottery, all you can think about is getting your hands on the money. However, take a deep breath and make smart decisions before claiming your prize. Depending on your state’s lottery rules and regulations, you will likely have a certain amount of time to submit your winning lottery ticket and claim your prize.
Winning a large sum of money will surely increase your stress, leading you to make bad decisions. Most lottery winners have little experience in handling large sums of money; therefore, they should obtain financial planning advice from a competent expert.
- Maintain your anonymity.
Getting in the local paper and announcing that you’ve won the lottery is great, but you’re also putting a huge mark on your back. Remaining anonymous means that only people in your close circle really grasp how things have changed. Many lottery winners have suffered the harassment that sometimes comes with too much media attention and, unfortunately, not everyone around us cares about our well-being. There have been situations where lottery winners have been harassed by their acquaintances to take advantage of their winnings. Let things flow naturally, go about your daily life and stick to what you know. Don’t open the package if you’re not sure what’s inside.
- Set a budget.
If you thought winning the lottery meant never having to worry about money again, think again! Lottery winners, celebrities and professional athletes demonstrate how easy it is to spend big money. While you won’t have to worry about buying your favorite coffee, you may have to stick to a budget to ensure your lifestyle is sustainable in the long term.
- Seek professional financial assistance.
You will need the advice of at least two people after you win the lottery: a financial planner and a lawyer. It is best to have all of these advisors in the same room so they can collaborate on the best tactics for claiming your prize and managing it over the long term. Seeking the best financial guidance is one of the best ways to manage your lottery winnings to create generational wealth.
- Find out more about tax payments.
Although perhaps not everyone knows it, lottery prizes are subject to tax, which can vary depending on the total amount of the prize. It may not be immediate, but the taxman will come knocking, either because of what you do with the money or because you won it in the first place. Remember that everything in life is subject to rules. Make sure you do your research and don’t overdo it.
- Clear any unpaid debts.
Everyone has a small amount of debt weighing them down here and there, whether it’s ten dollars or the college debt we couldn’t pay off. It’s not an overwhelming issue, and it’s certainly not one to focus on, especially if you’re getting rich. But it’s always best to start a new life with a clean slate, so it’s probably a good idea to take the opportunity to quickly pay off all your debts.
- Donate to a charitable organization.
Donating money to a good cause is one of the main things lottery winners spend their money on. Consider investing in your local community after winning the lottery. It can be as easy as contributing money to a neighborhood food bank, charity or animal shelter.
What to Avoid After Winning the Lottery
Just as there is a list of things to do after winning the lottery, there are also actions that are not worth doing. These include the following:
- Don’t make drastic lifestyle changes right away.
You probably want to quit your job, buy a car, a house or go around the world after winning the lottery. While these things may become options, you don’t need to make significant lifestyle adjustments overnight. Instead, make modest changes, develop a strategy and reflect on your financial values.
- Keep it a secret.
You will want to maintain as much anonymity as possible. You may have always wanted to be “rich and famous”, but now is not the time to start testing that dream. In the meantime, consider deleting your social media accounts and changing your phone number.
- Don’t try to please everyone.
After winning the lottery, friends and relatives will bombard you with various financial requests and demands. This does not mean that you should not handle these requests individually. You may decide to use some of the prize money to support some of these causes, or perhaps you can engage the services of a team of trusted experts who can help you determine the effectiveness and legality of these demands.
- Remember to pay your taxes.
Although winning the jackpot comes with certain responsibilities, you are still obliged to pay taxes like everyone else. Remember that it is always better to do things in a timely manner, rather than waiting for them to pile up and hit us all at once.
Winning the lottery is a life-changing opportunity of a lifetime, but it also has its drawbacks and temptations. Although your odds are extremely slim, if you ever win a large sum of money in the lottery, be sure to seek the advice of expert financial advisors who are looking out for your best interests.