If you happen to be one of the lucky few who have experienced a large winfall through the lottery, you should know that there are dangers associated with obtaining a large chunk of cash, and that you should be careful how – and where – you spend your money. Scores of lottery winners have lost big over the years after they made big mistakes with their winnings. Be careful in how you manage your newfound wealth, and be careful not to squander it away.
Here are some of the major obstacles that lottery winners must jump when the time comes:
1. Family & Friends
What is the first thing you do after winning the lottery? You call your friends and family to brag, that’s what! Excitement over winning a large amount of cash is certainly understandable, and who better to be happy for you than the ones you love?
Unfortunately, money often creates problems between people who love each other, even when it isn’t intentional. No matter your financial status five minutes ago; now you can buy whatever you want, and it is an incredible feeling. Of course, your friends and family might now see you as one big cash cow, and create problems for you in the future.
You might want to help people out, but be careful who you dish out money for. If, twenty minutes after collecting your check, you’ve promised half of it away, you’re already in over your head. And whenever people you know run into financial trouble, you’ll be the first person they call. Remember, its okay to say ‘no’ until you’ve figured out your own finances, and its okay to keep it for yourself, at least for a while. Money can cause resentment and hostility between friends and loved ones; why spoil your big day with all of that?
I know that if I won the lottery, I would be at the car dealership five minutes after signing the paperwork, buying a brand new car. Then I’d want to visit the realtor’s office, Best Buy, the mall, and a furniture store, in that particular order.
If that’s your plan, stop and think for a moment. You probably don’t know what to do with all that money, and you shouldn’t spend a dime of it until you have a plan. Hire a financial advisor who can break it down for you; figure out what goes in savings, what you’ll use for investments, and how much you have to burn right away. Let a professional put the situation in perspective for you, rather than making mistakes on purchases.
I know that you want to quit your job, and that you’re just aching to say those liberating words: “I quit!” But stop and think for a minute. What will you do instead of working? How will you survive if the money runs out? Is burning bridges really something you want to do right now?
Thtis really depends on how much money you’ve actually won. If you hit it big on a $300,000,000 pot, then yes, you can probably quit your job without any regrets. But if you won less than five million, I would consider your options. Figure out how much it will be spread out over twenty or thirty years, then make decisions. If you want a supplemental income, then keep your job. You’ll be happy you did.
A million dollars is a lot of money, right? Of course it is! A million dollars is more than you’ve probably ever seen, and certainly more than your annual salary. The problem is that you must put it in perspective.
Working with the million-dollar figure, break it down into more manageable sums. Without taxes taken out, that’s $50,000 a year for twenty years, $100,000 a year for ten years, neither of which is a terrible income, depending on where you live. But if you want to live “the charmed life” for twenty years, it won’t get you very far.
If you buy a house, a car, and furnishings, you could spend somewhere close to $250,000 or more. Subtract that from $1,000,000, and you have $750,000, which is a little less than $38,000 a year.
See how it breaks down? Take what you have, and be responsible with the money. Again, hire a financial advisor to help you make good choices as you figure out what to do. It will save you quite a bit of heartache in the long run.
Lottery winners are magnets for gambling addictions: “I won once, I can win again!” There is something to be said for stopping when you’re ahead, and excessive gambling can leave you bankrupt with no way to redeem yourself.
Gambling addiction is a real problem, especially in the United States, and every year hundreds of people fall victim to the slots in Vegas and the crap shoots in Reno. You don’t want to be a statistic, and you don’t want to squander your money. Now that you have a nest egg built for yourself, don’t blow it on gambling!
Lottery winners should be conscious of the dangers of monetary winfalls, and should do their best to assess the situation before making radical decisions. To protect yourself and your money, follow the following advice:
1. Hire a financial advisor.
2. Sit down and systematically figure out your earnings, your savings, and your investments.
3. Refrain from impulsive shoppings at the get-go; give yourself time to adjust to the newfound wealth.
4. Leave friends and family out of the equation until you determine how much you can safely give as gifts.