What would you do if the lotto numbers popped up on your TV screen, and all the digits matched those on your ticket? The first thing that is likely to happen is that your excitement will build, and your heart will start thumping as your adrenaline pump. After several seconds or minutes of doubt, you will believe that you hit the jackpot and from that point, your life will change.
So, what will happen when you win the lottery? Studies have shown that most lottery winners end up poorer and unhappy for failing to plan for the money. We do not want your happiness to last for a few days. The following tips will help you make the most out of the money without squandering it along the way.
- Process the win before you claim it
After you are certain that you won the lottery jackpot, you might want to get the money as soon as possible. Do not do that. Process the amount in your mind. Acquiring a huge amount of money will increase your stress level and in turn influence you to make bad decisions. Most likely, you will be dealing with a huge amount of money for the first time, so professional financial assistance from trained professionals will be of great help.
- Stay anonymous when possible
If the rules of your area permits, you have to stay anonymous because the many requests of handouts from friends, charities and relatives might surprise you. Moreover, many financial “experts” will do anything possible to reach you. Rules on winner anonymity vary from one state to the other. For example, the names of winners in New York are public records.
In other places, maintaining your anonymity might be possible. And depending on where you purchased the lottery ticket, you will have between 180 days and 12 months to collect the money. That is enough time to plot your plan.
- Hire a professional to protect the money
By hiring a trained financial planner immediately, you will avoid making bad decisions. Professionals will help you plan for your annual payments and how to handle lump sum amounts. They will also guide you on how to invest in profitable businesses, the amount to donate, and overall management of your finances.
Your financial team should include an accountant to help you with most IRS-related concerns and a lawyer to help you handle the many legal matters. Even though the professionals may charge a large amount of money, they will help you manage the money in a better way.
- Pay off your debts
Your next step should be to pay off all your debts. This might sound like a drag, but paying interest on your credit cards, auto loans, or student loans don’t sound good. If you are in a position to pay them off and avoid future interests, the better. Depending on the current debt and the amount you won, you have to pay off the entire debts to start enjoying your financial freedom. Alternatively, you can pay off some of your loans and invest the remaining amount.
- Make the winnings work for you
To create a passive income stream from your lottery winnings, invest some of the amounts. Most lottery winners choose to go on monumental shopping sprees, and they end up accumulating depreciating assets and debts. Eventually, they are declared bankrupt because they burnt their winnings very fast.
Invest the money in stable diversified portfolios of bonds, stocks, mutual funds and ETFs. With such portfolios, you will develop steady passive income streams that will make your winnings work for you and give you monthly returns to pay for your on-going expenses.
A 7-figure lottery winning may tempt you to retire early. Avoid doing that. Consider working at the current job for several years as a way to build your egg nest or look for another job to maintain your income flow.
- Treat yourself reasonably
You have to get yourself and your family something special as a way of celebrating the lottery winning. That does not mean that you have to replace the whole wardrobe with new designer clothes or buy a new car. Many mega-lotto winners foreclose on their homes because they do not consider the long-term effects of their spending.
The lottery winnings may be enough for the million-dollar home down payment, but you have to consider the monthly mortgage payments, upkeeps, and property taxes. Instead of going for the multi-million properties, go for something you have always wanted and yet affordable.
Your dream of winning the lottery jackpot is a good thing. The idea will help you get answers to all questions relating to what you need in life. But after winning the money, avoid making rash decisions. Engage the professionals when planning for the money so that you can invest wisely. Avoid spending money on expensive items.