Many people dream of winning the lottery and think about exactly how they would spend a jackpot. While the odds aren’t great that you’ll win a lottery drawing, it’s still possible.
Winning millions of dollars sounds exciting. Many believe that winning the lottery means being financially set for the rest of their lives. Unfortunately, it’s possible to have financial troubles even after winning the lottery. That’s why guidelines for spending are important.
What Not To Do After Winning the Lottery
Before you begin spending your lottery winnings, it’s important to take some financial precautions. A few nuggets of cautious wisdom could go a long way toward helping you hang on to your money.
Don’t Tell Anyone
When you find out you won the lottery, you probably have a list of people you want to tell. Pause and place that list on hold for a little while. If people find out you won the lottery, someone will have a hand out asking for cash.
Of course, every rule has exceptions. There are exactly three people you can talk to about your lottery winnings:
- Your spouse
- Your attorney
- Your financial advisor
Your lottery winnings aren’t going anywhere fast. Of course, there’s usually a limit on how long you have to claim winnings, but it doesn’t have to be today.
First, talk to a tax consultant about how you should claim your winnings. You may have the option to take one lump sum or smaller payments spread out over a designated period.
Don’t Assume You Can Manage It
How have you managed your current budget? Chances are, there’s room for improvement. Having more money doesn’t suddenly make you equipped to manage a larger budget.
Do you know if you can afford to spend $15,000 per month with your lottery winnings? You’re probably not sure. This is why it’s so important to seek out professional advice.
Don’t Spend Any Money for Six Months
You know the saying that you shouldn’t make any big decisions like getting a new haircut when you’re under stress? The idea is the same. The overwhelming excitement of winning is too fresh.
You’ve got ideas for what you want to spend your money on — places you want to travel, your dream home or car and everything in between. Wait to spend your money until after these thoughts have calmed and you’re able to work out a plan for your winnings.
Once you have a plan in place, you can responsibly make some of your dreams come true without jeopardizing your financial future.
Don’t Quit Your Job
Maybe six months from now, you’ll decide you have enough money to live on, but today is not that day. Making brash decisions can come back to bite you later.
Until you know exactly how your winnings may pan out for your future, it’s important to continue working.
Don’t Wave Goodbye to Your Budget
You may think the possibilities are endless, but even your lottery winnings have a limit. Even if your budget’s capacity has increased, it’s still smart to manage your money instead of spending aimlessly.
Many lottery winners in the past ended up spending all their money because they didn’t have a budget. Don’t let that happen to you. Set a budget now and practice financial responsibility.
Don’t Remain Stagnant
You haven’t just been given a load of cash — you’ve been granted a step on the road toward financial freedom. Successful financial experts suggest that you put your money to work. Why stop at however many millions you won? Invest your money safely and live off the interest.
What You Can Do With Your Winnings
When it’s time to take action and decide how to invest your newfound wealth, you’ll still want to proceed cautiously and be sure you make smart choices. Consider a few basic steps to help you take care of your money and your well-being.
Pay Off Your Debt
It’s important to know the difference between spending money and making an investment in your future. Chances are, paying off your debt won’t make a huge dent in your lottery winnings.
Debt comes with high interest rates, and the longer you allow debt to rotate on your credit, the more you’ll pay in fees. Consider all the areas where you might owe:
- Car loans
- Personal loans
- Credit cards
- Medical debt
- Items you’ve allowed to go on your credit
Pay them all off, and you’ll have some wiggle room in your old budget to relax. After you eliminate your debt, stick to your household budget.
Paying off your debt will give you a sense of freedom as that burden is lifted from your life. But it’s still not time to spend any of your lottery winnings on the fun things you have on your mind.
Get a Second Opinion
It’s important to talk to a financial advisor and an attorney. But don’t stop at talking to one person. Talk to several. Listen to your gut instincts as these professionals advise you on your lottery winnings.
While your financial advisors and attorneys may be well-intentioned, their advice may not be right for your needs. You could even fall prey to a bad deal from someone you trust. By seeking multiple opinions, you’ll have a more well-rounded perspective and can make better decisions about your financial goals.
If you have doubts, move along until you feel confident with the people providing you with guidance.
Plan Charitable Donations
A great way to offset taxes on your winnings is to give back. A tax advisor can help you with theoretical scenarios that outline how much you can save in taxes by donating to qualified charities.
Not only can you save yourself money at tax time, but you can also spread the love and help others with your good fortune.
Becoming a millionaire doesn’t change who you are as a person. Your lifestyle doesn’t have to change if you don’t want it to.
Protect Your Assets
If you don’t have a will in place, now is a great time to create one. You’ll also want to check on your state’s tax laws to ensure that your money is well protected from scammers.
You may not think it could happen, but someone from your past, such as an ex-spouse or coworker. may decide to pursue taking some of your winnings in court.
Monitor Your Stress
You may think that winning millions of dollars causes your stress to evaporate. Unfortunately, more money can mean more stress. Do your best to maintain your physical and mental health:
- Stay physically active.
- Maintain a healthy diet.
- Spend time with your friends and loved ones.
- Continue pursuing your hobbies.
- Seek counseling if needed.
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- State Farm. "What to Do If You Win the Lottery."
- CNBC. 2019. "What Financial Experts Say To Do if You Win the Lottery."