Disclosure: This post may contain affiliate links, meaning if you decide to make a purchase via my links, I may earn a commission at no additional cost to you. See my disclosure for more info.
Would winning the lottery be everyone’s preferred route to richness? Yahoo Finance reported in 2023 that between a third and 70% of lottery winners will go bankrupt. However, this is thoroughly avoidable. We can forgive some people; they may have never received guidance with money or simply grew up with none. If you were to win the lottery tomorrow, there are steps you can take to consolidate your winnings into lifelong security.
1. Double Check Your Ticket
A viral video from Texas in 2022 shows the moment a father thinks he has won the lottery, only for reality to bite. In a heartbreaking scene, Michael Mirelez jumps for joy as he enters his son’s bedroom, only to realize he had misread the ticket, causing the opposite reaction as his son consoles him. Mirelez’s actions remind us you cannot celebrate a lottery win until the balance is in your account.
2. Keep Quiet
One can only imagine the deluge of requests a lottery winner gets if their name is published, so it makes sense to keep quiet. However, psychotherapist Caron Barruw explains how lottery winners can feel conflicted in a Metro UK article. “Often, if they have kept it a secret, people resent it, yet if they do tell, they’re seen as changed and different anyway,” says Burrow. “Sometimes there is no winning!”
3. Choose Your Payment Format
The next step will be deciding how you want your money — a decision only a bucket full of human experience. There are two options: lump sum or annuity payments. AARP says that the latter will pay more in the long run. Citing 2023’s Powerball jackpot of $1.725 billion, a winner would pay 37% in taxes for the lump sum. Meanwhile, the annuity option, paid over 30 years, would yield $1.09 billion for the winner.
4. Pay Your Debts
Indeed, a lottery winner must first sever all financial loose ends to enjoy their winnings. Like a Lannister paying their debts, a lottery Lannister should pay back anything they owe — just think of the joy of seeing your student debt zeroed in one fell swoop.
5. Don’t Be Frankie Carbone
Like that post-Lufthansa heist scene in Goodfellas when Frankie Carbone’s wife shows up to the party with a new mink coat, winning the lottery doesn’t need to be a sprint. Frankie and his wife had to leave only because they didn’t follow instructions. Going wild with extravagant gifts and purchases will only set the tone for the entire amount. Take time to decide if you really need that third house.
6. Follow the Twenty Percent Rule
Winning the lottery must be sobering, allowing you to learn who your real friends are. Although the temptation to help true friends will be strong, there is no obligation to help anybody. Not that I have any experience in the matter, but I would allocate a certain percentage to friends and family, making a list of those I wish to help beforehand.
7. Invest Wisely
Too many lottery winners immediately think about what they want to buy instead of deciding what they want their money to do for them when they realize that $1,000,000 invested with 7% compound interest over 25 years would be worth five times the original investment.
8. Take a Financial Planning Course
Now you are freshly minted and no longer time-poor, so why not learn about the asset you now have? While there are dozens of Ivy League-affiliated courses to enroll in, websites such as Udemy offer Personal Finance 101. The temptation to go and spend will feel like a priority; understanding what you can do with this new-found resource should be one.
9. Keep Working
Of course, the whole point of entering the lottery is to leave work forever, so if you win the lottery and quit immediately, it isn’t a crime. However, they are convincing if we analyze why we shouldn’t leave work instantly. You might want to keep your win a secret; moreover, you can now go to work each day with the metaphorical Golden Ticket of zero pressure; furthermore, let’s not forget the positive impact of a daily schedule. Then again, you may hate your job and everyone in it and make a wild exit like the warehouse syndicate in The Office: An American Workplace.
10. Get Therapy
Keeping your sanity will be an uphill struggle with a sudden win, so seeking psychological guidance is important. A BBC interview with Robert Pagliarini, author of the self-help book Sudden Wealth: 12 Principles to Transform Sudden Wealth Into Lasting Wealth, reveals that you need a good team in place from the outset. Pagliarini also advises that “a therapist might also be helpful as many lottery winners face unexpected stress or anxiety if their relationships sour after winning.”
11. Donate to Charity
Whatever the annual exclusion limit is at the time of winning, a lottery winner can gift anyone up to that level without incurring tax liability. Now is the time to think about causes you follow or even to set up a tax-friendly charitable trust. Furthermore, as a lottery winner, you can donate up to $13.61 million (for 2024) “over your lifetime without paying a gift tax,” says Turbotax.
12. Spend Some Money
Now, we have reached the moment we can enjoy guilt-free. I like to think we all have a soundtrack in mind for our first post-lottery shopping spree. Of course, most of us will never get to hear it, but mine would be “Eye of the Tiger” by Survivor. In all seriousness, this is when all those fiscal fantasies can be realized as you finally get that dream house, car, or island (if you won the Powerball jackpot). Be warned: shopping produces dopamine, which can be highly addictive, says Psychology Today.
13. Don’t Flaunt It
Okay, maybe a little, but only when nobody’s looking. There is a paradox regarding a lottery winner flaunting their wealth. For those shallow enough to believe their financial status defines their persona, this tactic only works if nobody knows you won it. Furthermore, if you know you didn’t earn the money, can you still feel proud of your achievements? In any case, flexing one’s income is bad for mental health, says a study published in Sage Journals.
14. Hire a Dream Team
Coming into a large win means a complete sea change in your living standards, financial arrangements, and personal safety. Therefore, once you’ve transferred your winnings, it’s time for the “dream team” of a security manager, a tax attorney, and a financial advisor, among others, says Nasdaq.
15. Start a Scholarship Fund
Those who don’t choose to buy an island, hydrogen-powered yacht, or nightclub with their lump sum can plan a different pathway to enlightenment. Now the annuity payment will have their life set up, they can think about their legacy. Imagine having the power to change lives with a fraction of your wealth. Warren Buffett’s Susan Thompson Buffett’s Foundation is one of many avenues he has chosen for giving back to society.
12 Keys to Embracing a Frugal Lifestyle
To some, living a frugal lifestyle might be sessions of extreme couponing. For others, never paying full price for anything could be a commitment. But what does it mean to live a frugal lifestyle? Are there general rules to follow, or is there an assortment of ideas you cherry-pick from? The first step is to understand what living frugally really means.
12 Keys to Embracing a Frugal Lifestyle
14 Things People Are Ashamed They Have to Do to Save Money
Explore 14 surprisingly embarrassing things individuals do to tighten their belts financially. Have you ever found yourself resorting to outlandish tactics to save money, which makes you cringe to admit it? A certain Reddit user was eager to uncover the depths of extreme frugality people have plunged into. Look below for a compilation of some of the most intriguing and noteworthy responses from the original post’s vibrant discussion.
