It’s no secret that winning the lottery comes with many financial responsibilities. If you’re a winner, it’s important to take some precautionary steps to protect your finances and prevent the “lottery curse.”
Avoid making brash decisions before you’ve hammered out a wealth management plan and set financial goals. Here are six tips for what to do when you win the lottery: 1. Pay Off Debts.
1. Don’t Quit Your Job
One of the first things that many people do when they win the lottery is quit their jobs. However, this is a big mistake that can lead to financial disaster. Keeping your job allows you to have steady income, pay off debt, and stay healthy financially. It is also important to keep in mind that winning the lottery is a huge change and you may find it hard to adjust to life as a millionaire. It is important to have a support system, eat healthy, exercise and seek counseling if needed.
It is also a good idea to work with a financial team that will help you make your money last and plan for the future. This will include a tax accountant, attorney, financial planner and others. They will help you stay compliant with your state’s laws and ensure that your money can last a lifetime.
2. Set Financial Goals
After you win the lottery, it’s important to set financial goals. This can help you stay on track with your spending and avoid making rash decisions that could ruin your life. It’s also a good idea to hire a financial professional. They can provide ideas on where to invest your winnings and how much to save for the future.
Once you’ve figured out your financial goals, it’s time to create a budget. It’s important to be realistic about how much you can afford to spend and save. For example, you might want to buy a new car or a house, but be sure to factor in the mortgage interest and property taxes. It’s also a good idea if you have debt to pay it off before you start spending.
It’s also important to decide whether you want to receive your prize as a lump sum or in annuity payments. This decision will impact how much you’ll get, when you’ll get it, and the taxes you’ll owe.
3. Keep Your Winnings Confidential
The first thing you should do when you win the lottery is keep your winnings confidential. This will prevent you from becoming inundated with people who want to borrow or ask for money, as well as protect your privacy.
The rules on this vary by state, with some requiring winners to come forward publicly and others offering them the opportunity to stay private. Kurt Panouses, a Florida-based lottery lawyer, says his clients are often thankful for their ability to keep their winnings private. This helps them avoid safety concerns, legal questions and awkward conversations with family and friends who view them as a source of money.
To maintain your privacy, make sure to take multiple photos of both sides of the ticket and keep it in a safe or lockbox, according to State Farm. Experts also recommend changing your name and deleting all traces of you online, if possible.
4. Hire a Tax Accountant
One of the most common mistakes lottery winners make is failing to hire a tax accountant. This is a mistake because even if you win millions of dollars, it’s important to understand that your money is finite and needs to be managed carefully.
A tax accountant will help you determine how much taxes will be taken out of your winnings and will help you plan accordingly. They can also help you decide whether to receive your prize in a lump sum or annuity payment. The latter option is more beneficial for winners because it will allow them to regulate their spending habits by receiving a small amount at a time.
An accountant can also help you find a good financial advisor to manage your newfound wealth. A financial advisor will help you create a budget, discuss your goals and dreams, and provide counsel on how to achieve them with sound investments and strategies.
5. Talk to Several Financial Advisors and Attorneys
It’s important to have a crack team of financial experts in your corner after winning the lottery. They’ll help you figure out how to get your money, who to tell and what to do with it. They’ll also provide guidance on how to manage your newfound wealth and avoid making any costly mistakes.
While it may be tempting to shout your victory from the rooftops or throw a big “I won the lottery” party, it is best to keep it quiet and avoid making any dramatic changes to your life immediately after winning. Too many lottery winners wind up losing it all to extravagant spending and bad investments, according to Forbes business and finance magazine.
Before making any big purchases or investing your winnings, you should pay off all your debts. This includes student loans, a second mortgage, credit cards and car payments. Getting rid of all your debt will make you more financially secure and enable you to invest more in your future.
6. Create a Budget
Winning the lottery can be a dream come true, but it’s important to remember that it’s still just a windfall. The money doesn’t just automatically grow on trees, and many winners end up bankrupt within a few years. To avoid this fate, it’s crucial to create a budget and follow some guidelines that have been established by financial experts.
These tips may seem simple, but they’re essential for anyone who wins the lottery. By following them, you can keep your winnings safe and put them to good use.
Another important tip is to stay silent after you win, unless your state requires you to hold a press conference or give interviews. This will help you protect your privacy and prevent people from begging for money. Moreover, it will also keep you safe from the pitfalls that have plagued other lottery winners, like extravagant spending and bad investments.