The lottery might seem like a panacea to life's problems, but stories of lottery winners who end up broke or in tragic circumstances are readily available. Whether it's a small jackpot or a life-changing lottery winning, proper management of money you win through the lottery can make a big difference. Spending all of your money too quickly or making promises to loved ones that you can't keep can quickly deplete the jackpot of a lifetime.
Protecting Your Privacy
Lottery winners are sometimes faced with a never-ending cascade of long-lost relatives, needy friends and distant acquaintances asking for money and donations. If your state allows you to stay anonymous, request that your name not be shared. Keeping your newly discovered wealth a secret until you can get a financial plan together protects you from manipulative people who want to extort every last penny from you. If you can't keep your winnings private, stay at a location other than your home until the excitement of the news dies down, and avoid making extravagant purchases that can draw attention to yourself. If you are inundated with phone calls and requests, unlist your address and phone number or change your number altogether, if necessary. Steering clear of making commitments to people you hardly know can be an important first step in protecting your financial health.
Solid financial planning can help you manage your money for the long-term. Before you make any big purchases, talk to a tax professional who works with wealthy people. Your accountant can give you an idea of how much money you need to pay in taxes and offer options for tax-savings accounts. Your next stop should be to a financial planner, who can help you establish interest-bearing accounts that might even mean you can live off of the interest of your winnings. Your financial planner can also give you a general budget that provides you with a rough approximation of how much you can spend each year to maintain your wealth.
Paying off your debts can help you live a relatively secure lifestyle, even if your lottery winnings are modest. And if you hit a big jackpot, avoid going into debt to pay for anything. There's no reason to have a mortgage or car payment when you can pay cash, and paying upfront ensures that, should you lose your money, you won't be left homeless.
Forbes advises lottery winners to avoid making any big purchases for the first six months or so. If you need a new car, stick with a budget model; if you want to move, rent or buy a modest home first. If you're not used to having money, an impulsive splurge could quickly burn through your winnings, and you might find that you don't even want what you've bought. Pacing yourself gives you enough money to set up trust accounts for children and loved ones or to plan for starting a charitable foundation.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.