Picture it: tonight’s lottery numbers appear on your TV screen, and one by one they match the digits in your EuroMillions column. Your excitement is growing. Your heart is pounding. Your adrenaline is pumping. After a few seconds of doubt and disbelief, you realise that you have won, that you have hit the jackpot and that, from that moment on, your life will never be the same.
What do you do?
A lot, actually.
For example, you open a bank account to create an investment portfolio.
But beware! Studies show that lottery winners are likely to end up bankrupt and unhappy if they don’t play their cards right. To avoid becoming a wealth statistic, consider these tips on how to make the most of your winnings without squandering them along the way.
1. Process your win before claiming it.
Once you’ve calmed down after the initial shock, you’ll want to get your hands on all that money. Not so fast, don’t jump into buying a luxury yacht just yet, clear your head and get your thoughts straight first.
“Relax, take a deep breath and make responsible decisions,” advises finance manager Nate Masterson. “Acquiring a large amount of money will increase your stress, which in turn leads to poor decision-making. In most cases, lottery winners have no experience in handling this kind of money, so it is crucial to seek financial planning help from a trained professional.”
2. Hire competent advisors
You may have experience managing your regular income, but when your net worth skyrockets, it’s a whole new ballgame, and you’ll want to have some strategic players on your team.
“The best thing someone can do if they win the lottery is to first identify a lawyer, an accountant and a reputable financial advisor,” explains Dock David Treece, a financial analyst.
“It’s best to have all of these advisors in the same room together, so they can work to structure the best strategies for claiming your prize and the long-term administration of that prize.”
3. Try to remain anonymous
A judge recently ruled that a mystery woman in New Hampshire could remain anonymous, not missing, after winning the $560 million Powerball jackpot because her privacy outweighed the public’s interest in knowing her identity, but that may not always be the case.
Have your newly hired lawyer research the requirements for claiming your lottery prize and make your plan based on his or her findings. If you have to fight to remain anonymous, do so. Otherwise, you’ll have everyone you’ve ever met (and some you’ve never met) knocking on your door.
“The more people who know how much money you’ve made, the more requests to see you you can expect,” says Julie Ramhold, consumer analyst at DealNews. “Plus, letting everyone know how lucky you are is putting a target on your back. Scammers, thieves, and worse, they might want to track you down to make your luck theirs.”
4. Hold on to your job … for now.
Many of us dream of winning the lottery just so we can have our moment of glory and resign overnight. In fact, according to a recent TD Ameritrade survey of 1,000 investors, 48.1 percent would clear their desks immediately.
However, you should continue with your business like the other 51.9 percent who said they would keep working, at least until the cheque clears. Being too hasty can work against you, especially if you have not yet been officially declared the winner.
5. Collect the full prize
It’s better to collect the whole amount at once, rather than spend 30 years waiting like a salary or a mortgage. Worse, if you die before the payments are finished, your heirs could be left with a hefty tax bill, as the government will expect an estate tax on the full future value of the remaining payments.
Collect it all at once, even if it’s less money than if you split it up in instalments, and you can distribute it at will as you see fit.
6. Pay taxes on your earnings
In addition to all your long-lost aunts, uncles, cousins and relatives who now suddenly remember you, you’ll have another set of eyes on your money: the IRS. The people who run the lottery will deduct a significant percentage of the prize and give it to the state before they hand over what’s yours.
Your good fortune has probably pushed you into the highest tax bracket and you have to contribute as a good citizen. Satisfy that responsibility before you cannot. Pay the lottery taxes as soon as you receive the bank transfer and move on.
7. Pay off all your debts and other money movements wisely.
Before you go shopping, make sure you pay off all your debts. Credit cards, cars, school loans and mortgages should have a zero balance if they can be paid off. You’ve literally earned the chance to start over and you can only do so once you’ve eliminated all of it.
If you’re now debt-free, you can make the smart money moves you always wished you could make, like buying a property in a developing area, going back to university, setting up an education savings plan for your kids, opening an investment fund or…what do you know, buying virtual clothes with crypto-fashion!
You are already the financial envy of all your friends; now be the envy of yourself.
8. Save enough money to survive in the future
Once you have satisfied your existing debts, turn your attention to planning for the future. Maximise your planning for the year and set up an additional retirement-focused investment account with at least one million euros, if your winnings allow.
If your winnings were not in the millions, put away 50 percent of whatever is left over after zeroing out your debts. At least this way, you’ll have a safety cushion if things don’t go according to plan in the future.
James Lake, vice president of Guardian Life, offers his approach to managing this.
“Add up your basic expenses and create a ‘personal pension’ to at least cover those expenses,” he says. “Imagine when you retire and know that, no matter how long you live, your basic needs will always be covered. How do you know you’re in an optimal situation? The risks in retirement are neutralised.”
9. Create a budget to manage your money
The secret to staying rich, as a lot of wealthy people will tell you, is to watch what you spend while watching your budget. You may think you have more money than you could ever spend, but lottery winners regularly end up bankrupt because they had no structure and were driven by millionaire impulsivity.
Chuck Mattiucci, vice president of Fort Pitt Capital Group, advocates sticking to a budget like the one you had before you were loaded.
“Even if you’ve made a large amount of money, it’s essential to develop a foundation and maintain a budget,” he explains. “It determines how much you can spend on monthly expenses, how much to save and how much can be allocated to discretionary or investment funds. Creating and maintaining a budget is one way to succeed and ensure that the money outlasts the excitement of when it came into your life.
10. Stay away from freeloaders
Move to a new neighbourhood, change and make your phone numbers private, and increase security on social media accounts. That’s what a good jackpot winner would do. Also weed out all those toxic people who were never around, but suddenly show their faces. No thanks.
Mattiucci adds: “Surround yourself with people who have your best interests at heart. When you have money, all kinds of people can come out of the woodwork to ‘support’ you, and, while not all of them will, some people will want to take advantage of you. Knowing about the ulterior motives of others is a difficult reality to face when you have high net worth, but it is necessary”.
11. Pack your bags and get out of your comfort zone.
A lot has happened in the last few weeks – winning the lottery, quitting your job, improving your finances and dodging all the money purchases – and now it’s time to relax. Book that exclusive experience that was too expensive. Pick the place you’ve always wanted to go, turn off your phone, hop on a plane (first class, of course) and relax. All the chaos you left behind will be there when you get back, but for now just enjoy the mojito.
12. Change the life of a loved one
An idealistic way to distribute your prize would be to gather 10 of my friends and family and give them life-changing cheques. This will eliminate any awkwardness that might have occurred if they asked for a loan or a gift directly, and, really, what’s the point of having all that money and the lifestyle that comes with it if the people you love can no longer keep up with you?
Have them all sign legal documents dictating how they would spend it: pay off all their debts, set up retirement and college funds and make at least one long-term investment, and, with the remainder, do as they please. A thank you note from you is enough.
13. Go shopping and indulge yourself, but don’t overdo it.
It’s easy to shop till you drop after claiming all that money, but it’s a trap – a fool’s game that will only satisfy your urges and put a big dent in your earnings.
Treat yourself to a few things that have been on your list forever, but try to stifle your desire to possess everything money can buy. It can be helpful to consult a confidant when you feel the urge to buy. A person you trust to tell you to “stop being a jerk, you don’t need this or that”. If you don’t have such a friend, make one. They’re great to have, lottery winners or not.
14. Veto some local charities to provide donations.
Better to donate to local organisations rather than corporate charities because there is always a chance that the latter will not use the money to the best of their ability. Whether this is true or not, think about investing in your own community, such as supporting the local animal shelter or food bank, or helping to fund a project that will improve the quality of life for residents, where you can see your money in action.
15. Plan a lasting legacy
What legacy will you leave when you die? As a lottery winner, you have the opportunity to make a real impact: after all, money makes the world go round, so try to live your best life with the luck you’ve been given, pursue whatever you’ve always wanted to pursue, write a book, become a nomad. Share the wealth, too.
Not with everyone, but at least set up an inheritance and trust fund plan with your immediate family (children and grandchildren, specifically).
But all this without pressure. If, when the time comes, hopefully very old, and you have six months to live and want to go big and with zero euros in the bank, that’s fine too. And, above all, enjoy the ride, your life will be a constant VIP lounge.
Where to Play Lotto Online
Now you are ready to win the lottery, but of course you need to play consistently and, of course, responsibly.
The traditional way of going down to the kiosk to get your ticket is still the most exciting, part of a ritual or one of the most ingrained customs. Coffee, pincho and lottery, not to mention Christmas tickets.
But we don’t always have the time for it and, let’s face it, playing the EuroMillions from home is very convenient. For example, from Spain, the LoteriasYapuestas.es website is very intuitive and allows you to keep track of your investment in the lottobolsa, save your historical bets, automate them and collect the prizes without having to visit a fixed establishment.
So, as they would say: Let’s play!