Who doesn’t dream of watching that late-night lottery drawing and looking down at the ticket in your hands to find…you’ve won!
If you have been so lucky, keep your celebrations in check for the moment and consider how your life is about to change. Any Google search can yield loads of stories of lottery winners who got rich quick and got poor faster. Don’t be one of them. Taking the time to really think through what you’re going to do next can make all the difference in your financial future.
Keep it Quiet. It’s unwise to announce to the world you’ve won the lottery until the prize has been claimed and you have a solid plan for how you will manage that money. Keep your ticket in a safe place where no one will steal it, or mistake it for garbage and throw it away.
Don’t Wait Too Long. There is always a time limit on when you can claim your winnings. Find out how much time you’ve got and plan accordingly.
Talk to Experts. How will you protect yourself and your newfound money? Assemble a team to help. You’ll need a lawyer and a financial advisor; so, without tipping anyone off, ask your friends, family, and community for references. Interview the most promising candidates, looking for those who handle high-income clients and, optimally, those who’ve dealt with lottery winners before.
Prioritize. You probably want to quit your job and pay off your mortgage. But do you also want to help family? Start a business? Give to charity? A good financial advisor or CPA can look at your existing finances and the coming lottery winnings, and help you plan out the best way to meet your goals. Consider also how you’ll want to structure your estate, so that your money will go where you want when you are gone.
Lump Sum or Periodic Payments? Once you go to lottery headquarters to collect your prize, you’ll be given the choice of a lump sum up front, or periodic payments for a number of years. If you take periodic payments, you are counting on the lottery authority (usually the State) to invest your winnings for you. You may think that you are a better investor than the government, but don’t overestimate your ability. Another option is to take the periodic payments, and then sell that payment stream to someone else. Again, a good financial advisor should help you figure out what’s best for you.
Lay Low. Once you claim your prize, the lottery authority will release your name to the public. Prepare for the onslaught. Family, even those you’ve never met or haven’t talked to in years, will appear, asking for money. Salesmen will come calling, as will charities. You can’t save the world, so you need to protect yourself. Get a new, private phone number. Get a P.O. Box so that you don’t have to give out your home address. Most importantly, learn how to say no.
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