How To Manage Your Money After Winning The LotteryTweet
You buy lottery tickets with the hope of becoming an instant millionaire. But if that dream had to become your reality tomorrow, would you be prepared? Would you know how to manage your millions?
Chances are that you already have a list of ways you would spend the money, but have you thought about how you would grow that money and secure your future? You wouldn’t want to land up a lottery failure story and lose all your winnings. You would want to invest and save wisely, to make sure that your money increases instead of being depleted. Sure, that doesn’t sound as exciting as quitting your job and travelling the world, but it’s the smart and sensible thing to do.
If you bought your winning lottery ticket in a lottery booth, you should immediately sign it and lock it up in a safe place. If, on the other hand, you bought your lottery ticket on-line at a site such as theLotter.com you don’t even need to do that, because the on-line lottery service provider will do it all for you. However, when it comes to managing your winnings, it’s up to you to get all your financial ducks in a row.
1. Hire a legal and financial advisor – The more money you win, the harder it is to make the right financial decisions, so it is always a good idea to get an attorney and financial advisor involved from the moment you discover that you’ve hit the jackpot or won a large sum of money.
2. Lump-sum versus annuity payments – The lump-sum option is a considerably lower amount of money than the jackpot that you won, but if you go this route and invest wisely, there is potential for you to grow your money to an even greater amount than the jackpot itself. The best thing to do is to consult a tax expert before you decide, because there are different tax implications for each option. The upfront cash option requires immediate tax payment, however the annuity payments are only taxed at the time of each payment. There are pros and cons to each of these options and you have a window period to analyse each option and decide which is the most suitable for you. It’s recommended to do this analysis with a professional.
3. What are your net winnings? Calculate what your post-tax money will work out to. Find out what the local tax deductions are and work out how much you will be left with.
4. Say goodbye to debt – Pay off all your debts and bills before you do anything with the money. Settle all debts before you spend a cent and you’ll free yourself from creditors and potential legal claims.
5. Set a budget – Once you’ve paid off all debts you should assess how much money you need for daily living. Again, it’s always best to work together with a financial planner. What’s crucial here is to resist the temptation that comes along with lots of money. Try to keep your lifestyle as it has always been. In fact, you should make an effort not to make any sudden life changes during the first six months after a big win. For example, don’t quit your job, splash out on a mansion or Lamborghini, or go on a wild shopping spree. Learn to say no – not only to others that come begging for handouts, but also to yourself! That’s not to say that you can’t spoil your newly-wealthy self. Just keep your spending in check by putting a limited amount of funds aside for your spending pleasure. The golden tip of growing wealth – only spend income and not principal!
6. Invest wisely – Work out with your financial planner which investments are best for your life plan. One tip is to try put most of your winnings into a tax-free or tax-deferred investment. Invest in a diverse portfolio so that you strike a healthy balance between risk and security. Your main investments should be bonds, stocks and fixed investments – all safe investments. Not only should you have diversity in investment classes, but you should also have varied types of investments in each class. Even though you now have money to play with, riskier investments, such as playing the stock market, should be kept to the minimum. Why run the risk of losing money when you already have more than you could ever need? More importantly – steer clear of any investments that seem too good to be true. Always consult your trusted financial advisor before making any financial decisions!
7. Protect yourself and your assets – With great wealth comes great responsibility, and one of your biggest responsibilities is to protect your wealth. This is especially relevant for big jackpot winners that have not remained anonymous (whether by choice or by law). There is always going to be someone out there who will see you as an easy money-making target. Creditors, undeserving lawsuits, and even unscrupulous family members all pose a threat. Let your financial and legal team help you set up asset protection strategies, which make it virtually impossible for anyone to get their hands on your money.
8. Be philanthropic – Not only does donating to charity make you feel good, but it also has its tax benefits. You will receive tax deductions for making charitable donations. But you need to strike a healthy balance even when it comes to generosity. Set yourself a donation budget so that you don’t land up giving too much of your money away. It’s recommended to set up a fund so that you can manage your donations.
These money management tips are sound advice for any new millionaire, no matter how you earned your fortune. Whether you won the lottery or launched a successful new business, this advice will help you grow your money and will guarantee you (and your offspring) a secure and prosperous future.