The jackpot of the Powerball for Wednesday January 13th has expected winnings of over $1.4 BILLION… Isn’t that crazy? What would you do with so much money? I have never had huge lump sums in my life, it is more like money has been piling up slowly but surely, and for as much as I would like to think I wouldn’t go crazy, I’d probably, just a little bit… So what to do if you actually win the lottery?
You have probably put a ton of money in tickets already, and your chances to win twice are close to nothing. So do your finances a favor and stop playing. If you find it hard, think about what playing does to you. Is it for the thrill of winning? You’ve won already. Is it to pass the time? Find another hobby. You have money now.
Again, before you go all crazy, do yourself a favor and do nothing. For a week, for a month, for as long as you need this money craziness to go over. OK, if the fridge was empty, go and buy something nice to eat. But stay away from luxury car dealerships, realtors and anything that costs more than a few hundred.
That car will still be there a month from now, if you decide you still want it after sleeping on it 30 times.
Ever wondered who would remain your friend if you became rich overnight? Everyone. And you would even have new friends who love to party with you and ask for loans. You don’t want that. Tell a few close friends you can trust, or keep it between you and your family for the time being. You don’t want that to be the first thing people learn about you. After all, you’re pretty much the same person you were yesterday.
Pay off debt
That credit card balance? That personal loan? Your mortgage? Yeah, pay it all off. The bank won’t give you a better interest rate on your savings than the one you’ll get for paying off your debt. And it is a nice feeling, not to owe anyone anything.
What? Didn’t we just agree you would not buy that Ferrari? Yes, we did. But not that you have paid debt and are in a much better position than you have ever been, you deserve to celebrate. Again, try not to go overboard. Set an amount of the jackpot, 10% for example, that you will allow yourself to spend guilt-free. Do whatever you want with it. And with the next 90%…
Many people who win the lottery just end up broke, or worse, filing for bankruptcy, for wanting to live a life well above their means. Sure, maybe tomorrow you can buy a $5,000,000 house cash. But do you know how much that costs in taxes, maintenance, utilities or housekeeping? Enough to kick you back to where you came from if you are not careful.
Instead, if you invest and withdraw every month a portion of your nest egg, like the safe 4% withdrawal rate many experts recommend, your $5,000,000 can last forever, giving you a $16,666 windfall every month. I bet you can live on that?
Seek financial advice
So far, you have probably been managing your finances the best you can. That is probably not enough now that your net worth skyrocketed overnight. Look for a professional to help you make the best decisions in accordance to your long term financial goals. A fee-only financial planner will have your best interests at heart as he won’t be allowed to accept commission from any product he advises you to invest in.