Winning the lottery is a dream come true for most people. But, for some, it can turn into a nightmare if they are unprepared for the large-scale changes that their winnings bring. How can you avoid a myriad of problems now that you've won a big cash haul? Here are tips to save the day.
Stay Anonymous. Some states allow winners to remain anonymous, while other states require them to pick up the money in person. If possible, it's best to remain out of the spotlight. Why? With the acclaim can come con artists, scammers, thieves, and other greedy souls. Being inconspicuous helps you avoid adding to your pressures and problems through fame. This also often means that you should continue life as normal until you make a firm plan on what to do with your money.
Meet With a Tax Advisor. The first thing you're likely to face when dealing with the finances of your winnings is the tax man. There are some decisions you can make before you accept the money that will either help your current tax situation or help it down the line. For example, the decision between taking a lump sum and taking an annual payment may mean a lower tax rate over the long term. In addition, knowing how your taxes will be affected by things like charitable contributions and investments will help you make wiser decisions.
Work With a Financial Planner. Once you have the taxes out of the way, it's time to start making a plan of how to spend and save your money. Look for a financial planner who specializes in wealth management, and explain to them your sudden windfall and full financial picture aside from the winnings. If you live in a small town, it may be wise to work with a financial professional in a nearby metropolis for the sake of anonymity. Your financial advisor or planner can help you determine what the best mix of investments is for your own risk tolerance, how much you want to give away, and what types of business investments you may want to pursue. Ask him or her about how best to protect your assets from legal problems, too.
Be Patient. One of the biggest mistakes many lottery winners make is to jump into major decisions and lifestyle changes. Instead of blowing a bunch of money on cars, houses, and boats, act prudently for the first 6 to 12 months. Pay off your debts and put the maximum into tax-free retirement accounts. Place your money into a diversified, relatively safe portfolio and see how much is generated for you to live on. It's a good idea to write out a budget based on this income rather than spend the principal with wild abandon. As the dust settles, you will be in a better mindset to decide on more complex lifestyle changes.
By following these few steps after winning the lottery, you can help ensure that the money last for years to come and brings you greater and greater happiness.
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