When we hear news stories about how the lottery has surpassed the $100 million mark, it’s fun to dream about what we might do with that kind of money if we won (even if we don’t end up buying lottery tickets!). Buying a mega-mansion, vacation homes, luxurious trips around the world, private jets, and going out to fancy restaurants are typically at the top of the list, though some people decide to donate most of their winnings to causes and organizations that are near and dear to their hearts.
What You Should Do Immediately After Winning the Lottery
If your lottery dreams become a reality and you suddenly have a ton of money coming in (whether it’s $25,000 or $25 million), here are some things you should immediately do to avoid financial destruction like some lottery winners of the past:
Hire Professionals to Protect Your Funds
Hiring a certified financial planner on from the moment you find out you won should be a requirement for any lottery winner. These folks are trained to help you make important financial decisions like taking the lump sum amount or annual payments, how to invest it, how much you can/should donate to a nonprofit for maximum tax benefits, and how much your monthly budget can handle without blowing through your money too quickly.
Building a financial team should also include an accountant (you’ll definitely need some help with IRS-related concerns) and a lawyer (to help you navigate any legal concerns along the way). Yes, these folks charge quite a bit of money for their services, but you’ll be in a much better position to successfully manage your money than if you try to go it alone.
Pay Off Debts
Your next step after winning the lottery and assembling a financial team should be paying off debts. This probably sounds like a total drag, but why continue paying interest on auto loans, credit cards, and student loans if you have the means to pay them off now and be done with interest payments for years to come?
Depending on the amount of debt you currently have and how much you won through the lottery, you should strive to pay off as much debt as possible and take advantage of this rare opportunity to secure your financial freedom.
You could, alternatively, choose to pay off some loans and consolidate the rest of your debt so you can reserve some of your lottery winnings for other things, such as investments.
Make Your Winnings Work for You
There is no better way to ensure you reap the dividends of your lucky lottery win than by investing some of the money and creating a passive income stream. All too often, lottery winners go on massive shopping sprees and rack of more debt, more depreciating assets, and eventually declare bankruptcy because they burned through their money too quickly.
Investing your money in a stable, diversified portfolio of mutual funds, stocks, bonds, and ETFs can help you develop a passive income stream that will make your money work for you and bring in returns each month that will pay for ongoing expenses.
If you win 7-figures in the lottery, then it might be tempting to retire early. Instead, consider either working at your current job for a few more years (to build up a solid nest egg in the meantime) or look for more fulfilling work elsewhere to boost your job satisfaction and maintain a regular income (while funneling your lottery winnings into a retirement account and/or other investments).
Treat Yourself (Reasonably)
What fun would winning money through the lottery or scratch cards be if you didn’t at least get yourself (and your family) something special? Of course, this isn’t to say you should replace your entire wardrobe with designer clothes or buy a brand new car even though your current car operates flawlessly.
The reason why so many mega-lotto winners you read about in the news end up foreclosing on their homes is that their splurging didn’t consider the long-term consequences (e.g., they could afford the down payment on a million-dollar home, but the monthly mortgage payments, property taxes, and upkeep? Not so much).
Instead, find something (or a few things) you’ve really wanted for a while that you can now afford thanks to your lottery winnings. If you won $30,000 after taxes, then it doesn’t make much financial sense to buy a $50,000 car and hope your current income can make up for the high monthly payments on this depreciating asset. However, a $1,500 top-of-the-line television to replace your tiny, ancient living room TV could be considered a reasonable splurge if it’s 10% or less of your overall winnings.
Why You Should Dream of Winning the Lottery
Dreaming of winning the Power Ball Lottery is not a bad thing. In fact, it can be a good thing. It can be healthy to dream of winning the lottery. You should dream a little.
What’s important to you? What do you want your life to look like? Dreaming of winning the lottery can help you find the answers.
What do you want to be when you grow up? I remember a guidance counselor in school asking a group of students what they would do with $1 million. The exercise is supposed to give you a glimpse into what type of occupation or profession you may want to consider. It is a glimpse into the psyche and what you may really love to do.
So, for example, if you said that you would have liked to use your fictional $1 million to help those less fortunate than yourself, then maybe you might want to consider going into a job in public service. You could be a policeman, fireman, or the like.Dreaming of winning the lottery is not a bad thing. In fact, it can be a good idea.Click To Tweet
Are you stuck in a job that you hate? The dream of spending lottery winnings could be a stark realization or even a wake-up call to go in another direction with your life.
What’s On Your Bucket List?
What’s important in your life? Do you value buying things or experiencing things? Dreaming of winning the lottery can help you find the answers.
I’m a big fan of having a bucket list. I have one of 100 goals before I die. It is a dream list of things to do and not necessarily items to buy.
Do you have a bucket list? What would you regret not doing if you died tomorrow? Dream of winning the lottery and how you would send the money. Then you will have a great insightful look into a few things that should be on your bucket list.
Do you need 100 goals on your bucket list? Of course, you don’t. But, I think that bucket lists are a great tool.
What Does Your Retirement Look Like?
Have you ever thought about what your retirement might look like? What is your retirement dream? Are you like me and dream of owning your own business one day? Is that what you would do with lottery winnings?
The Power Ball Lottery jackpot ballooned to over $636 million. After taxes, the winner will receive a lump sum payment of almost $175 million. Experts think that with the lottery’s new rule changes, we may one day soon see a $1 billion jackpot.
These numbers are of course staggering. Dreaming of winning the lottery is a good thing. It is a glimpse into your mind, your dreams. There isn’t anything wrong with dreaming a little bit as long as it is taken in small doses. It is the obsessing over it that’s the unhealthy part.
Whether you win $20,000 or $2 million in the lottery, the four steps described above should be the first things you do after realizing you won. Rather than immediately looking at luxury mansions for sale in your area, consider how you might maximize this unexpected windfall so you can achieve financial independence for the years to come.