Did you know that 50% of lottery winners spend it all within two years, and 70% of lottery winners spend it all within five years; which in turn forces them to go back to their day jobs?
First, protect your ticketIn some cases, a person who has won the lottery will have their ticket stolen, or a false winner claims the true winner stole it from them, and family may fight you for it.
As soon as you win
- Don't tell anyone, except spouse, no bragging.
- Sign the back of your ticket.
- Take a selfie with the signed ticket.
- Make a photocopy of the signed ticket.
- Put the ticket in a safe place, like a safe or bank deposit box.
- Don't quit your job, it could take up to a year to get your money.
- Don't go on a spending spree.
- Sleep on it for a day.
Second, make an important decisionDecide if you want to receive your winning in installment or one lump sum payout. Here are a list of advantages & disadvantages for each:
Lump Sum Advantages
- Winnings are taxed at current rates, which could be higher in the future.
- Has more value now, because of dollar inflation and increased cost of living rising every year.
- You'll get what's owed to you now, dodging any unforeseen circumstances in the future where you might not receive payment.
Lump Sum Disadvantages
- You don't get the full amount, you actually only get about half the jackpot, plus about 40% in taxes. In other words, if you win 1 million, you walk away with roughly $300,000.
- You deny yourself a possible majority of life long income stream.
- If you blow your lump sum within a few years, you'll end up broke and back where you started.
- You can better your standard cost of living with a continued revenue stream.
- You cannot blow through all your winnings at once.
- Lower income tax bracket, meaning you pay less than 40% in taxes.
- You end up getting the entire jackpot.
- If you decide to invest, smaller income means smaller investments that earn you less in compounded interest.
- Because of inflation, your payouts become less valuable each year.
- If you die before finishing receiving your payouts, they are not passed on to someone else.
- If the lottery is canceled for whatever reason, so might your payments.
My adviceIf you are under 40, take it in installments and continue working on your career. If you are over 40, take the lump sum, retire, and be sure to invest some of it.
Third, claim your ticketChoose to remain anonymous when you claim your ticket. Although, only six states allow you to remain anonymous: Delaware, Kansas, Ohio, Maryland, North Dakota, and South Carolina.
Otherwise, after reporting your winnings, the media will be all over it telling the whole world that you won. Once the cat is out of the bag, all kinds of people will crawl out from under rocks asking for handouts. Suddenly, you'll have life long best friends that you didn't know you had. False injury claims with threats of a lawsuit. Family members who will present you with wish lists, and don't forget about Uncle Sam who wants his fair share.
To prepare for this you should
- Find a hotel to hide in until things calm down.
- Hire an attorney to help you prepare against lawsuits.
- Hire an accountant and financial advisor.
- Get a temporary phone to avoid solicitation and harassment.
- Get a temporary post office box to avoid solicitation and harassment.
- Prepare a conversation to have with family and friends about setting boundaries.
After receiving your winningsYou may want to buy your family and friends expensive gifts or just give them money. If you do, I recommend having them sign a document agreeing that they cannot ask or expect any more from you. In some states oral agreements are valid, some folks may claim to the courts that you made a verbal agreement to buy them something more.
Things to do
- Pay all your debts, including mortgage, car loans, and credit cards.
- Speak to your financial advisor about investing your money.
- Get a will, or update the one you currently have.