Now what do you do?
A big lottery win is the start of a journey that can either lead you to a very good place or a very bad one. See our Lottery Winners & Losers write up to see what we mean. Whether your journey turns out good or bad depends largely on how well you start the journey. There are a number of things you can do to ensure that you end up in a happy place.
First Things First: Get an Accountant or Financial Planner
The greatest lottery winner success stories are the product of financial planning. When you recognize that even millions of dollars won’t last forever unless used properly, you are truly on the right track to make the most of your winnings.
That’s why it is strongly recommended that you get yourself a good accountant and/or financial planner. Suddenly finding yourself wealthy can be a staggering, mind blowing thing. If you want to make the most of it, then you would do well to avail yourself to the help of people who’s life work is helping people handle large amounts of money.
Pay The Taxes
That’s right – you’re going to have to pay taxes on your lottery win. And it’s the very first thing you want to get out of the way. Failing to take care of the taxes first can very easily turn your dream into a nightmare.
Usually a part of your winnings are held back in order to pay taxes, but it often isn’t enough. Taxes on lottery wins can be as high as 50% of your winnings, which means that you can end up owing a ton of money even with the initial withholding! It is also important to account for both Local, State and Federal taxes – although in some states such as California, your winnings might actually be tax exempt.
This is why it’s so important to get yourself a good financial planner or accountant right away. You don’t want to become another cautionary tale of the lottery winner who went bankrupt the very next year. Before you do anything else, you should make sure that you will be able to take care of those taxes!
Take Care of Necessities
If you’re like most people, you probably have some financial burdens that have been nagging away at you for years. These burdens are usually some kind of debt – medical bills, a mortgage, a car payment. Maybe even all of the above.
After getting the taxes taken care of, relieving yourself of these financial burdens is the next logical step. Paying off your debt may seem obvious, but you would be amazed at how many people go straight to living life in the fast lane without taking care of these basic problems.
Also keep in mind that a big lottery win may mean that you can help out family and even friends with their own financial burdens. This is a very good thing to do, after all it’s hard to put a price on good will towards the people that you love. Just be careful not to make yourself an “easy target” that gets taken advantage of by the people close to you.
With your debt burdens out of the way, the next wise move would be to make some good investments. A good investment is the best way to make sure that your money keeps working for you for the rest of your life. Not only does investing the money prevent you from over spending, it also generates extra income. That’s the primary difference between blowing your winnings, and being set for life.
This is where your financial planner comes in. There are all kinds of investments out there, and some are safer than others. A good financial planner can help you find the right mix of safe, conservative investments that will protect your money while growing it slowly, and more aggressive investments that offer bigger, faster returns (but also come with more risk).
Gradually Improve Your Lifestyle
So now you’ve gotten the taxes out of the way, paid down your debts and maybe helped some friends and family with their financial woes, and socked away some of your winnings into savings and investments. It’s finally time to start having fun!
The biggest mistake that most lottery winners make is going right to the fun. They get their big windfall, start living life in the fast lane and before they know it they’re broke again! This happens because they immediately start living as lavishly as possible, rather than gradually improving your lifestyle.
A little self discipline goes a long way. If you take the correct first steps to make sure that you have minimal tax and debt liabilities, protect a good chunk of your winnings by making investments and only then start “living it up” then you will find that your lottery winnings truly can change your life for the better, forever.
Don’t be the fool that is soon parted from their money – be smart, and make the most of your good fortunes!