Winning a lottery sounds like a far-fetched idea, but the small “what-if I win the lottery” at the back of our minds forces us to buy the tickets anyway.
Are you one of those daydreamers who believes in turning into a millionaire via Powerball? Have you stacked a pile of lottery tickets in the hope of hitting a jackpot?
A little heads up, the probability of winning Powerball is 1 out of 175,000,000, which is 60,000 times less than the probability of being hit by lightning. However, life is full of surprises and one day, you might end up winning millions via your past time.
The question is, what to do if something like this happens?
As an answer, let’s have a look at what to do if you win the lottery:
Before Taking the Prize
If you intend to get the most out of your lucky victory, make sure that you follow the following tips:
1. Shh! Don’t Tell Anyone
You must be wondering, why should I stay quiet after such a great victory?
Well, this is because, you don’t want to end up under police protection like Mavis Wanczyk, a Powerball winner. He went big and publicized his win, which resulted in him being followed by criminals.
Some experts even suggest that lottery-winners should stay anonymous. However, this is not possible in all the states. Some of them require you to disclose your identity and the winning amount. Following are the 6 U.S. states that allow you to stay anonymous in case you win the lottery:
- Delaware
- Kansas
- Maryland
- North Dakota
- Ohio
- South Carolina
Now, let’s have a look at how staying quiet and anonymous will help you in protecting your lottery money.
- It will save you from criminals such as kidnappers.
- It will protect you from wealth managers, who are nothing but a scam.
- You won’t have to deal with dumb business partnership ideas.
2. Sign the Ticket
It’s a no brainer that your lottery ticket is the key to get the prize; therefore, you should keep it safe. In addition to that, as soon as you learn that you’ve hit the jackpot, sign it.
Now, you must be wondering, what’s the point of hurrying the signature?
It is so because the lottery ticket is like a bearer instrument. Only that person will receive the amount whose signature will be present on it.
3. Hire a Lawyer and a Financial Advisor
A handsome lottery amount means more financial difficulties, which requires a multidimensional team comprising of financial, legal and tax experts.
They will assure that you fulfil all the legal and tax obligations. They will also assist you in utilizing your money in the best possible way. They will guide that where should you invest your money; how should you manage your tax and what insurance do you require.
You should ensure that your team manages your financial and legal matters in a harmonious manner. In addition to that, you should make sure that you sign your checks yourself.
After Getting the Prize
If you are concerned about what to do with money if you win the lottery, then have a look at the following tips which are quite handy after getting the prize money:
1. Choose Between Lump-Sum Payment and Long-Term Payout
On winning a lottery, you will get two options to receive the payment, which are, lump-sum payment or annuity payment.
In lump-sum payment you will get all the money at once; whereas, in annuity payments, you will get money over the next 20 or 30 years depending upon the lottery’s rules that you’ve won.
Now, each one of these options has its pros and cons. You should consider them thoroughly before making the final decision. The advantages and disadvantages of both options are given as follows:
Pros of Lump-Sum Payment:
- It is an observed fact that currency’s value depreciates with time, which means that a dollar today is worth more than a dollar tomorrow.
- Your money will be taxed on the current rates, which will be less as compared to the future ones.
- There aren’t any risks associated with a lump-sum payment. This means you won’t have to worry about future circumstances affecting your payouts.
Cons of Lump-Sum Payment:
- You might end up spending all your money at once.
- You’ll lose a regular stream of money for the next 20 or 30 years.
- In case of a lump-sum payment, you won’t get the total $10 million. You will only get $5 million and after taxes, this amount will slide down to $3 million.
Pros of Annuity Payments:
- You will have a steady income for the next few years.
- You won’t be tempted to spend all your money at once.
- Annuity payments have less income tax.
Cons of Annuity Payments:
- You won’t have the chance to invest your money and benefit from compound interest.
- The prize money’s value will decrease with the currency depreciation.
- In case of your death, your heirs may or may not get the remaining amount.
- You won’t be able to take a higher amount than the annuity payment.
- If anything goes wrong with the lottery, you’ll lose the remaining money.
2. Payoff Your Debt
Are you struggling with a heap of debts over your shoulders?
If yes, then the lottery amount would be a great option to either reduce or remove the burden. No matter they are student loans or mortgages, your financial team will assist you in paying them off.
They might advise you to keep the low-interest rate loans, but most of them would agree that you are better off without the high-interest ones. They’ll also help you in investing the remaining money to get the highest possible returns.
3. Setup Emergency and College Funds
All of you must have heard, better safe than sorry if you win the lottery. This advice is also applicable in this case because no one knows what would happen in the future. Therefore, it is better to set up an emergency fund as soon as you receive the lump-sum payment. Our advice put at least 6 months of expenses in it.
In addition to that, if you have children or intend to sponsor someone else, set up an education fund. It’s always a treat to see the heartfelt smile of sponsored students.
4. Don’t Fall in the Trap of Partnership Offers
As soon as people will learn that you’ve won a lottery, many of them will come forward with attractive ideas. However, you shouldn’t say yes to anyone, unless your financial and legal team analyzes and approves the proposal.
Furthermore, learn to deny the relatives and friends who ask for money. This might sound harsh, but if you start catering everyone’s needs, then you’ll end up at where you started.
These are our top picks for what to do with the money if you win the lottery. If you have any other suggestion, then let us know in the comment section below. It is always lovely to hear from our beloved readers!
