While the odds may be stacked against you, there’s always a chance you could win the lottery. So no matter how slim your chances are, it’s wise to be prepared for what comes next.
Life after winning the lottery can look a lot different. For better or worse, grand prize winners’ lives change overnight. All too often, people blow through their winnings before they even know what happened. And it might surprise you to learn that winning millions of dollars often comes with unforeseen costs.
Avoiding this fate can be tricky. That’s why knowing how to handle your newfound fortune beforehand is key. So, if you find yourself with a winning ticket, don’t rush to cash in just yet. Take a deep breath and prepare yourself to make the most of your prize.
Here are 12 things to consider before and after you win the lottery.
Winning the Lottery Is Not As Glamourous as It Seems
Who doesn’t fantasize about being a lottery winner from time to time? If I had a dollar for every time I’ve heard someone say that winning the lottery would fix all of their financial problems, I’d likely be rich. However, if you do a little online digging, you’ll discover that winners of the past did not wind up living the dream.
New money doesn’t make us a new person. If you struggle to budget with your current income, having a lot of it won’t magically make budgeting easier. In fact, it can often make managing money a lot harder.
People dream of winning big, but they’re rarely prepared for it. The urge to splurge can be compelling, especially when you seemingly have so much change to spare. Even if you know which states have the biggest payouts and ways to beat the odds, knowing how to properly handle the winnings is the most important part.
So much financial freedom can feel foreign to lottery winners. In turn, many squander their newfound riches. On top of spending sprees and not adhering to a realistic budget, winners often give money to the people around them before they tend to their own finances, which can greatly get in the way of their best-laid lotto plans.
Some have called it “the curse of the lottery,” but financial experts say it comes down to poor budgeting. If you’re serious about winning the lottery, look at how much the grand prize is and draw up a realistic dream budget. Being prepared can only work in your favor.
Protect That Golden Ticket At All Costs
Luck can change in an instant. Once those numbers are called out, lottery winners suddenly have a lot more to lose. So protect your ticket at all costs.
You might feel invincible, but this is no time to become careless. If you drop your ticket on the ground, anyone could claim it. The only way to prove you are the rightful owner is to hold onto it. To be on the safe side, make a few paper and digital copies and keep them in different, secure places.
Don’t Rush to Claim Your Winnings
Depending on how much money you’ve just won, you may not be able to avoid media attention. If you claim your ticket too quickly, the public eye will almost always notice. So pace yourself. Taking a moment’s pause before you collect your winnings will allow you to prepare for what comes next.
That dream budget you made before winning should not be forgotten. Figure out which financial steps you’ll take first, rather than going on an immediate and lavish spending spree. In most cases, you should be able to wait for a while, if you wish. Most winners are given up to a year to claim their prize. Be fully informed of the rules before you decide when and how to cash in.
If Possible, Keep Quiet About Your Fortune
If you’ve just won the lottery, you might be tempted to shout it from the rooftops or immediately quit your job. However, financial experts say both of these moves are a bad idea.
Outside of your immediate family, play your cards close to the chest. Keeping your good fortune quiet can protect you from unwanted attention and requests for money.
After protecting your ticket, you’ll want to protect your earnings. It’s important to learn to say no. Per CNBC, “Once family and friends learn of the windfall, they have expectations of what they should be entitled to.”
Sometimes, people believe they’ve won the lottery when they haven’t. They begin changing their day-to-day in irrevocable ways, only to discover they were mistaken from the start. Don’t let this happen to you. Even if you’re sure you have winning numbers, don’t make any major life decisions based on your winnings until the money is in the bank.
Mega Millions Aren’t Easy to Budget
Word to the money-wise: don’t make drastic lifestyle changes just because you’ve won. No matter the amount, the money will run out if you let it. While hitting the jackpot might seem like a definite way to get out of financial trouble, most winners find themselves in more of it overnight.
“Evidence shows that most people who make it to the top one percent of income earners usually don’t stay at the top for very long,” per The Washington Post.
Life after winning the lottery may not stay glamorous forever. As noted by Reader’s Digest, “about 70 percent of lotto winners lose or spend all that money in five years or less.” On top of that, various studies show lottery winners are more likely to declare bankruptcy than the average American.
Hire Financial Help Right Away
If you’re already a tax attorney, financial advisor, estate attorney, or licensed accountant, you might not need as much help as the average winner. But if you’re not in the business of handling large sums of money, take those earnings and hire someone who is.
It can take a village to oversee millions of dollars. For many, hitting the jackpot means suddenly having more money than most people will ever see in their lifetime. In turn, money gurus say that truly making the most of your newfound fortune starts with the people you add to your team.
Typically, financial experts strongly advise seeking the assistance of four types of professionals: a tax attorney, a financial advisor, a family law (or estate planning) attorney, and a reliable, top-tier accountant. You might think it’s not necessary, but chances are, you’ll need the guidance more than ever before when tax season rolls in.
If you don’t want to hire a team, seek out a financial advisor for valuable insights. Find one who charges by the hour, develop a rapport, and turn to them when you feel uncertain of what to do with your new money next.
Pay Off Your Debts
Winning the lottery can be a once-in-a-lifetime chance to turn your financial situation around for the better, but whether or not that dream becomes a reality depends solely on what the winner does with the money.
There is never a bad time to pay your debts, but the ideal time is when you have enough in the budget to put them behind you. If you’ve just hit the jackpot, that time is now.
It doesn’t take an expert to know that neglecting your debts will never work in your favor. Historically, many winners feel compelled to do what they want with their money before assessing what they actually need.
While you might be ready to buy a Tesla or two right away, you won’t know what’s really in the budget until you’ve taken care of your money problems in a responsible manner. Start by paying off any and all debts. Remember those student loans and ever-mounting credit card debt? Now’s the time to get out of it and start fresh.
You Won’t Win as Much as You Think
Winning the lottery comes with a lot of hidden costs. No matter how much you win, taxes will be taken out. And a higher tax bracket means higher taxes. Lottery winners are never handed the exact amount they first won. Generally, you have two options on how to collect.
If you opt for a lump-sum payout right away, you won’t receive the original, advertised jackpot amount. Instead, you’ll be awarded the current cash value of the actual jackpot, whatever it may be. When you take a lump-sum payout, the actual winnings equal about half the initial jackpot, or slightly more.
This leads many luck ticket holders to take the annuity ( or long-term investment) option, which spreads the full winnings over a period of up to 20 to 30 years. Payments will increase over time, with the final payout usually being the largest.
To figure out how much you’ll actually win, check out AfterLotto’s payout calculator. It can help you figure out state-specific lump sums and annuity payouts once state and federal taxes are taken out.
Make a Lasting Plan For Your Winnings
When it comes to financial stability, you can never be too prepared. No amount of money can prevent financial problems, after all. Putting your money to good use is entirely up to you.
If you really want to never worry about money again, you will need safety nets in place. No matter anyone’s financial standing, setting up an emergency fund is always smart. If you’ve just won the lottery, you can officially afford it. And millions in the bank or not, emergencies happen when we least expect it.
We never know what tomorrow holds. So set aside at least enough to cover six months of expenses with the unknown in mind. Even if you’re living in the moment, opt for a high-yield savings account with the future in mind. From there, start building your nest egg. Tax-advantaged retirement accounts can become your best friend someday. So sit down with your financial advisor and pick the long-term savings plans that work for you.
Read More: Choosing the Best Retirement Plan for Your Goals
While you’ll want to take your time and budget accordingly, strike while the iron is hot. If you’ve just won the lottery, now is the time to invest. If you want to see your fortune grow, you’ll need to give it a fighting chance to do so. Don’t be swept up by weekly stock trends, however.
Smart investing comes down to two things: portfolio diversification and playing the long game. You might not see returns right away, but be patient. Those who make millions off their investments know that what’s happening from moment to moment is not as important as what can happen long-term.
Don’t be deterred by dips in stocks or foreboding financial forecasts. After you’ve paid off your debts and built a few strong savings accounts, spread your money around and give it time to grow.
Read More: Before Investing in Stocks, Take Note of These 10 Tips
Help Others, Within Reason
Many are down on their luck and in need of a helping hand. Obviously, you can’t say yes to everyone who asks for help. Just be sure to share portions of your winnings responsibly.
Rather than loaning or gifting your friends obscene amounts of money just because you can, look into causes you care about and make a contribution. While you’ll undoubtedly be helping others, there are also tax benefits for those who donate to charity. Noble intentions aside, that’s often part of why so many millionaires donate so often.
If you have a family member or friend facing tough times, there’s nothing wrong with helping them out. Hoarding one’s money is rarely a good look, and sharing your good fortune with others can be deeply rewarding for you both.
Know When (and How) to Say No
One way or another, word will spread that you’ve won the lottery. So you’ll need to be clear about who you can trust and who is merely seeking a handout without considering your well-being. If you haven’t heard from someone in years and they suddenly call you to say hi, their motives should be questioned. Still, saying no isn’t always easy, especially when you feel you could afford to lend a helping hand.
Undoubtedly, you will run into requests for financial help. Trust your instincts and don’t say yes without thinking. Mull over every request compassionately and logically. If you are approached with an urgent request that leaves you little time to decide, proceed with caution.
Don’t let the pressure of others lead you astray. Their urgency might be real, but their money messes are not yours to fix. Above all else, make sure that you’re taken care of first and foremost. When it comes to winning the lottery, your financial well-being should be your first priority. Until you’ve taken care of yourself, you’re not really in a position to start handing out money. So build that dream budget with reality in mind, and then play to win responsibly.