5. Don’t forget about the debt and obligations you already have.
If you get the “I’m rich and don’t have to pay anymore” bug, you might be dooming yourself. One lottery winner in California was strapped with debt from property purchases and what seemed to be excessive insurance policies. Regardless of whether you take the lump sum or the annuity option, if you have even one cent of debt in the immediate future and distant future then something is seriously wrong with you.
The new harsh reality is that lottery winners should not have a single debt ever again. What if, even by no act of your own, you end up broke again and still have a mortgage, car payments, student loans, credit card debt and personal bills? You won’t have the right to be angry when all of your friends and family ridicule you every day for the rest of your life.
6. Don’t become a high-roller or live too large.
If you go from living a simple life to suddenly being able to blow hundreds of thousands of dollars each week, there is a good chance that it will change your expectations for life ahead. Most people who get to that level don’t want to go backward. If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars per play, you are dooming yourself. Now imagine what happens when the real con men find you.
Taking you and your favorite 50 people on a luxury cruise around the world can become very expensive, very fast. Having an entourage generally only works for people who keep making more money, and entourages have bankrupted many musicians and athletes.
7. Don’t go buy everything for everyone and for yourself.
There is always a temptation for lottery winners to share all that new wealth. Buying all the millionaire toys you can think of might crush a lottery winner. How to avoid this is simple to say, but history has proven that it is hard to follow. Chances are high that you will regret the decision if you go out and buy dozens of cars and houses for you and for your friends and family members. This will start you on a bad path, and you could easily become the next friends and family personal welfare department.
If you start buying everything for everyone, there is a good chance that they are going to come to you expecting more of the same ahead. And what if they can’t afford the upkeep of such a gift? The other end of the spectrum is that you do not have to be a cheapskate either, but a budget and a team of advisors will keep you steered in the right direction. Do not be the lucky winner who bought more than 30 cars and multiple houses in three months for himself and friends and family.
8. Don’t think you don’t need a budget!
Do millionaires have budgets? You bet your assets, at least from the smart ones. Again, extreme wealth brings the need for extreme responsibility. Maybe it sounds funny that the mega-rich have to live within certain means with instant empire-making money. This is true, even when you consider that most lottery winners instantly become wealthier than everyone they know combined.
The notion of living within your means also goes back to having advisors and being prudent, but at the end of the day you do still have a finite sum of money. Chances are very high that you will make some serious purchases and your lifestyle will be changed forever. Not setting realistic limits for yourself, and not limiting how much you are willing to do for others, is a recipe for disaster. Again, many lottery winners go broke in a short time.