The lottery seems to have become the new American dream. After all, making money the old-fashioned way from hard work and a little bit of luck might just be too difficult for most people to fathom these days. The reality is that most people never get a dime out of the lottery, while many do from hard work and planning for the future. Still, the thought of becoming filthy rich overnight by raw luck and with just a few bucks sure sounds a lot more fun than decades of challenges and toil.
Many lottery players will be playing for a chance to win Friday night’s (June 10, 2016) $280 million Mega Millions lottery. This begs the question: what are you supposed to do or not do if you win? Lottery winners know that the cash value is of course discounted, down to $186 million for the up-front cash. We also saw the note from the lottery site that this is the largest Mega Millions lottery since November of 2014. Whichever payment option is taken, the reality is that this is multi-generational empire money.
What the public needs to understand is that there is a more serious side to the lottery, even much farther along than the odds being 1 in 258,890,850. With instant extreme wealth comes the need for extreme responsibility. Sadly, many lottery winners and people who come into unexpected instant wealth end up broke. Some of them go broke in just a few years.
24/7 Wall St. has tracked many lottery winnings over the years, and we have come up with a self-help guide of 12 things not to do if you win the lottery. It probably seems hard to imagine, but you can blow through $186 million in a very short time if you are not careful. The newly wealthy (and those who have had wealth) need to keep one adage in mind: you should only have to become rich once!
This may seem hard to imagine, but there are many pitfalls waiting for unprepared lottery winners who never decide to take certain steps of protecting themselves. With extreme wealth comes extreme responsibility.
Lottery winners and others who win large sums of money unexpectedly need to consider more than just themselves. This can and likely will impact your family relationships and friendships. Some people continue to work or use their time like the rest of us, but some go live the easy life of luxury.
Lottery winners need to do several things immediately. Signing the winning lottery ticket and reporting it to the state is just the start. Before going to brag to everyone you know, you might want to reconsider. Winners also better line up solid financial and tax advisors, and they better get a handle on the notion that a budget and a life plan is imperative.
Before thinking that you need to be responsible after becoming filthy rich overnight, ask yourself this: if it is so easy after winning the lottery, then why do some people still go broke? Some pitfalls are hard to avoid. Family and friends may think you should be their own piggy bank and ATM. Others will think you need to bankroll all their business ideas or extravagances. And then there is protecting yourself from yourself. Running out and buying up every luxury item imaginable is a recipe for disaster.
Do you know about alternative investment vehicles outside of stocks and bonds? Do you know about investing in businesses or other cash flows, and about complex financial and tax structures? Do you know that your life could now be real in jeopardy? Do you buy everything for everyone, or do you throw extravagant Gatsby parties?
These are just some of the things that a lottery winner will have to consider. It is rather simple to blow through a close to $200 million. The 1980s film Brewster’s Millions made it seem impossible to blow $30 million in 30 days, but that can now be done in hours or days without even being all that creative.
Private jets, mega-yachts, mega-mansions, private islands, fourth and fifth homes, keeping an entourage, holding private concerts, buying endless jewelry or arts and collectibles: these are all fun, but they add up to endless money real quick. And most things like that come with ongoing maintenance, staff and even ongoing taxes and insurance. Any combination of those could hit close to $200 million rapidly.
24/7 Wall St. does not want to see any lottery winner go broke. Here are the 12 things not to do for any lucky lottery winner. Again, you should only need to get rich once!