With $502 Million in Lottery Money Up for Grabs, 12 Things Not to Do If You Win and Strike It Rich

June 18, 2016 by Jon C. Ogg

Winning the lottery seems to have replaced years of hard work for a comfortable life as the new version of the American Dream. Playing the lottery gives people the dream of becoming filthy rich overnight, and that is a lot more exciting than hard work year after year and having to save along the way. The media and politicians keep telling you over and over that your parents had it better, and they keep convincing you that it’s too hard to succeed and get ahead just from work and savings.

Now there is a whopping sum of $502 million up for grabs in two different lottery drawings in the coming days. The Powerball lottery drawing for Saturday, June 18 has an estimates annuity value of $169 million, or $114.2 million for a cash option. The Mega Millions drawing for June 21 has now risen to $333 million in annuity value, or up to $226 million as the cash option.

Can you imagine winning a large portion of $502 million? Perhaps the real question that matters is what lottery players should do — or really what they should not do — if they win. The next lottery winner better understand that they better be responsible and give their new life some serious thought.

A theme you will keep hearing is that newly attained wealth comes with the need for extreme responsibility. Sadly, many lottery winners (or those who come into lots unexpected money) never seem to have read that memo. The really sad part of this is that many lottery winners end up absolutely broke, some 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. This is 12 things not to do if you win the lottery.

Maybe it seems hard to imagine that you could blow through $100 million, $200 million or even $300 million very fast. The reality is that any amount of wealth can be blown through in rather short order. The newly rich need to keep one adage in mind that “old money” has known for generations: you should only have to become rich once!

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There are many pitfalls waiting for unprepared lottery winners. Again, extreme wealth comes with extreme responsibility. One consideration is that vast money almost certainly will have an impact on your family relationships and friendships. Signing the winning lottery ticket and reporting it to the state is a must. Before you run out and brag to everyone you know, hold back on that urge. You will need immediate financial advice and tax advice. And hear this loud and clear: you absolutely need to live on a budget! Bankrolling your family and friends on everything can send you to the poorhouse rather quickly. Do you know everything about business now that you are rich? If all these points sound silly, then you should understand one thing right now: you are a prime candidate to go from riches back to rags.

Do you know the world of high finance outside of stocks and bonds? Do you know about investing tax-efficiently and about structuring your finances for decades? If your answer is yes, then you probably didn’t even play the lottery.

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 really quickly. Most of these things come with ongoing maintenance, staff, taxes, insurance and other obligations and headaches. Any combination of those could blow through $200 million or $300 million rapidly. Now consider that at least two lottery winners have been murdered in recent years. They could have avoided that had they handled their winning properly.

Hopefully this tough love case of reality is setting in. The whole point of 12 Things Not to Do If You Win the Lottery is that you can quite easily blow through $200 million, $300 million or more. 24/7 Wall St. does not want to see any lottery winner go broke. Again, you should only need to get rich once!

Here are the 12 things not to do if you win the lottery.

1. Do not forget to sign the ticket and report to the state.

It may seem crazy that people might not sign a ticket. It seems even crazier that they might lose a ticket, or fail to report to the state that they won. Can you imagine losing a lottery ticket? Then imagine what can happen if someone else snags your ticket and shows up to collect the prize. Fighting over this is no simple task and disputes have arisen over who owns what ticket.

In a way, lottery tickets are almost considered the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds. You have to sign and secure that ticket, and you then have to report to the state.

2. Do not run out and brag (and do not tell anyone).

If you are lucky enough to win millions of dollars, chances are pretty high that you will to want to brag about it to everyone you know. How could you not? Still, keep quiet for now. The problem is that telling everyone you know before you collect your winning puts you in danger, and in more ways that just one. Everyone who has ever done anything for you now may come with their hands out asking for something, or worse.

You may have heard of kidnap and ransom insurance before. Sadly, more than one lottery winner became a murder victim. If you can manage it, and if your state allows it, try to remain anonymous for as long as possible. How you became vastly wealthy will be found out in time anyway, but there is no need to hurry that along and jeopardizing yourself.

3. Don’t just automatically take the cash option without considering the annuity option.

One-time all up front, or handed out over a lifetime? Taking it all now may sound good on the surface. Supposedly some 70% of lottery winners end up broke again, many within a couple or few years. Let’s say that you can choose to get $200 million up front, or you can choose to receive a payout of $300 million slowly over the course of a lifetime. Most people choose the lump sum rather than the annuity payment. After all, it is instant empire-making money.

Go see a reputable and visible tax professional and a reputable investment advisor at a top money management firm with a widely recognized company name and a long corporate history. This theme of “reputable and visible” will echo throughout.  Do this before you automatically make the decision about a lump-sum or annuity option.

4. Do not dare think you are now the smartest person to manage your money and finances.

The rich know that their money has to work for them, even while they sleep. You must immediately go get outside financial advice. If you were living paycheck to paycheck before, does it seem logical that someone will know the best things to invest in and the best tax and asset protection strategies? There are many ways to invest and protect that fortune. Strategies of the wealthy often go way beyond buying stocks and bonds and letting the investments ride. As far as who to use, or who not to use, chances are very high that your drinking buddy might not be the best choice as an advisor and expert.

Having a solid and respectable team of advisors and managers from reputable firms in place will act as your buffer to protect your assets now and in the future. Do you know how to protect your assets against all threats and know exactly how to protect your estate in case you die or become incapacitated? Here is a very real hint – If you answered yes, you probably did not bother playing the lottery.

5. Do not let your old debts and financial obligations remain in place.

If you get rich overnight, go out immediately and get rid of your old financial obligations and debts. If you get the bug in your head of “I’m rich and don’t have to pay anymore” you are dooming yourself. Whether you take the lump-sum or the annuity option, if you have a single penny of debt in the immediate future and distant future, then something is seriously wrong. For that matter, you should not have a single debt ever again. One lottery winner in California was reportedly strapped with debt from property purchases.

If you manage to go broke down the road and still have a mortgage, car payments, student loans, credit card debt and personal bills, all of your friends and family members should get to spank or ridicule you every day for the rest of your life.

6. Do not become a live the big life and be an immediate high-roller.

Temptation to live lavishly can be a killer. If you go from living a simple life to instantly being able to spend hundreds of thousands of dollars (or more) per week, what do you think happens to your expectations in life ahead? Chances are high that you will want more of the same.

If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars (or more) per play, you are dooming yourself. Wait until 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.

7. Absolutely do not buy everything for everyone — nor for yourself!

Society and the endless commercials make you think you need to own endless items. Do not go out and buy dozens of cars, followed by houses and whatever else, for you and 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, chances are high that they might expect that to last forever. The other end of the story is that you do not have to be a cheapskate either. Still, after hearing a real life personal story of one lucky winner buying more than 30 cars and multiple houses in three months it is just crazy.

8. Do not think a budget is just for the poor and middle class.

Budgeting is not just for the poor and the middle class. Again, extreme wealth comes with extreme responsibility. It may sound crazy on the surface that you have to live within means when you get a vast sum of money. After all, major lottery winners are generally wealthier than everyone they know combined. This 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.

Without setting limits for yourself and for what you do with others is a recipe for disaster. Again, many lottery winners go broke. If they went broke in a very short time, what do you think the reflection about wishing for a proper budget would be?

9. Do not become everyone’s business backer.

Being a venture capitalist or a merchant banker sure sounds powerful and enticing. One common theme that has come up with lottery winners who suddenly get vast sums of cash is that their friends and family start pitching them on endless business ideas. Sure, some will sound great and some will sound crazy.

If someone has no knowledge of a particular business and does not know what it takes to actually run a business, will they do better because a lottery winner who lucked into vast wealth gave them money to start it? If your answer is yes, you seriously need to protect yourself (from yourself).

10. Do not give away the whole fortune immediately!

Many winners may want to immediately share their new wealth with society. It may seem nice to give away vast amounts of cash to charity or to religious institutions. This might not be the case for everyone, but giving away an entire fortune or a large part of it to a charity or to religious institutions needs to be given great consideration. You can be generous without doing the unthinkable. Rather than giving everything away now, the current charitable trend of the extremely rich is to plan for how to give the money away upon their death, while still often leaving some for their heirs.

Imagine what you will feel like down the road when a serious crisis arises in your life or your family’s life, knowing that you no longer had the means to change it. Should you be charitable? Absolutely! Should you give it all away? Absolutely not!

11. Don’t let celebrity and athlete envy get you.

Those movie stars and entertainers sure seem to live the high life. Keeping up with the Jonses is bad enough, but definitely do not try to keep up with the Kardashians or other celebrities. It may seem cool to own a 200-foot yacht. It may seem practical that certain celebrities have an entourage, or to have a film crew following you around. It may seem cool owning castles in Europe. Owning an original Picasso painting sure sounds impressive.

Having a big new private jet makes sense for a lot of people. Trying to dodge taxes might even sound appealing to misguided people. Now go add up the price tags of these things, plus the cool cars and houses and the rest of it. You can go broke really quickly. Just ask actors and athletes who did this how they feel now.

12. And don’t think laws and decency standards no longer apply.

Some people think the rich can do whatever they want without consequences. It is true that the wealthier you get, the more high-class trouble you can find. It is also true that the rich can afford better attorneys and legal defense then the rest of us. Still, living a reckless life without concerns about the law will not keep you from going to prison, or worse.

A good sports coach will tell any star athlete upfront that chances are high they will have to be human for far longer than they are going to stars. Movies and television shows often glamorize scoundrels, but what good does it do you if you are incredibly wealthy and such a pariah that no one will associate with you? Remember, you don’t get to take any of your wealth with you.

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24/7 Wall St. would not want anyone who wins the lottery to end up broke. Losing wealth, or worse, is just not how things are supposed to go. Following a list of tasks may sound easy enough. Unfortunately, life and temptations can often interfere with logic.

One last thing here. Please keep in mind that the odds of a Powerball winning are 1 in 292,201,338. The odds of winning the Mega Millions are 1 in 258,890,850. Those are only representative of one American adult out of the entire United States, assuming that every adult plays. Many more thousands times that number strike it rich from hard work and a little luck each year. Maybe the lottery is really just the American Pipe Dream.