2. Do not decide to take the lump sum cash option without consideration.
If you can choose a life of payouts of millions per year or a monster lump sum in the hundreds of millions of dollars, most people prefer a lump sum rather than getting money sent out over a lifetime. A figure that is frequently used is that around 70% of lottery winners and those who unexpectedly come into wealth end up broke again. Some of them even manage to go broke within a couple or a few years.
Let’s say that you can choose to get $100.5 million in a lump sum payment, do you know for sure without consideration that is a better choice than receiving a payout of $151 million slowly over the course of a lifetime. Again 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.
3. Do not dare brag and tell everyone you won the lotto.
If you just won tens of millions of dollars or hundreds of millions of dollars, one of the first impulses would probably be to go tell everyone you know. How could you not? Listen quite closely here — Do not do this! Keep as quiet as you can. Your life depends upon this, and that is no exaggeration. The sad reality is that your friends or family members cannot be trusted to keep your secret a secret.
Telling everyone you know before you collect your winnings can put you in danger, and in more ways than just one. Everyone who has ever done anything for you now may come with their hands out asking for something. You may even become a target.
Have you ever heard of kidnap and ransom insurance before? It is also sad to report that some lottery winners became murder victims, and for far less than the massive empire-building jackpots. 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.
4. Do not think you suddenly are a master of money and high finance.
Lottery winners, and those who come into unexpected vast sums of cash, need to immediately get outside financial advice. If you are living paycheck to paycheck before the lottery, does it seem logical that you suddenly know the best things to invest in? How likely is it that you will immediately know the best tax and asset protection strategies?
There are many ways to invest and to protect that new fortune. Strategies of the extremely wealthy often go way beyond just buying stocks and bonds and letting those 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 financial advisors and managers from reputable firms 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 forget about your current debt and obligations.
If you suddenly become filthy rich, get rid of your old financial obligations and debts immediately. If you feel like “I’m rich and don’t have to pay anymore,” you are already deep into the path of 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 jump into living the big life too big.
Temptation to keep buying or accumulating can wipe you out. 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. Now just wait until the real con men find you. Taking you and your favorite 500 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 and more money – and they usually end up broke for that cost.