This is a rare moment in the wide world of the lottery. The Powerball lottery jackpot is a massive $384 million, and the Mega Millions lottery jackpot is at $306 million. Mega Millions is up first with a Friday night drawing, and Powerball follows this Saturday. Either will make for the best new years launch ever for a lucky winner.
It may seem odd that lotteries are so enthralling to the public, considering how stacked the odds are against lottery players. That being said, winning the lottery now seems to have become the modern version of the American Dream. After all, it’s hard for most people to get excited about a lifetime of work and decades of savings to enjoy the golden years of retirement. Even for those who can be responsible, politicians and the media keep reinforcing how hard things are to manage properly these days.
The Mega Millions jackpot of $306 million is the annuity value for Friday night’s drawing, but the cash lump sum payout is $191 million. Saturday’s Powerball drawing has an annuity value of $384 million, and that comes with a lump sum cash payment of $239.7 million.
It really doesn’t matter which lottery is won, and it really doesn’t matter if the winner chooses the lump sum or the annuity payout over years. Either way it is enough to easily create multi-generational wealth.
Unfortunately, there is a dark side to winning the lottery. Many winners end up losing all or most of their lifetime gift, and some winners go broke in just a few years. It is for this reason that 24/7 Wall St. has created a guide for lottery winners: 12 things you should not do if you ever win the lottery.
Those lucky few who become filthy rich overnight better have a serious plan in place. It’s too easy to go broke, even with $100 million, $200 million or even $500 million, if safeguards are not put in place. No one wants to go from rags to riches only to go back to rags or mediocrity. No one should ever have to get rich twice.
One recurring theme about how to handle the new instant wealth is this: with extreme wealth comes extreme responsibility. It’s easy to get glassy-eyed over thinking about things you would do after winning the lottery. There would be endless, limitless opportunities. What if that isn’t true? On top of the odds being astronomical against winning (roughly 1 in 292 million), very few people think about what they need to do (and not do) if they win the lottery in order to protect their new fortune.
While the 12 things not to do is a guide for lottery winners, it is also suitable for anyone who comes into vast money unexpectedly. This could be an unexpected inheritance or a settlement or lawsuit, from becoming a stock option millionaire, or even from selling a business or big asset.
Serious pitfalls await lottery winners and the newly rich. These must be avoided at all costs, and some of those pitfalls may come directly from friends and family. Others may come from acquaintances, and some may come from those who intend to do harm to relieve winners of their newfound wealth. And take this to heart without a joke: Your life may depend on taking action and having a plan in place.
The reality is that most lottery winners choose to take the cash lump sum option rather than the annuity payout. Vast and instant wealth is just more enticing than just getting a multimillion paycheck each year. And it is more money than almost everyone can imagine making in their lifetimes.
Endless temptations can snag the newly rich. It is quite easy in modern times to blow through $100 million, $200 million, $500 million in weeks, months or even just a few years.
Lottery winners need to assume that their family relationships and friendships will be tested. Acquaintances and enemies may also be coming with expectations. Bragging about getting filthy rich could literally cost you your life. Getting a financial planner and tax advisor are about as important as setting and living within a budget. Avoiding any of these strategies is a recipe for disaster.
Start adding up the costs of buying and maintaining mega-mansions, yachts, private jets, luxury cars, lavish vacations, art and jewelry, private island retreats and endless other temptations. Now think about the insurance and personnel needed to operate or protect those new things. None of the toys of the super-rich come cheap. Even a combination of just a few of these new vices could rather easily wreck your new vast fortune.