Playing the lottery is a little like fishing. You put in you line and sit and wait, hoping for a bite. You tell yourself “somebody has to win.” And somebody always does. Sadly, the people who win do not always have a plan in place. It’s like fishing without a landing net; you risk losing it all.
Five big mistakes and how to avoid them
The New York Daily News reported that 70% of lottery winners go broke after seven years. There are many reasons why winning can make things worse, including unchecked spending habits, addiction and greedy family members. But there are things you can do to protect yourself and your winnings. Five things you can do are:
- Keep your winning to yourself. Lottery officials will ask to take a publicity photo and use your name. SAY NO. You will want to keep your winnings to yourself. It can feel awkward to bask in the glow solo, but this is the NO. 1 thing you can do. If necessary, hire an “internet scrubber” to keep your name out of the news and off the web.
- Take a lump-sum payment and invest immediately. Also, understand the tax implications first and foremost. Pay off debts first, instead of allowing them to pile up.
- Hire a financial professional to manage your money. Look for someone who has a fiduciary duty, this means they are bound to put your interests ahead of their own per the Investment Advisors Act of 1940. All investment advisors who are registered with the U.S. Securities and Exchange Commission, such as Certified Financial Planners, must act as fiduciaries.
- Limit your celebratory spending. Buy the one thing you’ve always wanted or take that one trip you’ve dreamed about and then set a budget and stick to it.
- Quit gambling. More than one winner has continued to roll the dice and lost everything. Some of these people did not pay off their debts and ended up with less money than they had before the lottery win. Want to feel good? Buy Girl Scout cookies, attend charity auctions or give what you would have spent at the casino or on lottery tickets to a local charity. Giving locally means you are more likely to see the difference your contribution makes.
The stories abound of lottery winners who lost everything or filed for bankruptcy in the years after winning. The best way to prevent this type of loss is to have a plan for your windfall if your lucky numbers come up.