What to Do After You’ve Won the Lottery (or Received a Financial Windfall)

October 3, 2013
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Oct 2, 2013 / By Mary Hiers

What to Do After You've Received a Financial Windfall :: Mint.com/blog

The probability of winningWanna Play? The Stats Behind the American Dream of Winning the Lottery. Read more ... » the Powerball$338 Million Powerball Ticket Sold at Tiny NJ Liquor Store. Read more ... » jackpot is one in 175,223,510.

MostGive a Little Bit: A Visual Guide to Which States are the Most Charitable. Read more ... » people10 Characteristics of Debt-Free People. Read more ... » realize they’re never10 Money Rules You Should Never Ignore. Read more ... » going to win the lottery, but manyMany expect inheritances, kids to fund their retirement. Read more ... » people receive windfalls like inheritancesMany expect inheritances, kids to fund their retirement. Read more ... », giftsHow Much to Spend on Christmas Gifts for Kids?. Read more ... », or generous bonuses.

Unfortunately, a lot of people who find themselves with a sudden, substantial sum end up with nothing to show for it. In fact, the “lottery curse” is a well-known cautionary tale.

The Lottery Curse

TruTV.com has a sobering slideshow of lottery winners who wound up with nothing. In some cases, lottery winners have lost loved ones, theirHow Do Americans Spend Their Tax Refunds?. Read more ... » freedom, or their own lives.

The causes of the “lottery curse” are mostly downPaying Down Debt Vs. Saving More: Which One Comes First?. Read more ... » to bad financial planningPlanning for Black Friday? Consider Giving Tuesday. Read more ... ».

Many things20 Things You Might Overlook When Making a Budget. Read more ... » lottery winners spendHow Much to Spend on Christmas Gifts for Kids?. Read more ... » money on are non-refundable (cosmetic surgery), unnecessary (luxury cars and jewelry), or bad investments (like businesses purchased on a whim).

Windfalls can mess with people’s minds, so it’s smartHow to Make Smart Wardrobe Purchases That Will Last (infographic). Read more ... » to have a basic planThe Pros and Cons of Using Your Tax Refund as a Forced Savings Plan. Read more ... » ready for dealing with windfalls, fromMoney Lessons Learned from “Shark Tank”. Read more ... » the surprise yearA New Year, A New You: How to Make Your Financial Resolutions Stick (Infographic). Read more ... »-end bonus to the Powerball jackpot.

Things to Do After a Windfall

If you win a large lottery jackpot, sign your ticket$338 Million Powerball Ticket Sold at Tiny NJ Liquor Store. Read more ... », make copies, and put the original in a safe deposit box.

In most statesGive a Little Bit: A Visual Guide to Which States are the Most Charitable. Read more ... » you have three months to come forward$50M lotto winner comes forward days before deadline. Read more ... » with your ticket. Beforehand, you need4 Types of Insurance You Might Not Need. Read more ... » to put together a teamMint Introduces Kelly Anderson to the MintLife Team. Read more ... » of professionals consisting of an attorney (or several), a CPA, and a certified financial planner.

Get a goodInfographic: How Good are Minters at Budgeting, Saving and Paying Off Debt?. Read more ... » lawyer firstPaying Down Debt Vs. Saving More: Which One Comes First?. Read more ... ». Many lottery winners get claims out of the blue from, for example, co-workers who say they were in on a “pooled” ticket.

With big lottery winnings, maintain as muchHow Much to Spend on Christmas Gifts for Kids?. Read more ... » anonymity as possible.

In many states, you have to giveGive a Little Bit: A Visual Guide to Which States are the Most Charitable. Read more ... » your name for publicity purposes. If so, get an unlisted phone number, and considerMoney Makeover: Retiree Needs to Consider Selling her House. Read more ... » moving to an undisclosed location for a period to avoid7 Ways to Avoid Self-Sabotage and Stay Debt-Free for Life. Read more ... » the inevitable media crush.

With big jackpots, you have to choose between a lump sum payment and an annuity. This shouldShould You Ditch Your Adjustable-Rate Mortgage?. Read more ... » be a considered decision based on your age and other factors.

With wiseMoney Mindset: Becoming a Financially Wise Woman. Read more ... » investment, you can takeTake the Financial Compatibility Test for Couples: How Do You Match Up?. Read more ... » the lump sum and do fine. However, there are advantages to taking an annuity (assuming you’re10 Ways to Tell if You’re a Shopaholic. Read more ... » youngIs Homeownership Right for Young People?. Read more ... » enough to expectCanadians expect CPP, lottery to fund retirement. Read more ... » to live 30 yearsHappy Mid Year: Revisiting Your Financial Goals with a New Years Do-Over. Read more ... » after winning).

Your accountant and financial planner should review both options with you. The main advantage of the annuity is that you can’tTop 5 Reasons You Can’t Get Out of Debt. Read more ... » blow it all at once, which is surprisingly common.

The following tipsSix more tax tips to keep in mind. Read more ... » apply after any windfall, smallThe Path to Financial Freedom: Start Small to Save Big. Read more ... » or large.

Strive for consistency in daily life7 Ways to Avoid Self-Sabotage and Stay Debt-Free for Life. Read more ... ». Windfalls bring their own stress, particularly when family3 Ways to Start Your 2014 Family Budget Now. Read more ... » members have strong opinions about what to do with it. Try to keepSix more tax tips to keep in mind. Read more ... » life as normal as possible.

Pay off debtsThe Debt Destroyer Method: Tackling Your Debts One By One. Read more ... ». It is possible to receive $ 100,000 and still end up with a carConcert Tickets at BargainSeatsOnline.com Have Customers Excited. Read more ... » payment. UsingUsing the Power of Benchmarks to Reach Financial Goals. Read more ... » windfalls to pay down debt buys you freedom, and freedom from debtTop 5 Mistakes Consumer Make While Managing Debt. Read more ... » is one of the most liberating life accomplishments.

Make a budgetWhat’s Your Budget Personality?. Read more ... ». That’s rightWhich financial expert is right for you?. Read more ... »: Figure out how to mete out your windfall.

Sudden cash has a way of burning a hole in people’s pockets, and makingMaking the Grade: Are Americans Failing Financial Literacy?. Read more ... » a budget helps ensure you’ll have something positive to show for it, whether it’s tangible (a new car to replace your battered 2001 Corolla) or intangible (lack of debt).

Use some of it to make the world a littleGive a Little Bit: A Visual Guide to Which States are the Most Charitable. Read more ... » better. People who win huge sums often set up charitableGive a Little Bit: A Visual Guide to Which States are the Most Charitable. Read more ... » foundations, but even if your windfall is $ 500 at ChristmasHow Much to Spend on Christmas Gifts for Kids?. Read more ... », givingPlanning for Black Friday? Consider Giving Tuesday. Read more ... » part of it to a well-vetted charity that does work you support is the right thing to do.

You’ll feel good inside, and the charity will definitely appreciate it.

Things Not to Do After Winning the Lottery

• Don’t assume that because you have moneyThe Mint.com Money Boo Boos Sweepstakes Wrap-Up: Week 2. Read more ... », you’re automatically an entrepreneur. An experienced financial planner can help5 Signs You Need Help Managing Your Money. Read more ... » steer you away from harebrained ideas6 Summer Job Ideas for College Students. Read more ... ».

• Don’t try to get out of payingPaying Down Debt Vs. Saving More: Which One Comes First?. Read more ... » taxes. Your CPA and financial planner can help you minimize your tax burden, but you’re going to give some of your winnings to Uncle Sam.

• Don’t adopt a “high roller” lifestyle. This is how lottery winners end up brokeBroke? It Might Not Be Your Fault — A Visual Guide to Your Rung on the Economic Ladder. Read more ... » despite winning millions.

• Don’t become Santa Claus. Of course you want to be generous, and within reason, you can. But you’re not Oprah, and you shouldn’t buy a new car for everyone in your life.

Finally, don’t be a jerk about it.

Money changes people. It can change people for the better by increasing opportunities, or it can change people for the worse, by turning them into entitled dopes who thinkThink you’re an expert money manager? Try our quiz. Read more ... » they’re better than everyone.

You only set yourself up as the object of major schadenfreude if you adopt this mindsetMoney Mindset: Becoming a Financially Wise Woman. Read more ... ».

Windfalls should never be included in normal budgetsThe Complete Beginner’s Guide to College Budgets. Read more ... » because sometimes they don’t happen. But that doesn’t meanWhat Does Fear of Spending Really Mean?. Read more ... » you shouldn’t have a basic plan for windfalls, small or large.

Be smart, be humble, and be prudent, and if you find yourself with that winning Powerball ticket, you can use your winnings to better yourself, your family’s life, and the lives of those in need.

Mary Hiers is a personal finance writer who helps people earn morePaying Down Debt Vs. Saving More: Which One Comes First?. Read more ... » and spend lessHoneymoon Budget: How to Enjoy Your First Vacation for Less. Read more ... ».

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Oct 2, 2013 / By Mary Hiers

What to Do After You've Received a Financial Windfall :: Mint.com/blog

The probability of winning the Powerball jackpot is one in 175,223,510.

Most people realize they’re never going to win the lottery, but many people receive windfalls like inheritances, gifts, or generous bonuses.

Unfortunately, a lot of people who find themselves with a sudden, substantial sum end up with nothing to show for it. In fact, the “lottery curse” is a well-known cautionary tale.

The Lottery Curse

TruTV.com has a sobering slideshow of lottery winners who wound up with nothing. In some cases, lottery winners have lost loved ones, their freedom, or their own lives.

The causes of the “lottery curse” are mostly down to bad financial planning.

Many things lottery winners spend money on are non-refundable (cosmetic surgery), unnecessary (luxury cars and jewelry), or bad investments (like businesses purchased on a whim).

Windfalls can mess with people’s minds, so it’s smart to have a basic plan ready for dealing with windfalls, from the surprise year-end bonus to the Powerball jackpot.

Things to Do After a Windfall

If you win a large lottery jackpot, sign your ticket, make copies, and put the original in a safe deposit box.

In most states you have three months to come forward with your ticket. Beforehand, you need to put together a team of professionals consisting of an attorney (or several), a CPA, and a certified financial planner.

Get a good lawyer first. Many lottery winners get claims out of the blue from, for example, co-workers who say they were in on a “pooled” ticket.

With big lottery winnings, maintain as much anonymity as possible.

In many states, you have to give your name for publicity purposes. If so, get an unlisted phone number, and consider moving to an undisclosed location for a period to avoid the inevitable media crush.

With big jackpots, you have to choose between a lump sum payment and an annuity. This should be a considered decision based on your age and other factors.

With wise investmentShould You Use Your IRA to Buy an Investment Property?. Read more ... », you can take the lump sum and do fine. However, there are advantages to taking an annuity (assuming you’re young enough to expect to live 30 years after winning).

Your accountant and financial planner should review both options with you. The main advantage of the annuity is that you can’t blow it all at once, which is surprisingly common.

The following tips apply after any windfall, small or large.

Strive for consistency in daily life. Windfalls bring their own stress, particularly when family members have strong opinions about what to do with it. Try to keep life as normal as possible.

Pay off debts. It is possible to receive $ 100,000 and still end up with a car payment. Using windfalls to pay down debt buys you freedom, and freedom from debt is one of the most liberating life accomplishments.

Make a budget. That’s right: Figure out how to mete out your windfall.

Sudden cash has a way of burning a hole in people’s pockets, and making a budget helps ensure you’ll have something positive to show for it, whether it’s tangible (a new car to replace your battered 2001 Corolla) or intangible (lack of debt).

Use some of it to make the world a little better. People who win huge sums often set up charitable foundations, but even if your windfall is $ 500 at Christmas, giving part of it to a well-vetted charity that does work you support is the right thing to do.

You’ll feel good inside, and the charity will definitely appreciate it.

Things Not to Do After Winning the Lottery

• Don’t assume that because you have money, you’re automatically an entrepreneur. An experienced financial planner can help steer you away from harebrained ideas.

• Don’t try to get out of paying taxes. Your CPA and financial planner can help you minimize your tax burden, but you’re going to give some of your winnings to Uncle Sam.

• Don’t adopt a “high roller” lifestyle. This is how lottery winners end up broke despite winning millions.

• Don’t become Santa Claus. Of course you want to be generous, and within reason, you can. But you’re not Oprah, and you shouldn’t buy a new car for everyone in your life.

Finally, don’t be a jerk about it.

Money changes people. It can change people for the better by increasing opportunities, or it can change people for the worse, by turning them into entitled dopes who think they’re better than everyone.

You only set yourself up as the object of major schadenfreude if you adopt this mindset.

Windfalls should never be included in normal budgets because sometimes they don’t happen. But that doesn’t mean you shouldn’t have a basic plan for windfalls, small or large.

Be smart, be humble, and be prudent, and if you find yourself with that winning Powerball ticket, you can use your winnings to better yourself, your family’s life, and the lives of those in need.

Mary Hiers is a personal finance writer who helps people earn more and spend less.

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