You’ve probably heard fascinating stories about what happens if you win the lottery. Most of these captivating stories related to massive lottery winnings are of people who blew it all after making poor financial decisions or due to a lack of knowledge of how to manage a financial windfall.
Nonetheless, winning the lottery doesn’t necessarily have to end in regrets. With the right knowledge of financial responsibility and strategic planning, managing a financial windfall shouldn’t be as difficult as many people perceive.
In that case, DisruptionBanking feels it’s high time we took some financial advice from entrepreneurs and financial advisers who have been in the financial game for quite a while and with reputations to match!
1. Elizabeth Glasgow: Determine How Much You Trust Yourself
Elizabeth Glasgow is a renowned attorney providing comprehensive advice to wealthy individuals and families on matters to do with tax and estate planning. The co-founding member of Rise says that it’s important to look deep into your personal money habits because a lot of people have been presented with lottery wins and spent them too quickly or became too generous to everyone.
In that case, whether the money will come as an annuity or a lump sum, you should consider how much you trust yourself before managing it.
Glasgow emphasizes more on understanding the potential tax limits that you could face depending on your country or state. For instance, although lottery winnings are tax-free in the UK, an income tax will be charged from the interest earned after you’ve invested your lottery winnings. And that’s besides Inheritance Tax and Gift Tax, depending on the money won.
In the US, the government imposes a gift tax, which is usually a percentage of every dollar above the set amount, which keeps changing from time to time. In that case, Glasgow advises people to work with trusted financial professionals to stay tax compliant and make their wins last.
2. Marc Cuban: Don’t Try to Become a Smart Investor
This may sound like bad advice, but Marc had a valid point here. According to him, you shouldn’t take a lump sum because it’s very likely that you’ll blow it all in one spot. Instead, put the money in a bank, and you can sleep a lot better knowing that you won’t lose the funds.
So what about inflation? An excellent option that even Marc himself advocates for is investing some of the money in a low-cost index fund. According to him, anyone who isn’t familiar with the markets should consider putting their money in a cheap S&P 500 SPX fund.
In an interview with Dallas Morning News in 2016, Cuban advised that winners should start by hiring a tax attorney to guide them accordingly.
He also noted that winners should say no to their loved ones. They can help some, especially those they know are genuinely in need of help. However, lottery winners should consult with their accountants first before making such decisions.
Marc is not new to becoming a sudden billionaire, and one piece of advice he gave and really makes sense is that this is just money; it’s not happiness. So, if you were happier yesterday, you’re going to be much happier tomorrow, regardless of whether you’ve won the lottery or not.
3. Farnoosh Torabi: Don’t Do Anything Right Away
Farnoosh Torabi, a personal finance expert, author, journalist, and television personality, says that you shouldn’t do anything right away when you come into a massive windfall, like winning the lottery. Instead, take time to reflect for at least a few weeks.
Avoid making any money moves because it’s highly likely that they will be fueled by adrenaline, friends, or family members. In such a scenario, you want to make it last. Consider creating a more fulfilling life to make an impact.
You should avoid passing the good news to strangers or extended family members— at least not right away. You will save yourself from being bombarded with money requests.
Instead, research the best plan and consult the right people capable of guiding your financial decisions.
4. Suze Orman: Reflect On Your Ability to Manage Your Own Guilt
Suze Orman, the best-selling author of “Women & Money” and financial expert, believes that when you win the lottery, you’re bound to feel guilty that you have so much money and your family and friends don’t. Therefore, when handling a significant windfall, ask yourself if you can manage the guilt.
Orman believes that knowing where to invest hundreds of millions of dollars can be overwhelming, particularly if it’s your first time. For first-timers, Orman advises them to opt for an annuity to avoid blowing the whole amount immediately.
However, if you deem yourself capable of managing such money, consider taking a lump sum to control it better. Of course, these decisions should be made after consulting with your accountant.
5. Kevin O’Leary: Take the Lump Sum, Don’t Spend It
Kevin O’Leary is a Canadian entrepreneur and financier best known as a panelist on “Shark Tank” and “Dragon’s Den.” O’Leary says you should “pay yourself an annuity” and put the excess money to work for you. He believes that more cash upfront means more cash to put into an investment and grow.
As such, the entrepreneur recommends investing in low-volatility, dividend-paying stocks. He believes that a lottery jackpot is like financial freedom, so you shouldn’t screw it up!
Final Word
The first thing that comes to most people’s minds when they lay their hands on a financial windfall is either doing good for themselves or their loved ones. Nonetheless, some people have unknowingly lost all their lottery winnings due to a lack of financial wisdom. Anyone lucky enough to acquire life-changing money should consider investing in knowledge first or consulting a renowned financial adviser before making rushed financial decisions.
Landing an unexpected windfall like winning the lottery on sites like Lottoland can be overwhelming, particularly when managing such an amount of money for the first time. So, we invite you to read these tips and tricks about what to do with an unexpected windfall.
Author: Andrew Samu
