Managing Your Lottery Winnings: What You Need to Know
Billions of dollars suddenly landing on someone’s lap. It’s a fictitious notion. An idea for a great movie perhaps. Yet these stories occur in real life, and instant billionaires have either make the most out of their prize money or squandered it for nothing. Have you heard of their stories?
- Checkout operator Callie Rogers is Britain’s youngest lottery winner. The 16-year old won £1.9 million ($3.8 million) in 2003. She spent it on partying, gifts, and cosmetic surgery. Rogers is currently training to be a nurse and is now living in a simple 3-bedroom house.
- British Michael Carroll is a rubbish collector before scoring a £9.7 million ($19.5 million) jackpot in 2002. He squandered the jackpot money in 5 years then spent time in jail. He now works as a factory worker.
- Maria Lou Devrell from New South Wales was murdered by her financial adviser Peter Kelly in 2011 after he became enraged that she and her husband were wasting their $5 million Oz Lotto winnings.
The chances of winning billions could be more than a million to one. Yet large inheritances come the way of people who can create similar opportunities and challenges. So what do you do if you won a large sum of lottery money? Here’s an example on how you can sustain your wealth and generate income after winning billions.
A Life-Changing Jackpot Shouldn’t Alter your Life
Wendy won the lottery 5 years ago. The 40-year old single parent says that it’s best practice not to announce you’ve won the lottery and immediately seek financial advice from a trusted consultant. Wendy gave a percentage of her winnings to relatives and close friends, bought a new card, took a month-long holiday, bought her own home, and most importantly – sought the advice of a financial consultant that is recommended by a friend.
“Once the money came in and I’d given [some] to my other family [members], I knew how much I had left and so I went in very quickly. I didn’t want it sitting there doing nothing and the temptation being too great. I don’t get all of the income sent to me, I get some of it. My adviser actually set me up with a budget and said ‘how much do you need to live the life you want to live?’ and that’s what he sends me each month…and the rest of it’s reinvested.”
Here are Wendy’s other tips to manage lottery prize money:
Handle your Emotions
Winning millions of dollars can be overwhelming. Remember not to act like a highroller. You’re not an entrepreneur or a hotel owner, so don’t act like your money will stay forever. Be prudent on what you buy after winning a large sum of money.
Seek Financial Advice
It’s a fact that you are not a financial expert. But you have enough money to pay for the services of a financial adviser. It’s a good move to properly manage your winnings instead of burning it. A financial adviser will teach you how to sustain your savings through sound investments.
Don’t know your fully franked dividends from your Treasury bonds? Professional input can help you maximise the return and minimise the tax on newfound wealth. Ask your accountant or solicitor to refer you to an adviser, or seek a recommendation from a money-smart friend or relative.
It’s always a best practice to keep quiet and humble. Don’t announce on Facebook if you won the lottery. Remember to keep it to yourself until you claim your winnings and have a financial adviser at your side.
Don’t Burn It
Treat yourself by buying tangible things you’ve only dreamed of – a fancy car, a big mansion, or maybe even a private island. After buying these, ask yourself “how do I sustain my wealth?” Don’t buy things because you have the money. Invest money to make more money.
Wendy invested the remaining $2.5 million in managed funds plus a spread of international shares. Her financial adviser managed her investments while a relative accountant handles the monthly allowance she receives for her expenses. Wendy gave up her day job to spend time with her kids, but continued to be prudent and invested her winnings.