The Mega-Millions lottery has reached a stunning $1.15 billion, the fifth largest prize in the history of the game. The amount you would take home would likely be less than half of that, depending on your payout choice. 24% would be withheld upfront and would likely jump to 37% as you would be elevated to the highest tax bracket. While the cash payout is much lower than the annuity multi-year payout, you would be in the highest cotton ever.
24/7 Wall St. Key Points:
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The chances of winning are estimated at one in 302 million
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The chance of winning without playing is obvious – zero
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Should you win, you will need an army of legal and financial help. Getting a financial advisor near you would be the first step in determining the course of action. Either way now is the time for an end-of-year portfolio review.
It seems obvious now that one of the ultimate American Dreams is winning the lottery. Becoming filthy rich in an instant sounds a lot more exciting than a life of hard work, savings, and responsibility. On top of that, the media and the politicians keep telling you that it is just too hard to get ahead the old-fashioned way these days.
While the dream of winning is incredible, remember how many tales you have heard of big lottery winners who either lost it all or had terrible things happen due to the unlikely windfall. Drug addiction, alcoholism, losing their family as they got way too carried away with the good fortune and lifestyle, and countless other stories of woe.
The remarkable lure of buying jets and yachts or mega-mansions and third and fourth homes, owning private islands, keeping an entourage, buying tickets to fly into space, throwing Taylor Swift-styled parties—the list is endless. However, the reality is that you can spend hundreds of millions in a few days and be wiped out if you do not create safeguards.
For years, 24/7 Wall St. has posted a list of 12 things not to do if you win the lottery. While many may seem obvious, we always like to share them once again when the prize gets sky-high, like it is now.
1. Remember to sign the winning ticket and do not forget to report it to the state:
It may seem unrealistic or wild that people might not sign a winning lottery ticket. It must seem even crazier that they might lose a ticket or fail to report to the state that they won. Can you imagine losing a lottery ticket? Imagine what could happen if someone else snags your ticket and shows up to collect the prize. Fighting over a winning lottery ticket is no simple task, and disputes have arisen over who owns which ticket.
In a way, lottery tickets have become the last form of bearer bonds anyone can collect if they show up with the winning ticket.
2. Do not brag to everyone you know — or anyone if you can help it:
If you are lucky enough to win millions of dollars, one of the first things you might think is that you want to tell everyone you know. How could you not? Do not do this! Please just keep as quiet as you can. The problem is that telling everyone you know before you collect your winning can put you in danger in more ways than just one. Everyone who has ever done anything for you now may come with their hands out asking for something, or worse.
You may have heard of kidnap and ransom insurance before. Sadly, some lottery winners became murder victims. If you can manage it and your state allows it, try to remain anonymous for as long as possible. How you became vastly wealthy will be discovered in time anyway, but there is no need to hurry that along and jeopardize yourself.
3. Do not automatically decide to take the lump sum cash option:
Taking it all now may sound better than getting money sent over a lifetime. Supposedly, some 70% of lottery winners end up broke again, many within a few years. Let’s say that you can choose to get $516 million upfront, or you can choose to receive a payout of $1.15 billion slowly throughout a lifetime. Most people prefer the lump sum rather than the annuity payment. After all, it is instant empire-making money.
Seek a reputable and visible tax professional and a reputable investment advisor at a top money management firm with a widely recognized company name and a long corporate history. This theme of “reputable and visible” will echo throughout. Do this before you automatically decide on a lump-sum or annuity option.
4. Do not think you are now the most intelligent person to manage your finances:
Lottery winners and anyone who comes into large, unexpected sums of cash need to immediately get outside financial advice. If you lived paycheck to paycheck before, does it seem logical that someone will know the best things to invest in and the best tax and asset protection strategies? There are many ways to invest and to protect that new fortune. The strategy of the wealthy often goes way beyond buying stocks and bonds and letting the investments ride. About who to use or not to use, it’s logical to say that chances are very high that your drinking buddy and best friends might not be the best choice as an advisor and expert.
A solid and respectable team of advisors and managers from reputable firms will act as your buffer to protect your assets now and in the future. Do you know how to protect your assets against all threats and know exactly how to protect your estate in case you die or become incapacitated? Here is a real hint – If you answered yes, you probably did not bother playing the lottery.
5. Don’t let your old debts and obligations remain in place:
If you suddenly become filthy rich, it is a must that you get rid of your old financial obligations and debts. If you get the bug in your head of “I’m rich and don’t have to pay anymore, ” please know up front that you are on the path to dooming yourself. Whether you take the lump-sum or the annuity option, something is seriously wrong if you have a single penny of debt in the immediate and distant future. For that matter, you should not have a single debt ever again. One lottery winner in California was reportedly strapped with debt from property purchases years ago.
If you manage to go broke down the road and still have a mortgage, car payments, student loans, credit card debt, and personal bills, all of your friends and family members should get to spank or ridicule you every day for the rest of your life.
6. Do not become a high-roller or live a way too big a life:
The temptation to live lavishly can be a killer. If you go from living a simple life to instantly being able to spend hundreds of thousands of dollars (or more) per week, what do you think happens to your expectations in life ahead? Chances are high that you will want more of the same.
If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars (or more) per play, you are dooming yourself. Wait until the real con men find you. Taking you and your favorite 50 people on a luxury cruise worldwide can become very expensive, very fast. Having an entourage generally only works for people who keep making more money.
7. Do not run out and buy everything for everyone, not even for yourself:
Buying things is fun for many people. It can even bring a rush for some. Imagine getting to buy whatever your imagination can think up. Society and the endless commercials make you think you must own infinite stuff. Do not buy dozens of cars, followed by houses and whatever else, for you, your friends, and your family. This will start you on a destructive path, and you could quickly become the friends and family personal welfare department.
If you start buying everything for everyone, chances are high that they might expect it to last forever. The other end of the story is that you do not have to be a cheapskate. Still, hearing a real-life personal story of one lucky winner years ago buying more than 30 cars and multiple houses in three months is just wild.
8. Do not believe budgets are just for the poor and middle class:
This may seem hard to imagine, but creating and living on a budget is not just for low-income people and the middle class. Again, extreme wealth comes with extreme responsibility. It may sound wild on the surface that you have to live within means when you get a vast sum of money. After all, major lottery winners are generally wealthier than everyone they know combined. This also goes back to having advisors and being prudent, but you still have a finite sum of money at the end of the day. Chances are very high that you will make serious purchases, and your lifestyle will be changed forever.
Without setting limits for yourself and for what you do with others is a recipe for disaster. Again, many lottery winners go broke. What would you think the reflection about wishing for a proper budget would be if they go broke quickly?
9. Do not become the business backer for all your friends and family:
Being a venture capitalist or a merchant banker may sound powerful and enticing. One common theme that has come up with lottery winners who suddenly get vast sums of cash is that their friends and family start pitching them endless business ideas. Sure, some will sound great, and some will sound crazy. This could expose you to more than just a loss. You could end up with endless liabilities in some cases.
If someone has no knowledge of a particular business and does not know what it takes to run a business, will they do better because a lottery winner who lucked into vast wealth gave them money to start it? If your answer is yes, you seriously need to protect yourself (from yourself).
10. Do not dare give it all away:
Many lottery winners or those who come into vast, unexpected wealth may want to share their newfound wealth with society immediately. Giving away vast cash to charity or religious institutions may seem nice. This might not be the case for everyone, but giving away an entire fortune or a large part of it to a charity or a religious institution needs significant consideration. You can be generous without doing the unthinkable. Rather than giving everything away now, the extremely rich’s current charitable trend is to plan how to give the money away upon their death while often leaving some for their heirs.
Imagine what you will feel like when a severe crisis arises in your or your family’s life, knowing you no longer have the means to change it. Should you be charitable? Absolutely! Should you give it all away? Absolutely Not!
11. Do not develop celebrity envy and athlete envy:
Many movie stars and entertainers get to live the high life. Keeping up with the Joneses is terrible enough. Trying to keep up with the Silicon Valley tech giants, high-profile NFL stars, or Hollywood celebrities is a recipe for disaster.
Having a big new private jet makes sense for a lot of people. Trying to dodge taxes might even sound appealing to misguided people. Now go add up the price tags of these things, plus the cool cars, houses, and the rest. You can go broke quickly. Just ask actors and athletes who did this how they feel now.
12. Lastly, don’t think laws and decency standards no longer apply:
Some people think the rich can do whatever they want without consequences. It is true that the wealthier you get, the more high-class trouble you can find. It is also true that the rich can afford better attorneys and legal defense than the rest of us. Still, living a reckless life without concerns about the law will not keep you from going to prison or worse.
Movies and television shows often glamorize scoundrels, but what good does it do you if you are incredibly wealthy and such a pariah that no one will associate with you? Remember, you don’t get to take any of your wealth with you.
