Although many aspire to win the lottery, this life-altering event only happens to a few lucky souls. If you are fortunate enough, this extra money means you must suddenly make critical decisions. From budgeting to investing, you have different options for spending this money. Some choices are more reasonable than others.
Managing your finances after a lottery win requires thought and care, almost like estate planning. If you were to spend it, that’s easy. But saving, sharing, and investing can all be equally essential strategies. They help you balance priorities and achieve your financial goals.
Here are some tips to help you maximize lottery winnings and budget finances going forward.
Call a financial planner.
Notify your bank’s financial planner of your plans and needs for lottery winnings. A financial planner or advisor will protect and grow your money, usually through investments. If you go this route, you can have someone manage your assets. Without doing anything, you can increase your lottery winnings over the years.
Don’t quit your day job yet.
After winning the lottery, you may be inspired to quit your job. While relaxing at home all day may sound too tempting, don’t resign yet. Instead, take a leave of absence to assess your options. Some winners may want to continue working or pursue a career in another field. Either way, your job is an income. It’s wise to avoid making rash decisions and take things slow when transitioning to post-lottery life.
Pay down your significant debts.
After winning the lottery, most people prioritize clearing all the debts in their lives. That includes utility bills, credit cards, loans, mortgages, or car payments. These invoices can amount to thousands of dollars, occupying a prominent part of your winnings. Future financial planning can only happen if you aren’t saddled with significant debt.
Do not make impulse purchase decisions.
A sure way to diminish lottery winnings quickly is to make impulse purchases. Your mantra may be, “I have the money!” That statement is valid at the moment, but your funds won’t last forever. Even jackpot winnings from a Powerball drawing can deplete quickly when you spend excessively here and there.
Also, take the time to process your lottery win. It’s not uncommon to take 6-12 months to adjust to lottery winning. It’s the collection of thoughts and emotions that come with it. There is no rush to spend or save, thankfully. It’s better to take things slow when making financial decisions than to rush them.
Consider putting your lottery winnings into a GIC.
A guaranteed investment certificate, or GIC, is a way to create a short-term investment from lottery winnings. This way, you can sit with a financial planner or create your plan. You also keep your money liquid and earning as an investment.
Plan before giving anything away.
People who win the lottery often give away money to family, friends, and charities. They may be sent requests from family members in need. Although generosity is tempting, try not to spend money until you have a definitive financial plan. Avoid the impulse to give away your winnings. Instead, determine how to stretch your dollar the furthest.
Set aside some fun money for yourself.
You won the lottery. It should feel like it! Set aside some funds to do something you know you will enjoy. You can also enjoy a few small guilty pleasures within reasonable limits. For example, buying a new coffee maker, a mattress, or a computer chair are tiny spendings you can afford.
However, consider big purchases carefully. Large retail purchases are sure to come when you win the lottery. Always think about it before buying. Even if it’s as simple as paying off your mortgage, wait a few days and think about your decision carefully. With significant purchases, you always want to rationalize before buying.
Have financial objectives.
Create a list of short-term and long-term financial goals you want to achieve. This plan can take trial and error but try anything wild with your list. Consider all the possibilities. You can rule out what doesn’t make sense while scheduling what does.
Know your lottery winners won’t last forever.
Lottery organizations cannot take back your winnings after you have them. Unfortunately, you can overspend and overindulge in lavish consumption. Despite winning millions, you may end up with little left to spend. It has happened time and time again with many lottery winners. No matter what you’ve won as a prize, it will not last forever. You must prioritize realistic and responsible financial planning.
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