Lottery Winners: What to Do With Your Multimillion-Dollar Windfall

lottery winnersAre lotteries good or bad for America? When they're criticized for hawking a "statistically unwinnable" product, or even levying a "tax on innumeracy," lottery advocates argue that at least their intentions are good: For the most part, lottery revenues not paid out as prizes are earmarked to fund schools.

And actually, this time they're right about that.

The award of three separate $100 million-plus payouts from last month's Mega Millions lottery resulted in at least one undeniable success story for education.

In Maryland last month, three Baltimore area public school employees pooled their money to buy several dozen lottery tickets. On March 30, one of these tickets turned out to be "golden" -- winning a $105 million lump sum payment for this team of a school administrator, an elementary school teacher, and a special-ed teacher.

As Maryland Lottery Director Stephen Martino said when announcing the result: "If it can't be you, these ... are precisely the people you would want to see win."

You also have to applaud how these winners are reacting to their good fortune. They don't plan to quit their jobs. They like teaching kids and plan to keep on doing so.

As for the loot, they plan to fulfill a few wishes, sure -- taking a European vacation, buying a new house. But the rest of the money, they say, will be earmarked for more practical uses. One winner will use his winnings to pay off a mortgage and fund his kids' education.

And all three insist that they'll invest the bulk of their $35 million shares.

But how does one go about "investing" $35 million?

We All Put Our Pants on One Leg at a Time

When it comes to deploying your cash -- whatever the amount -- newly minted millionaires would be wise to do it exactly the same way the rest of us do. After you've accounted for your day-to-day living expenses, any money left over is what you have left to "invest" -- be it $35 million, or just $20 salvaged from your biweekly paycheck.

Successfully investing this extra cash breaks down into three main steps -- three piles of cash that anyone with money to invest should have in place, be they lottery winners, self-made millionaires, or just the rest of us ordinary, everyday working stiffs.

1. Your First Pile of Cash: Rainy Day Fund

All investments carry some risk. Stocks can lose value. Bonds can become worthless when the company that issued them goes bankrupt. The last thing you want is to be hit with a big medical bill, the need to replace a furnace, or a job loss, and forced to sell your long-term investments at the very moment when they've lost a substantial portion of their value.

Key to surviving this risk is ensuring that over any short-term period, you have enough cash around to weather the storm. Whether you're starting with $35 million, or just a few thousand dollars, your very first move must be to set up a rainy day fund -- a bank account that can't lose value, with enough cash in it to cover your living expenses for at least three to six months.

2. Your Second Pile of Cash: Sleep-at-Night Investments

Once you've got your rainy day fund, the next step is to figure a way to earn more than the 0.1% to 1% your bank pays you for the privilege of sitting on your cash. Bonds are one option here. Certificates of deposit are another.

Historically, though, the best returns on investment come from investing in stocks. The easiest way to do this, and ensure your stocks are diversified (so that bad news at any one company cannot torpedo your whole portfolio), is to buy a broad-based index fund like the S&P 500.

Sure, even the mighty S&P can lose value from time to time. It can even stay down for years at a time. But historically, investments in this index have returned 10% or so annually to investors who had the patience to wait for the eventual turnaround -- and the rainy day fund to permit them to do so.

3. Your Third Pile of Cash: Maximize Your Money's Potential Investments

The third and final leg of the investment stool is, of course, individual stocks. Picking a single stock to buy is obviously riskier than spreading out your money across 500 separate stocks. But it also gives you a bit more control over the outcome, and a chance to earn more than 10% on your money. (And until you are extremely comfortable investing in individual stocks, the bulk of your money should stay stashed in that index fund for diversification.)

To maximize your chance of earning extra profit, investors should buy stocks they're familiar with enough to understand which companies have a leg up on the competition. If you're a teacher, like the Mega Millions winners for example, you might want to start with for-profit education companies such as ITT Educational (ESI) or Strayer (STRA), textbook publisher McGraw-Hill (MHP), or perhaps the company behind all those book-fair inserts sent home with the students, Scholastic (SCHL).

Whatever your profession, though, buy what you know.

Increase your money and finance knowledge from home

Introduction to Value Investing

Are you the next Warren Buffett?

View Course »

Understanding Stock Market Indexes

What does it mean when people say "the market is up 2%"?

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

wow if only we all could be so lucky! but in reality we are not.. but we can earn extra cash, and if your like me with the way everything is today, extra cash can come in really handy. Check out this video.. take time listen to it.. then after really taking time to do what it says without giving up.. and a little dedication, you to could be making alot ot extra money, and its FREE.. all it takes is your time.. and a little determination.. try it .. and don't give up!

April 24 2012 at 3:55 PM Report abuse rate up rate down Reply

Who can resist the wonderful tale of Mega Millions anonymous jackpot winners - the Three Amigos as described to the media by Maryland Lottery director Stephen Martino in his best Elmer Fudd dialect.

Don't you think Maryland Lottery director Stephen Martino is tickled pink that his Mega Millions anonymous jackpot winners have chosen to call themselves the Three Amigos?

Almost as if they knew the title of his favorite comedy film from 1986 ------ !Three Amigos! -

starring Martin Short, Chevy Chase and Steve Martin in the role of Lucky Day.

April 22 2012 at 8:25 PM Report abuse rate up rate down Reply

We don't know how much of the story that Maryland Lottery director Stephen Martino has told us about the Three Amigos is truth and how much is make-believe. We don't know how the winning ticket was validated and how the identity of the winners was verified.

We do know that the Maryland Lottery has been looking to hire quite a long time to fill the vacant position of Internal Auditor.

We do know that Maryland Lottery has said that the Three Amigos purchased their tickets for Mega Millions from three separately located Lottery ticket vendors.

We know that Maryland Lottery has also said that Three Amigos purchased all $60 of Mega Millions tickets at one single location.

We do know that Mega Millions rules endow the individual State Lottery Directors with unchallenged final decision authority in most dispute scenarios.

We do know that a court ruling was issued on April 15, 2012 in favor of a plaintiff who was denied a license by the Kansas Racing and Gaming Commission under Executive Director Stephen Martino.

We do know that the March 9,2012 Mega Millions draw was halted due to technical difficulties - but no other detail or explanation has been given.

We can watch video of the MegaMillions ball draws conducted in the run-up to March 30 and see the most astonishing variation of slowed-down/ speeded-up, stop-motion, off-sync, in-sync, out-of-sync and mismatched audio and video for what is supposed to be a technically top-notch and ethically reputable operation.

For the March 30, 2012 record breaking $656 million Mega Millions jackpot - there were three winning tickets. One jackpot winning ticket from Maryland, one from Kansas and one from Illinois.

The Kansas and Maryland winners have chosen the option of remaining anonymous. Maryland Lottery director is Stephen Martino. He was hired two years ago from his position as the Executive Director of the Kansas Racing and Gaming Commission.

Illinois does not allow Lottery winner's to claim a jackpot anonymously. The MegaMillions jackpot winning ticket from Illinois was claimed by a couple in their 50/60's from rural farm country. They talk and dress just like you might expect from small-town farm country folks. But they are not in the farming business. Like most folks in farm country - they both list their occupation as computer programmers.

There are so many magical nuances to the March 30, 2012 Mega Millions record jackpot draw - its hard to keep track of all the magic.

Even the announcer for live Mega Millions ball drop draws puts on the magic touch. He knows better than to announce what will become the record breaking Mega Millions jackpot winning ticket numbers while wearing his standard coat and tie.

Something magical is about to happen. What better occassion than this to get spiffed up and announce the winning numbers while wearing his finest tuxedo and bow-tie.

April 22 2012 at 8:15 PM Report abuse rate up rate down Reply

April 22 2012 at 8:54 AM Report abuse +1 rate up rate down Reply

Well..... I don't play since I don't want the money. All it brings grief. On the chance someone gave me a winning ticket, I would donate it all and be done with it. The happiest people are the ones with the least! Maybe, because they have less to lose. Your truly wealthy when you have peace, family and health.

April 21 2012 at 9:40 PM Report abuse rate up rate down Reply

I would open a hostel for kids and teach them something useful

April 21 2012 at 9:25 AM Report abuse rate up rate down Reply

I hope that if I would win a large amount of money and I didn't know what to do with it. Before I allow the Government and the Stock Marketers take my money, because eventually that's what will happen because they truly don't know enough to protect it all. I would go from State to State and City to City looking for ordinary folks like myself who are trying hard and need need need money to help them out of the slumps they are in. I truly would ask the Lord to lead me in that way. To just be a true philanthropist and help my fellow man who I could Identify with and pass them out some of the bread that I had found.

April 20 2012 at 5:56 PM Report abuse rate up rate down Reply

If any lottery winners are reading this artical please donate to your local animal shelter & try to save some lives. The animals give so much love back & they can't help it that they are in shelters awaiting the death sentance. PLEASE SAVE SOME ANIMALS. Thank you.

April 20 2012 at 5:14 PM Report abuse rate up rate down Reply

Money sure does buy Happiness! All the wealthy who say that it does not, have not given all their money away and lived the poor life!

April 20 2012 at 4:07 PM Report abuse +1 rate up rate down Reply

Set up a corporation in the Cayman Islands or Switzerland and have the money sent to an account there. Like Mitt.

April 20 2012 at 3:59 PM Report abuse +2 rate up rate down Reply