How to Keep Control After a Lotto Win
Apr 5th 2013 4:18PM
Updated Apr 5th 2013 5:36PM
We've all taken the mental vacation that starts with coming into a huge sum of money. The fantasy likely involves thoughts of laying down tire tread in your workplace parking lot followed by a permanent vacation. Or perhaps some variation of that.
But the reality of winning the jackpot is actually much different from the fantasy. Sudden wealth brings many considerations, and oftentimes attracts creditors and every relative you've never met to your doorstep. It can also make you question who you are, and what is most important to you in life.
Not surprisingly, the odds of winning are heavily stacked against you -- 1 in 175 million, to be exact. Compare that to your chance of getting hit by lightning in your lifetime, which is 1 in 5,000. Disturbingly, you're 100 times more likely to die from flesh-eating bacteria than to hit the Mega Millions. Needless to say, if you hit it big, you are a very lucky person.
But, unfortunately, once you actually get your hot little hands on the cash, the odds turn against you incredibly quickly. About 90% of all lottery winners squander away their winnings within five years. Many nouveau riche go bankrupt, get divorced, and battle ugly family feuds.
Chances are -- with those 1-in-175-million odds against you -- you won't need to worry about those unpleasantries. But the odds for something you may face in your lifetime, like inherited money, aren't great either. Roughly 1 in 5 baby boomers who inherited a significant amount of money spent or lost all of it, according to a recent study.
So, before doing anything else, consider the following (based in part on my experience as a former financial advisor who had clients who won the lottery, pocketed casino jackpots, received inheritances, and sold businesses).
1. Write down everything you'd like to do, what you want to avoid, and how you feel right now about the situation and your future. This might seem silly and a complete waste of time (after all, you could be test-driving Ferraris!). But think of this document as your sanity contract. In the event dollar signs ever distort your life, you can go back to this contract. It'll remind you how you felt and what you wanted when you were clueless about living like a Kardashian.
2. Extravagance can make you lose yourself, your family, and all you hold dear.
3. Some fantasies are best left as dreams instead of very expensive realities. After all, what would you ever dream about if all of your wishes were fulfilled?
4. Remember that money doesn't buy happiness. But, if handled prudently, it can grant you independence, opportunities, peace of mind, and security.
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