Mega Money! Wow, you just won the lottery! Your dreams have come true. Everything you ever hoped for……. drug addiction……divorce…….suspicious death. Wait, HUH?
The media is littered with stories of the lottery ruining people’s lives. What they thought was their greatest day turned out to be their worst: lives coming off the rails as winners are tempted, targeted, and sometimes torn up with guilt about their incredible fortune.
Coming into sudden wealth, whether it be from the lottery, selling a business, or receiving an inheritance, can be a case of “careful what you wish for.” But it doesn’t always have to be. If your ship came in what could you do to make sure this windfall doesn’t lead to your downfall?
GO SLOW. Any big life change calls for patience. Not just a financial windfall, but also a new job, relocation, marriage, divorce, or birth of a child. Go slow. No medals are awarded for quick decision making. Change in an important part of our life can cause stress. Stressful situations can often increase performance, but they sometimes impair judgement. Researchers Mara Mather and Nichole R. Lighthall from the University of Southern California found that “when people under stress are making a difficult decision, they may pay more attention to the upsides of the alternatives they’re considering and less to the downsides.”
Common sense tells us that if our attention is diverted we are not likely to give other matters proper consideration. So take your time when change hits you. Trust me, the salesperson will still sell you that car, boat, watch, or ring months down the road. And let’s kill the myth of the perfect house. There is one you, but lots and lots of great houses out there.
Sticking with the “Go Slow” theme, we are going to use the letters of S.L.O.W. to help guide you if your lottery ticket gets picked or you come into sudden money.
S – Shut Up! Easier said than done in today’s selfie culture. Blabbing about your good fortune strokes your ego, but the more publicity you get the longer the line of scammers and people looking for a handout. Stay low profile and do as little press as possible. All but six states require that you come public if you win the lottery, but they give you time, typically 180 days. Use the time to change or get an unlisted phone number. Change your email and take down your social media. Don’t make any flashy purchases. Some states allow winners to claim their prize in the name of a Limited Liability Company (LLC) or Trust and keep their identity private. If you can, do it.
L- Look for Help – You’ll need an attorney if you are going to create an LLC or trust, plus they can help with estate planning and other forms of protection. In addition to a lawyer you’ll want to have a tax advisor or CPA on your team. They can help you understand what you’ll owe in taxes and help you decide if a lump sum or annuity payment makes sense. Bringing in a trusted financial advisor can help determine what potential lifestyle is now possible and how to invest the assets to pursue your goals. Lastly, consider some psychological help to deal with the feeling of guilt many winners experience. This can prevent winnings from being used to fund destructive behavior that may arise as a way to cope with feelings of unworthiness and depression.
O- Opportunities to Strengthen Your Position – Don’t waste this opportunity to set yourself up (and maybe your kids) for life. First use your winning to get out of any debt – credit card, auto, school loans and your mortgage. Use the proceeds to fund your children’s (or grandchildren’s) education and work with your advisor to make sure you’ve saved enough to fund the life you want. If you are no longer interested in working, make sure you have contingencies in place for poor market times. Once all this is in place, go ahead and take a dream vacation.
W- Watch Your Back – I don’t mean from a safety side. Although Mr. Khan, a Chicago lottery winner, likely could have benefited from a security detail. He was killed from cyanide poisoning just one day after collecting his prize in 2012. More than personal safety concerns you need to be aware of all your new “friends” and potential business partners. You can’t fund every new breakthrough idea just looking for a little financing. If you are lucky enough to be in a position to give some money away, do it in a structured way. Have a set criteria you use to determine the merits of each venture. Then stick to the rules. Even lottery winner pockets are not bottomless.
A big pile of ruined lives is visible in the rear view mirror of those who came into Mega Money. Yet most of us would still welcome a chance to navigate the burden of being an instant multi-millionaire. Your big day doesn’t need to be the beginning of the end. Put together a trusted team of advisors and just GO SLOW.