If you’ve read any stories of past lottery winners, many of them are filled with tragic endings — all the money was lost, something terrible happened with friends or family members, or both.
But that doesn’t have to be the case if you win the lottery or find yourself the lucky recipient of a surprise cash windfall. Here are some mistakes to avoid and actions you could take instead.
Going public with your win
What’s a common and natural reaction to receiving good news? Sharing it with other people such as friends and family members. And if that good news is winning millions of dollars, you might want to shout it from the rooftops, or at least shoot it across your social media channels.
But this course of action is likely to draw plenty of unwanted attention your way. This could include attention from strangers, but also family members or friends you haven’t heard from in a while (or maybe even knew existed).
What to do instead: Keep your win as private and anonymous as you can. This can be hard to accomplish, as the laws around lottery winners staying anonymous depend on the state you live in. But you can delete as much information about yourself online as you have access to before other people find it and try to contact you.
Choosing the wrong payment option
Lottery winners typically have two payout options: a lump sum cash option or an option for annual payments. The annual, or annuity, option pays out your lottery winnings over the course of many years. In the case of the Mega Millions lottery, you would receive one immediate payment and then 29 additional annual payments. This can be an appealing option because it might remove some of the temptation to spend all of your money at once.
What to do instead: Consider taking the lump sum payment. If you don’t spend all your money, this option might prove more favorable in the long run because you would be able to invest the money and (hopefully) reap the benefits.
Managing your new financial situation on your own
Have you ever successfully managed millions of dollars before? If so, it could make sense to make a go at it on your own. But already having wealth and suddenly getting more of it doesn’t always work out. Just take the story of Jack Whittaker, who was reported to have been worth $17 million before becoming a $315 million lottery winner. But then he was reported to have lost it all through what seemed like a series of poor financial and personal decisions.
What to do instead: Seek financial advice from professionals to help you learn how to manage your money. This is likely one of the first things you should do, even if you think you know what you’re doing.
We’ve all seen stories about celebrities and mega-rich individuals and how they spend their money. Many of them have extravagant lifestyles that look like fun. They get to travel all the time, buy expensive cars, and live in the fanciest of houses. If you suddenly came into money, it might make sense to try and replicate this behavior of buying anything you want. After all, you’ve seen other people do it and you might not consider the implications of a heavy spending habit (like the millionaires who have gone bankrupt).
What to do instead: Splurge within reason (you should celebrate a little, right?) and then take a step back to consider your financial situation. Start a budget and account for how you want to live your life and what that’s going to cost per year. Part of budgeting is considering all the details, including costs of food, travel, dependents, utilities, gas, vehicle maintenance, and much more.
Debt doesn’t simply disappear if you suddenly strike it rich — it stays with you until it’s paid off. And if you win a large amount of money, you might be tempted to start spending more and worry about how to pay off your debt later, while potentially creating even more.
What to do instead: If possible, don’t get into debt. But if you’re already in debt and you have more than enough money to pay it off, it’s likely best to immediately make those payments. Additionally, consider having a frugal mindset when making future purchases. Ask yourself if an expense is necessary and check whether it fits into your budget.
Making rash investment decisions
If you end up with a lot of money, you might wonder how you’re going to hang onto it and potentially make more of it. People always say you should invest your money, right? It’s true, but that doesn’t mean you should invest in any random business, stock, or cryptocurrency you see on the internet.
What to do instead: Consult with investment professionals and do plenty of research. Investing money is inherently risky, but it might go better for you if there’s a plan in place that follows trusted investment advice.
Filling your pockets with cash, literally
If you have a lot of money, should you carry loads of it around so you can pay for things? That might seem like a logical move, but it also just doesn’t seem … safe. As it turns out, it’s not. Multiple lottery winners have reportedly been robbed when carrying large amounts of cash or valuables.
What to do instead: Keep your money somewhere safe, such as one of the best savings accounts. You can use a credit card or debit card to make purchases rather than carrying around wads of cash.
Continue playing the lottery
If you won once, you can win again, right? Technically, yes. But the chances of winning certain lotteries are well below one in 100 million. For most people, it’s just not going to happen. In fact, you have better odds of being struck by lightning (one in 500,000).
What to do instead: Consider putting your lottery ticket money toward something else, such as an investment or into savings. This could help you earn some cash or start an emergency fund rather than spend your money on an option that’s not likely to pay out.
Even if you never make it big by winning the lottery, this advice — such as sensible investing and paying down your debt — can typically apply to anyone. We all have unique circumstances, but the financial principles of budgeting and saving are often universal. If you want to help round out your financial situation, check out these different ways you can learn how to save money.
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