When you think about winning the lottery, you can probably imagine that all of your problems will be solved instantly. It's harder to imagine yourself wishing that you had torn up the lottery ticket instead of cashing it in.
However, for some lottery winners, like "Wild" Willie Seeley, that's exactly what can happen. Don't believe me? Check out the stories of these lottery curse victims to see how a lottery win can turn nasty. And I mean, really nasty.
Losing a large windfall, whether it comes from a lottery jackpot, a sweepstakes prize, or a sudden inheritance, happens more often than you might think. The National Endowment for Financial Education states that "70 percent of all people who suddenly receive large amounts of money will lose that money within a few years."
The good news is, you don't have to be one of them. While there are some very unhappy lottery winners, many more manage their money and relationships wisely and stay happy after the win. Here are some tips to help you prepare to win the lottery without losing your shirt.
1. Keep Your Lottery Win as Private as You Can
You might be so excited that you want to share the news with everyone — your mom, your best friends, the mailman. It's a natural reaction, but try to fight it. The more people who know about your lottery win, the more pressure you'll receive.
You'll also want to check your state's lottery laws right away. Some states allow lottery winners to stay anonymous, others require them to go public. You may also have the option to incorporate and claim the prize as a business, which can give you some legal protection.
If you can stay anonymous, it's a good way to protect yourself and avoid pressure from friends, relatives, and strangers.
2. Don't Quit Your Day Job... Yet!
If you're dying to quit your job, the moment that you get the news that you have a multi-million dollar lottery win coming to you might seem like a perfect time. After all, those millions of dollars should last a lifetime, right?
But before you make an irrevocable decision like quitting your job (or any other big decisions, like moving or getting a divorce), take some time to let the "high" of claiming a win wear off.
One of the biggest mistakes a lottery winner can make is to start making decisions when they are overly emotional from the win. Brian Kuhn, who is a Certified Financial Planner in Maryland, says that before considering what to buy or whether to move, "take a deep breath, have a long meeting with your family and loved ones, seek legal and tax counsel on how to claim and own the prize money, and don’t make too many decisions all at once."
When the time does come to make a change, be sure not to burn any bridges.
3. Hire a Financial Advisor or a Team of Advisors
When you win the lottery, you're going to have a lot of financial questions to deal with, including how and when to pay your taxes, how to reduce your tax liability, whether to take a lump-sum payout or an annuity and more.
Most of us aren't experienced enough to answer these questions. An experienced financial adviser can help you navigate the tricky issues surrounding a lottery win to your best advantage.
Keep in mind that all financial advisors are not equal. One lottery curse victim, Abraham Shakespeare, was even murdered by someone that he trusted to care for his money for him.
You're going to want to put together an experienced, knowledgeable, and reliable team to help you. Start by reading how and when to hire a lottery lawyer.
TheBalance's retirement pro, Dana Anspach, offers some tips on how to choose a reliable financial advisor. These include understanding your potential advisors' qualifications, asking the right questions, and finding out how their payment works (and if it's right for you).
Some people choose to use more than one advisor to mitigate the risk that bad advice from one person or firm could tank your investments.
4. Create a Spending Plan (a Budget Doesn't Have to Be as Bad as It Sounds!)
Russ Thornton of Wealthcare for Women says that one of the biggest mistakes a new lottery winner can make is to have a "spend first attitude".
"They feel as if they have so much money, they can afford to spend it on lots of stuff, including some expensive purchases like cars and/or a new home. What felt like a lot of money can quickly dwindle down to not so much before you know it," Ross says.
So, it might be hard to do, BUT before you buy that new Lamborghini or book that world cruise, create a spending plan, aka a budget.
For many people, a "budget" is a stressful idea. But a spending plan doesn't mean that you can't treat yourself. It just means that you'll know where your money is going before you spend it. " Plan first, spend second, and save some for the future," Ross recommends.
5. Don't Spend Any of Your Lottery Money
You might be thinking, "What's the point of winning the lottery if you can't spend the money?" Well, don't worry, I'm not talking about not having fun with those millions. I'm talking about investing that money wisely, then spending the interest. That way, you will never lose your nest egg.
Stacy Turner of Turner Advanced Financial recommends: "One way to restrain yourself would be to only spend income, not principal."
Brian Kuhn agrees. He warns not to "spend more than the income that money produces. If you immediately start dipping into principal that money is destined to be spent down. Capital, meaning money, is designed to produce more money through interest, compounding, and dividends."
Joshua Kennon, an investment expert for TheBalance, calls this idea "Don't Eat Your Seed Corn," comparing the idea to the farming practice of setting aside some of each harvest to replant the fields next season.
By spending only your interest, you ensure that your lottery jackpot is always working for you.
6. You're Going to Get Asked for Money, So Protect Yourself in Advance
When the news hits that you're a lottery winner, you're going to start hearing from long-lost relatives, acquaintances you lost touch with years ago, even complete strangers, and they're all going to want (you guessed it) some of your lottery winnings.
Some people feel that because you won the money, you don't really "deserve" it, or will have an "easy come, easy go" mentality and be happy to give it away.
And there's nothing wrong with helping your loved ones or people in need. But the constant demands can be exhausting.
Stacy Turner suggests: "You’ll be making a lot of friends, and possibly a lot of enemies. You’ll want to take steps to protect your winnings. The best defense is to set up a series of roadblocks, or asset protection strategies, to make it harder for creditors to get at your money. These strategies can be anything from relying on state-law exemptions to using trusts and family limited partnerships or limited liability companies."
7. Take Extra Time for Your Relationships
Aside from losing their money, many lottery curse victims lose something even more important — their relationships with the people they love. Winning the lottery might feel like a whirlwind of excitement and stress, but it's vital you take extra time to discuss your situation with your loved ones.
Marriage Experts Bob and Sheri Stritoff offer some great advice about handling money problems in your marriage: "Even though it is difficult sometimes to face into your feelings and thoughts about money, it is imperative that a married couple make time to discuss their finances and to make decisions together about budgets, short- and long-term goals, and investment strategies."
The hustle and bustle of winning a lottery can also take a toll on your relationship with your children. It might be a good time to review these tips on building a strong relationship with your children.
8. Finally: Don't Let the Lottery Curse Scare You Off!
Financial experts agree that the lottery curse isn't a curse at all. Rather, people cause problems for themselves by not knowing how to manage the sudden windfall caused by a lottery win. Which, to be fair, isn't a skill most people have needed to develop before striking it big.
By following these tips, your lottery dream come true won't turn into a nightmare.