If I win The Lottery where do I put the Money
If I win The Lottery, where do I put the Money
For many individuals receiving a lump sum is a key turning point in their lives.
When markets are uncertain, as they are today, it can be difficult to know when to put the resulting cash windfall to work.
Someone who is not good with money and will spend everything might need to not have total access.
There have been a number of reported cases in which winners won millions of dollars and were bankrupt a few years later.
If you can control spending and have a good financial team, you can often earn more by taking the reduced lump sum and investing.
With this size of investment, your asset allocation would include many things that a normal citizen does not need to consider.
What do you do with the money after winning the lottery?
The most important first step is to devise an investment plan that is tailored to meet your financial aspirations.
But going from a plan to reality isn’t straightforward.
I would focus on taking these steps:
- Do nothing for weeks
- Procrastination is seldom good, however taking a holiday and taking your mind off it for 2 weeks+ is great
- You will avoid making silly hash decisions this way
2. Get advice
Consider using a certified financial planner, certified public accountant, or some other financial advisor to help you come up with a plan for making your inheritance last.
That could include everything from investing, creating a diversified portfolio, to creating a will, purchasing life insurance, and paying taxes.
- Do your own reading
- About investing and portfolio management for a few weeks after work
- Don’t spend too much early on
- This is a key mistake. If you get $1M+ and you spend 200k on yourself and give 300k to others, or any other combination, you are only left with 500k.
- In comparison if you invest the money properly, you will have more before you withdraw.
5. Have some fun
Use some of the money to do things that you feel good. Travel, buy a new car, splurge a bit with your family and friends.
If I win The Lottery where do I put the Money: Safe way
In general, the safest way to invest a large pot of money is
- Invest in a liquid portfolio of ETFs and other investments. By liquid I mean something which you can sell easily. Investing all into something like a business or real estate is riskier because if you invest into the wrong thing, you can’t sell it.
- Only withdraw 4% per year of your portfolio. On $3.2m that is about $128,000 a year. Increase that by 2%-3% to keep in line with inflation. The founder of the 4% rule of retirement said 5% or even 6% could be safe, but it is best to be conservative.
Things to avoid when you win the lottery are:
- Failing to take advice. Many people who receive huge lump sum are new to investing and personal finance, and then trade on emotion.
- Dipping your toes in. Many people try to invest it gradually (dollar cost averaging) rather than in one go because it feels more emotionally easier. Yet numerous academic studies have shown that investing a lump sum straight away is more likely to beat dollar cost averaging or monthly investments.
- Trying to time the markets. Nobody can time markets. Being well balanced is good enough.
- Being too risk adverse or too cavalier with risk. You need a balance. Too little risk, keeping money in the bank, often leads to big indirect losses to inflation over time. Likewise, trying to dig your toes in with dollar cost averaging will hurt you (more than likely) long-term. But putting 100% in stocks or 100% in one real estate property also doesn’t make sense. A diversified strategy is needed.
- Not staying the course. Even somebody who invested one day after the 2000, 2008 or 2020 crashes have done fine if……..they didn’t panic sell during the crash. There is no need to fear market crashes unless you can’t trust yourself not to click the sell button!
- Not thinking carefully enough about spending. It is easy to go on spending spree but then it affects your overall pot.
- Not paying off any debts which are charged at high interest rates, such as credit cards. 16%-24% is excessive and should be paid off asap.
- You first must pay off your debts, especially credit card debts. Financially, credit card debt is like carrying around a rotting albatross carcass around your neck; the 14% or so APR you’re likely paying on that debt will outpace any investment you could think of. Free yourself of that stinky dead bird!
3 Options where to put your money if you win the lottery
It’s important to know your goals before you invest as they dictate where you should put your money. If paying off debt is not one of those goals, you have a bunch of great options:
- Buy a house: Though you might be able to find a bank that will loan you more, it’s inadvisable to take a mortgage loan for more than 80% of the home’s sale price. For many, winning a lottery may be the only way to come up with the necessary 20% down payment. There are some rent-don’t-buy evangelists out there who swear that home ownership isn’t the best investment a person could make because home prices in the last quarter century haven’t been as robust as stock market gains, but other smart folks see it as a pretty effective way for regular folks to amass a million dollars. If you aren’t a particularly disciplined saver or regular investor, a mortgage may represent a forced savings plan for you, and it’s hard to quantify the sentimental value of a home of one’s own if you plan to raise a family.
- Put your kids through college
- Invest it: The absolute best way to turn a lump sum into something that will support you when you’re old — and even provide an inheritance for your kids — is through investing. There are many things that could happen that could disrupt the global economy in the future, and past results should never be understood to be any type of guarantee, but rather imperfect predictors of future performance.
If i win the lottery how much can i give to family
But a trickier issue is how to deal with relatives and friends.
Once you hit the jackpot, many people will likely come calling, even those you have not seen in years.
Suddenly, you’re the dearest person they know.
Our suggestion is to make your friends, family and other loved ones as happy as possible.
And to do that, you could give them a share of your winnings – but research on money and happiness suggests not too much.
If you are going to dole out cash to your friends and family, keep it to about $100,000 per year for each person. If you want to help people in your life for a long time, then buy them an annuity that pays $100,000 a year for the rest of their lives.
Giving them more may do more harm than good.
Best financial advisors for lottery winners
Inheriting a lot of money can be scary, and even if you have a lot of investing experience, there are plenty of tax and legal pitfalls that can trip you up.
Because of the complexity associated with where to put an inheritance, it’s helpful to hire experts early on to help you navigate the ins and outs of making the most of the money that’s been left to you.
Depending on what kind of financial planning you’ve already done, you may already have this network in place.
If you don’t, then avoid the temptation to go it alone.
A financial advisor will help you avoid making mistakes with your lottery money.
Mintco Financial Team of Independent Advisors: If I win The Lottery where do I put the Money
Regardless of what you are feeling now when the lights fade and the cameras go away, things will calm down and you will be able to enjoy your newfound wealth.
Hitting the jackpot can be a life-altering event that can bring financial security for the prize winners and the ones they love. However, winning the lottery does not come without challenges.
A lottery winner must be prepared to protect the newly acquired assets and ensure that your affairs are in order so that you are protected from those who might try to manipulate you out of money that rightfully belongs to you.
Hitting the jackpot should be the beginning of a new chapter of financial security for lottery and casino prize winners. The Independent Financial advisors at Mintco Financial can help clients in Florida, New York and throughout the country settle prize claims and responsibly manage winnings.