Ok, so you've won the mega jackpot and suddenly you're ten million dollars richer.
You're a pretty smart cookie though- you do watch The Infographics Show after all- and
you've seen one of our previous episodes on lottery winners who lost it all, so you know
you need to take some steps to protect this incredible windfall, or else you'll end up
in one of our episodes as another disaster story.
But what in the world do you do with all that money when up till now your focus has been
on making it from paycheck to paycheck?
Don't worry, because as usual we've got your back with another episode of The Infographics
Show- the intelligent person's guide to spending your lottery winnings.
Winning the lottery can be a mixed bag.
On one hand it can have the power to make all your dreams come true, and you can finally
tell that boss of yours with the stupid little mustache exactly how you feel about him.
But on the other you're going to have to deal with the instant celebrity, and a whoooollleeee
lot of people in your life who suddenly want a handout.
If you've seen our episode on lottery losers then you'll know that people are going to
come begging, and not just your own family but complete strangers who somehow think that
suddenly they're entitled to some of your cash!
But you'd be lucky if begging is all that comes with your lottery win, as some of your
own family members may in fact be out to kill you just so they can hope to inherit some
of your cash!
It's said that big lottery wins are good for three types of businessmen: those who sell
fancy vacations, ones who sell fancy cars, and hitmen.
So if you don't want to end up being fleeced by leeches trying to get at your dough, or
on some hitman's list, you're going to want to spend that money intelligently.
First thing, it's ok to splurge some- I mean after all you did just win the lottery.
Get yourself a few fancy things, take a nice vacation- maybe take some of your more murderous
family members with you to stay on their good side.
But don't go overboard with it.
First, if you start spending big it's only going to encourage moochers and beggars, and
suddenly you're going to start finding people that you played jump rope with for one day
in kindergarten popping up in your life, claiming you're the best of friends.
Or worse, old boyfriends and girlfriends, wives and husbands, who are going to serenade
you with ceaseless sonnets of their unending love for you- or who by the way, also might
hire someone to try to kill you.
It's not just family you have to worry about.
But there's another good reason why you shouldn't start spending money right away- it attracts
criminals.
Lottery winners are prime targets for thugs who intimidate, coerce or outright threaten
winners into giving them large sums of money, or perhaps bundles of all the expensive things
they just bought.
Even more insidious though, it attracts a specific type of criminal: the scam artist.
These professional con men will grease their way into your life claiming to be anything
from a financial advisor to a business entrepreneur- or they might actually pose as old friends
you lost touch with.
Whatever their mark's emotional vulnerability, these pros will exploit it for their own benefit.
So the best way to avoid all this unwanted attention, is to spend discreetly.
A few luxuries are nice, but don't suddenly go from driving a Ford Fiesta with a clutch
that sticks to zooming around in a Lamborghini.
Another prudent reason not to go into a spending spree is the simple fact that most high end
luxuries don't come with a one-time price tag.
That fancy fiery red Lamborghini you just bought?
It's monthly insurance could be as high as $568 a month!
Think buying a mansion is a smart move?
Hope you're ready for heating and air conditioning bills that are a few thousand dollars a month-
big homes take a lot of heating and cooling after all.
How about paying landscapers to keep your home from being overrun by nature?
That's about one thousand a month.
Oh, and let's not forget the government, who definitely is going to get what's coming to
it- property taxes every year can be in the six figures!
So maybe set more realistic expectations for yourself, because we really can't stress it
enough: luxuries are not one-time purchases, and once the money is gone there's little
chance your grocery bagging income is going to cover all the fees of your new fancy lifestyle.
Instead of blowing money on the things you see on tv, focus on spending the money on
helping you achieve a lifestyle that can afford those things on its own- you have a ten million
dollar opportunity to completely change your life!
And that's the secret to why most lottery winners end up dirt broke- they see the money
as a windfall, not an opportunity, and when it runs out they are back in the same place
they started.
So how do you prepare yourself for a brand new lifestyle and use this mula-rich godsend
to catapult you into a brand new life?
First, remain anonymous if your state's lottery rules allow it.
States differ, and while in New York lottery winners are a public record, other states
allow winners to remain completely anonymous- which will help cut out a lot of the freeloaders
and moochers coming your way.
You can set up a trust or limited liability company to receive the winnings in your name,
with a lawyer claiming the prize on behalf of the trust.
It might sting a little to have to spend a few thousand dollars to get some suit just
to show up and receive your check for you, but hey it's money well spent for the peace
of mind it'll bring you.
Next you have to decide if you want to take the cash up front or receive payment in 30
installments over 29 years.
There's a lot of things to consider here, such as what exactly are your plans for this
money?
If you don't have plans yet or if you know you'd be too tempted to spend foolishly, take
the installment plan.
You should also consider which way you will end up receiving more of your money, as tax
laws in different states might favor you taking the full payment up front over being taxed
on every single annuity- or vice-versa.
With taking an annuity though there's another issue to consider, and that's what'll happen
to your family if you die before the 30 year period is up.
This will leave your family with the burden of paying an estate tax on your winnings,
which could see the money quickly dry up.
Do yourself a favor and have a conversation with some tax professionals before you decide
how to get your money- since you have 60 days from the time you claim your prize until you
have to decide, there's plenty of time.
Next, do the obvious thing: pay off all your debts.
Just do it.
We shouldn't even have to explain why, but you'd be surprised at how many lottery winners
cash in their big prize and continue to make monthly payments on their old debts- and then
when the money is all gone they're still stuck with their old debt, and likely with a great
deal of new one.
Don't be a dummy, bite the bullet and pay back any debt you currently have, then you
can enjoy the rest of your money with a clear conscience!
The next thing you should do is set yourself up a team of legal and financial advisers,
and we don't mean your mom, dad, and big brother who has a rad idea to turn a used car lot
into a restaurant.
We mean professionals, people with credentials that you can trust to advise you on how best
to handle your money.
This is another major pitfall for lottery winners, and even though we read every day
about the rich amongst us having financial advisors, for some reason lottery winners
mostly never think to actually get one themselves.
Here's a protip: if even the rich and wealthy need financial advisors, it's probably because
having boatloads of cash is something that needs careful management, specially if you
plan on using it to make even more boatloads of cash- which you should.
Vet each advisor you meet with and check broker records at the financial Industry Regulatory
Authority, where you'll be able to see if they have any pending or past legal actions
or legal complaints against them.
You can do the same with attorneys and insurance agents to see if they've been subject to any
state complaints or legal filings against them.
It's incredibly important you vet the people you're entrusting to advise you on how to
manage your fortune, so don't take shortcuts.
Plus having a financial advisor lets you pass off the responsibility of telling moochers
and freeloaders no onto him or her- which is perfect when your big bro comes around
again to tell you about his great idea to turn a former junk yard into a restaurant
where the customers can eat inside old bulldozers.
Ask your advisors on the best route to invest your winnings, many will recommend that you
don't even touch it for the first six months and instead put it into short-term investments
that will yield some initial returns.
Yes, this means you won't be able to live the high-life right away, but you're already
putting your money to work for you, and you'll be able to tell people you can't give any
money away because it'll be safely tied up with various investments.
In six months time you can start to live off the interest earned on those investments and
ask your financial team for more long term plans.
And no matter how insistent he is, continue to ignore your big brother's idea to turn
an old bowling alley into a Nerf-gun arena and Hooters restaurant all in one.
While your money is being invested, learn to live within a budget.
Set spending limits for yourself, or better yet ask your lead advisor to set up a monthly
allowance for yourself.
As your money does more work for you and earns more, this monthly allowance can grow to reflect
your growing fortune.
It might feel like being a kid again, and might be frustrating that you're not living
the high life right away, but prudence and discipline will be exactly what lets you completely
redefine your lifestyle, and in a few years your money will have (hopefully) exponentially
grown through wise investments.
Another smart move will be to set up an annual charitable donation.
Not only will you be doing a good thing for others, but those who donate to charity are
eligible for huge income tax deductions- and remember, your income taxes are now going
to be based off your new wealth, and not your old paycheck from bagging groceries, so basically
don't expect a return on your taxes and instead expect to owe.
A lot.
But with deductions of up to 50% of adjusted gross income, you can offset how much money
you're giving back to Uncle Sam and do some good at the same time, a natural win-win.
Honestly we can't harp enough on how prepared you need to be for taxes, because if you win
big, you better be ready to pay up just as big.
Not only do you have to worry about property taxes on any new homes, and income taxes on
your winnings, but you'll also likely for the first time have to worry about the estate
tax.
As of 2016 each person was entitled to a $5.45 million limit on tax-free transfers of wealth
after they died, meaning this is the most money their family could receive before Uncle
Sam came to get his cut.
So if you win big- really big- it will be prudent to start thinking about how your money
is going to be handed down to your next of kin in case you die.
Yet another reason why you need financial advisors.
Winning the lottery can be a life-changing event, but unfortunately for most it only
leads to ruin and the depressing reality of ending up exactly where they left off.
For smart people though, winning the lottery is they key to creating a brand new lifestyle
for themselves, and setting them on the path to financial success for life.
But whatever you do, don't give any siblings money to open restaurants.
Restaurants are terrible investments.
How would you spend your lottery winnings?
What would be your plan?
Don’t forget to watch our other video, why you don’t want to win the lottery!
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