Is it possible that the new American dream has become winning the lottery? This is a real question now that lottery mania has become one of the nation’s greatest interests. After all, if you can become filthy rich overnight just by picking random numbers for a buck or two, that has to beat a lifetime of hard work. The Powerball lottery drawing for Saturday, May 7, 2016, has reached a whopping $415 million annuity value. The cash value is of course discounted, but a $269.7 million cash value is hardly chump change. In fact, this is multi-generational empire building money.

There is a more serious side to the lottery most winners and dreamers fail to ever think about: with extreme wealth comes extreme responsibility. It might seem impossible to blow $50 million, $100 million or more, but the reality is that it is now easier than ever to waste or lose that sum of money.

24/7 Wall St. has tracked many lottery winnings over the years, and we have come up with a self-help guide of 12 things not to do if you win the lottery. Again, it is just too easy to go broke, and it is important to remember an adage here: you should only have to become rich once!

Sadly, many lottery winners have gone broke in just a few years. There are many pitfalls here, above and beyond deciding whether you should take the lump-sum cash payment or take a payout over the rest of your life. Most people who win the lottery choose the lump-sum payment rather than getting annual checks. So what happens if you win the lottery?

Again, extreme wealth comes with extreme responsibility. You have to consider how this can impact your family and your relationships. Will you work, or will you just chill out for the rest of your days?

The first thing that lottery winners need to do is to sign the winning lottery ticket and report it to the state. Before going to brag to everyone you know, you might want to reconsider. You also better line up a solid financial advisor and get some serious tax advice. Life is about to change drastically, but there are always limits. Thinking that you can live without a budget is a major pitfall.

Before doubting that you need to be responsible after becoming filthy rich overnight, ask yourself this: if it is so easy after winning the lottery, then why do some people still go broke? Some pitfalls to avoid are going to be hard to do. Your family and friends may now expect you to be their personal ATM machine and bankroll all their extravagances. You may fall into the trap of thinking you need to go buy everything you ever wanted, and ditto for your friends and family.

If you think there are no perils ahead, ask yourself if you know about alternative investment vehicles outside of stocks and bonds. Have you ever heard of kidnap and ransom insurance? And now consider the ultimate extreme — your life could become in jeopardy. You could even lose your life. Do you keep it all or become the world’s largest benefactor? Do you back all your friends and family businesses? Do you buy everything for everyone? These are just some of the things that a lottery winner will have to consider.

If the message hasn’t set in yet that you could conceivably blow millions and millions of dollars, get it in your head that it is easy. The 1980s film “Brewster’s Millions” made it seem hard to blow $30 million in 30 days, but that can be done in hours or days now.

Start tallying up the costs of owning and keeping up private jets or mega-yachts, living on a private island or keeping an entourage around. Then think about the ongoing costs associated mega-mansions, luxury cars, extravagant parties, private concerts, buying other luxury goods or art and collectibles. Any combination of those could go over $100 million without even being that creative.

24/7 Wall St. does not want to see any lottery winner go broke. Here are the 12 things not to do for any lucky lottery winner. And remember: you only need to get rich once!
1. Don’t forget to sign the ticket or report to the state.

Can you believe that one common mistake lottery winners make is forgetting to sign a ticket or failing to report to the state? Many lottery winners never even know that they won. Can you imagine losing a lottery ticket? If that isn’t bad enough, imagine if you are one of the few instances in which someone else takes your ticket and shows up to collect the prize. Fighting over true ownership of a lottery ticket is no simple task. There have been many disputes over the true ownership of a lottery ticket.

In some ways, lottery tickets are almost like the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds in hand. Lottery tickets expire at different times from state to state, but generally in 90 days to one year.

2. Don’t go immediately tell everyone (or any one) you know.

If you become an instant multi-millionaire overnight, the odds would be pretty high that you will to want to tell all your friends and family. After all, how could you not? Where this is such a problem is that lottery winners announcing that they won before collecting the winnings literally are putting themselves in grave danger. Chances are high that anyone who has ever done anything for you now may come with their hands out asking for something.

Then there are the extremes. Have you heard of kidnap and ransom insurance before? Two lottery winners have even found themselves victims of murder. If you can manage it, and if your state allows it, try to remain anonymous for as long as humanly possible. How you became vastly wealthy will be found out in time anyway. There is just no need to alert everyone before you get your plans in place.

3. Don’t decide to take the upfront cash without consideration.

Most lottery winners are going to choose to just take the lump-sum cash award. Still, some lottery winners may choose to get an annuity payment over the course of their life. Getting tens of millions of dollars at once (or well over $100 million) probably sounds better than getting a paycheck for the next 30 years or so. Again, keep in mind that close to 70% of those who gain instant wealth without earning it end up in hard times again.

Hiring a highly reputable and visible tax professional and a reputable financial advisor with long histories is a must here. The theme of “reputable and visible” will echo throughout here, but please hire those two people before you make the decision about a lump-sum or annuity option.

4. Don’t think you are suddenly the smartest money guy in the room.

If you knew little about high finance and business yesterday, you probably don’t know any more than you did right after finding out that you won the lottery. The odds are high that you probably aren’t the best person to manage your money and financial interests. If you go from living on a few thousand a month or struggling from paycheck to paycheck, what are the odds that you will know the best things to invest in and the best tax and asset protection strategies? There are many ways to invest and protect this new fortune. That might not include just buying stocks and bonds and letting it ride.

Chances are extremely high that your drinking buddy might also not be the best choice as an advisor and expert. Having a solid and respectable team of advisors and managers in place will act as your buffer that protects your assets now and in the future. Don’t count your eggs before they hatch — this money is not at all tax-free, with the highest IRS tax bracket, and don’t forget about state and local income taxes either.

Do you know how to protect your assets against all threats and know exactly how to protect your estate in case you die or become incapacitated? If you want a hint, consider this: If you answered yes to that question, then you probably did not bother playing the lottery in the first place.
5. Don’t forget about your existing debts and obligations.

It stinks to be reminded about responsibility all the time, but chances are very high that you still have obligations and responsibilities. Thinking that debts and obligations, past or future, suddenly do not matter might be a serious mistake. One lottery winner in California was strapped with debt from property purchases and what seemed to be excessive insurance policies. Regardless of whether you take the lump sum or the annuity option, if you have even one cent of debt in the immediate and distant future, then something is seriously wrong with you.

The new harsh reality is that lottery winners should not have a single debt ever again. What if, even by no act of your own, you end up broke again and still have a mortgage, car payments, student loans, credit card debt and personal bills? You won’t have the right to be angry when all of your friends and family ridicule you every day for the rest of your life.

6. Don’t go live too large or become a high-roller.

If life was simple yesterday, the ability to blow hundreds of thousands or millions of dollars any time you want will change your expectations in life. Many people who reach that ability just are never happy if they have to revert back to being sensible. If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars per play, you are dooming yourself. Now imagine what happens when the real con men find you.

Taking you and your favorite 50 people on a luxury cruise around the world can become very expensive, very fast. Having an entourage generally only works for people who keep making more money, and entourages have bankrupted many musicians and athletes.

7. Don’t go buy everything for everyone and for yourself.

Many people love sharing with their friends and family. This is to be expected, but spending endlessly for yourself, family and friends can crush any lottery winner. How to avoid this may sound simple, but living it may be very hard. Chances are high that you will regret the decision if you go out and buy dozens of cars and houses for you and for your friends and family members. This will start you on a bad path, and you could easily become the next friends and family personal welfare department.

If you start buying everything for everyone, there is a good chance that they are going to come to you expecting more of the same ahead. And what if they can’t afford the upkeep of such a gift? The other end of the spectrum is that you do not have to be a cheapskate either, but a budget and a team of advisors will keep you steered in the right direction. Do not be the lucky winner who bought more than 30 cars and multiple houses in three months for himself and friends and family.

8. Don’t think a budget is just for people without much money!

Does it seem right that millionaires need to have budgets? The smart ones know to live within their real means. Again, extreme wealth brings the need for extreme responsibility. Maybe it sounds funny that the mega-rich have to live within certain means with instant empire-making money. This is true, even when you consider that most lottery winners instantly become wealthier than everyone they know combined.

The notion of living within your means also goes back to having advisors and being prudent, but at the end of the day you do still have a finite sum of money. Chances are very high that you will make some serious purchases and your lifestyle will be changed forever. Not setting realistic limits for yourself, and not limiting how much you are willing to do for others, is a recipe for disaster. Again, many lottery winners go broke in a short time.
9. Don’t become everyone’s banker and business backer!

It is important to leave the world of venture capital and banking to those who are already in that field. One theme that is very common among lottery winners who lost it all is that they start backing all of their friends and family on outside business ventures. Sure, some ideas will sound great.

If someone has no knowledge of a particular business and does not know what it takes to actually run a business, will that person do better because a lottery winner who lucked into vast wealth provided money to start it? If your answer is yes, you seriously need to protect yourself — from yourself. Now think about whether most lottery winners had the understanding of how to run a business the day before they won the lottery.

Some friends and family members may expect you to become their own overdraft source of funds. Avoid this at all costs.

10. Don’t just give it all away to charity!

Some lottery winners might feel so lucky that they just want to donate a vast sum immediately to their favorite charities or to their religious institution. While this may sound like a good idea, those rich people who earn their money the hard way do not do this in the manner you might think. You can be more than generous without doing the unthinkable of giving away the whole treasure trove. Imagine what you will feel like down the road if or when a serious crisis arises in your life or your family’s lives and you no longer have the finances to help.

Should you be charitable? Absolutely! Should you give it all away just because a church or a charitable group does good things? Absolutely not. If you insist on giving away your new-found fortune, do it the way the wealthy do it. They generally structure their wills or trusts to give away that fortune upon death.

11. Don’t develop celebrity and athlete envy.

Being a high-roller is one thing, but you can go incredibly broke trying to keep up with the lifestyles of celebrities. It is hard enough to keep up with the Jonses, but do not try to keep up with the Kardashians and all the other rich and famous people you can think of.

It may seem cool to own a 200-foot yacht or private jet, or to have your own entourage. It may also seem cool to own castles in Europe or Picasso paintings. All of these are easy ways to drain your financial statement to zero. Trying to dodge taxes might even sound appealing to misguided people. Now go add up the price tags of these things, plus the cool cars and houses and the rest of it. You can go broke very quickly. Just ask the endless movie stars, athletes, musicians and people who come into vast sums overnight.

Many famous people have had it all, only to end up broke. And thinking you can dodge your taxes like so many famous people have done is another recipe for disaster, one that may come with a greater price than just mere penalties.

12. Don’t think that the law and decency no longer apply.

It is true that wealthy people have better access to attorneys and that they might be able to avoid certain penalties as a result. Still, even the wealthy have to live within the law. You still likely will have to pay taxes for the rest of your life just like everyone else. Living a reckless life without concerns about the laws of the land will not keep you from going to prison (or worse). Most good sports coaches will tell their star athletes upfront that chances are high they will have to be human for far longer than they will be stars.

Movies can glamorize scoundrels, but what good does it do you if you are incredibly wealthy and such a pariah that no one will associate with you? Remember, you don’t get to take any of your wealth with you when you die. And how fun will it be to be paying out all of your winnings to attorneys fighting to keep you out of jail or fighting civil suits looking to take your new wealth away?

Again, 24/7 Wall St. would not want anyone who wins the lottery to end up without a penny to their name (or worse). Remember this adage: You should only have to get rich once! Following a list of things to do or not do sounds easy enough. Unfortunately, life’s temptations can get in the way of logic.

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