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As Mega Millions Lottery Rolls Up to $293 Million, 12 Things Not to Do If You Win
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It is hard to argue against the notion that the new American Dream is winning the lottery. After all, that old American Dream of hard work and saving could take you a lifetime. On top of that, the media now keeps telling you that your parents’ generation just had better opportunities to succeed. Playing the lottery gives people the dream of becoming filthy rich overnight, just by luck and spending a few dollars.
There was a $5 million Mega Millions lottery winner in Texas on Friday, June 10, but the reality is that the massive $280 million Mega Millions lottery will roll to Tuesday, June 14, 2016, with an annuity value of $293 million since the so-called Megaplier did not get hit.
The question that many lottery players will ask is what they should do, or what they should not do, if they win a vast sum in the tens of millions or hundreds of millions of dollars. Lottery winners know that the cash value is discounted for a lump sum, down to $198 million in this upcoming Mega Millions drawing. Friday night’s lottery drawing was already the largest Mega Millions lottery since November of 2014. Whichever payment option the next winner chooses, they better be responsible and give this some serious thought.
Attaining an instant fortune that creates multi-generational wealth also comes with the need for extreme responsibility. Many lottery winners, and many of those who come into unexpected money, never seem to have read that memo. Many lottery winners end up broke, some in just a few years.
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. It has to seem hard to imagine that you could blow through almost $200 million very fast. But think about it when you back out taxes (at the highest rate of course), then think about buying a few things and settling up your past life’s messes. If you are not careful, you could end up back in the poor house.
The newly wealthy need to keep one adage in mind that “old money” has known for generations: You should only have to become rich once!
There are many pitfalls waiting for unprepared lottery winners. Again, extreme wealth comes with extreme responsibility. Instant wealth can and almost certainly will have an impact on your family relationships and friendships. Several things need to be done by lottery winners, above and beyond signing the winning lottery ticket and reporting it to the state.
You might want to run out and brag to everyone you know, and you might think you have all the time to worry about financial advice and tax advice. Living on a budget may seem silly — after all you’re rich! Maybe you want to bankroll your family and friends on every need and desire. And maybe you think you know everything about business now that you are rich. If very much of this sounds right up your alley, please take it to heart right here and right now — you are a prime candidate to go from riches back to rags.
Some pitfalls are very hard to avoid. Family and friends can create enormous pressure. Temptation to live the high life is hard to avoid. After all, all those commercials and programs showing the excesses of the wealthy sure are tempting. If you have the need to do these, you are already on the road from becoming instantly wealthy back to the poor house.
Do you know the world of high finance outside of stocks and bonds? Do you know about investing tax-efficiently and about structuring your finances for decades? If the answer is yes, then you probably didn’t even play the lottery.
The thought of owning private jets, mega-yachts, mega-mansions, private islands, multiple homes, of having an entourage, holding private concerts, buying endless jewelry, buying art and collectibles, have to all sound fun. Reality check. These all add up to endless money really quickly. Many of those things come with ongoing maintenance, staff and even ongoing taxes and insurance. Any combination of those could hit close to $200 million rapidly.
These are just some of the pitfalls that a lottery winner will have to consider. Now consider that at least two lottery winners have been murdered in recent years over their winnings. Frankly, they could have avoided that — and it’s hard to find people who want to be murdered over money (or much of else).
Hopefully the reality scenario is setting in. The whole point of 12 things not to do if you win the lottery is that you can quite easily blow through almost $200 million. 24/7 Wall St. does not want to see any lottery winner go broke. Again, you should only need to get rich once!
Here are the 12 things not to do if you win the lottery.
1. Do not forget to sign the ticket and report to the state.
It may seem crazy that people might not sign a ticket. It seems even crazier that they might lose a ticket, or fail to report to the state that they won. Can you imagine losing a lottery ticket? Then imagine what can happen if someone else snags your ticket and shows up to collect the prize. Fighting over this is no simple task and disputes have arisen over who owns what ticket.
In a way, lottery tickets are almost considered the last form of bearer bonds that anyone can collect on if they show up with the coupons and bonds. You have to sign and secure that ticket, and you then have to report to the state.
2. Do not dare tell everyone you know.
If you are lucky enough to win millions of dollars, chances are pretty high that you will to want to brag about it to everyone you know. How could you not? Still, keep quiet for now. The problem is that telling everyone you know before you collect your winning puts you in danger, and in more ways that just one. Everyone who has ever done anything for you now may come with their hands out asking for something, or worse.
You may have heard of kidnap and ransom insurance before. Sadly, more than one lottery winner became a murder victim. If you can manage it, and if your state allows it, try to remain anonymous for as long as possible. How you became vastly wealthy will be found out in time anyway, but there is no need to hurry that along and jeopardizing yourself.
3. Don’t just automatically take the cash option without consideration.
Taking it all now may sound good. Supposedly some 70% of lottery winners end up broke again, many within a couple or few years. Let’s say that you can choose to get $198 million up front, or you can choose to receive a payout of $293 million slowly over the course of a lifetime. Most people choose the lump sum rather than the annuity payment. After all, it is instant empire-making money.
Go see a reputable and visible tax professional and a reputable investment advisor at a top money management firm with a widely recognized company name and a long corporate history. This theme of “reputable and visible” will echo throughout. Do this before you automatically make the decision about a lump-sum or annuity option.
4. Do not dare think you are now the smartest person to manage your money and finances.
You must immediately go get outside financial advice. If you were living paycheck to paycheck before, does it seem logical that someone will know the best things to invest in and the best tax and asset protection strategies? There are many ways to invest and protect that fortune. Strategies of the wealthy often go way beyond buying stocks and bonds and letting the investments ride. As far as who to use, or who not to use, chances are very high that your drinking buddy might not be the best choice as an advisor and expert.
Having a solid and respectable team of advisors and managers from reputable firms in place will act as your buffer to protect your assets now and in the future. 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? Here is a very real hint – If you answered yes, you probably did not bother playing the lottery.
5. Do not let your old debts and obligations remain in place.
Go out immediately and get rid of your old financial obligations and debts! If you get the bug in your head of “I’m rich and don’t have to pay anymore” you are dooming yourself. Whether you take the lump-sum or the annuity option, if you have a single penny of debt in the immediate future and distant future, then something is seriously wrong. For that matter, you should not have a single debt ever again. One lottery winner in California was reportedly strapped with debt from property purchases.
If you manage to go broke down the road and still have a mortgage, car payments, student loans, credit card debt and personal bills, all of your friends and family members should get to spank or ridicule you every day for the rest of your life.
6. Do not become a high-roller or go immediately live the big life.
Temptation to live lavishly can be a killer. If you go from living a simple life to instantly being able to spend hundreds of thousands of dollars (or more) per week, what do you think happens to your expectations in life ahead? Chances are high that you will want more of the same.
If you start gambling in Las Vegas and are not happy until you are gambling with hundreds of thousands of dollars (or more) per play, you are dooming yourself. Wait until 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.
7. Absolutely do not buy everything for everyone — or for yourself!
Society and the endless commercials make you think you need to own endless items. Do not go out and buy dozens of cars, followed by houses and whatever else, for you and 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, chances are high that they might expect that to last forever. The other end of the story is that you do not have to be a cheapskate either. Still, after hearing a real life personal story of one lucky winner buying more than 30 cars and multiple houses in three months it is just crazy.
8. Do not think you are above living on a budget.
Budgeting is not just for the poor and the middle class. Again, extreme wealth comes with extreme responsibility. It may sound crazy on the surface that you have to live within means when you get a vast sum of money. After all, major lottery winners are generally wealthier than everyone they know combined. This 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.
Without setting limits for yourself and for what you do with others is a recipe for disaster. Again, many lottery winners go broke. If they went broke in a very short time, what do you think the reflection about wishing for a proper budget would be?
9. Don’t become the business backer for all your friends and family.
Being a venture capitalist or a merchant banker sure sounds powerful and enticing. One common theme that has come up with lottery winners who suddenly get vast sums of cash is that their friends and family start pitching them on endless business ideas. Sure, some will sound great and some will sound crazy.
If someone has no knowledge of a particular business and does not know what it takes to actually run a business, will they do better because a lottery winner who lucked into vast wealth gave them money to start it? If your answer is yes, you seriously need to protect yourself (from yourself).
10. Do not give away the whole fortune, at least not yet.
Many winners may want to immediately share their new wealth with society. It may seem nice to give away vast amounts of cash to charity or to religious institutions. This might not be the case for everyone, but giving away an entire fortune or a large part of it to a charity or to religious institutions needs to be given great consideration. You can be generous without doing the unthinkable. Rather than giving everything away now, the current charitable trend of the extremely rich is to plan for how to give the money away upon their death, while still often leaving some for their heirs.
Imagine what you will feel like down the road when a serious crisis arises in your life or your family’s life, knowing that you no longer had the means to change it. Should you be charitable? Absolutely! Should you give it all away? Absolutely not!
11. Do not develop celebrity and athlete envy.
Those movie stars and entertainers sure seem to live the high life. Keeping up with the Jonses is bad enough, but definitely do not try to keep up with the Kardashians or other celebrities. It may seem cool to own a 200-foot yacht. It may seem practical that certain celebrities have an entourage, or to have a film crew following you around. It may seem cool owning castles in Europe. Owning an original Picasso painting sure sounds impressive.
Having a big new private jet makes sense for a lot of people. 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 really quickly. Just ask actors and athletes who did this how they feel now.
12. And don’t think laws and decency standards no longer apply.
Some people think the rich can do whatever they want without consequences. It is true that the wealthier you get, the more high-class trouble you can find. It is also true that the rich can afford better attorneys and legal defense then the rest of us. Still, living a reckless life without concerns about the law will not keep you from going to prison, or worse. A good sports coach will tell any star athlete upfront that chances are high they will have to be human for far longer than they are going to stars.
Movies and television shows often 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.
24/7 Wall St. would not want anyone who wins the lottery to end up broke. Losing wealth, or worse, is just not how things are supposed to go. Following a list of tasks may sound easy enough. Unfortunately, life and temptations can often interfere with logic.
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