It’s everyone’s fantasy: “What would I do if I won the lottery?” And whether we ever play the lottery or not, we all have plenty of ideas: We’d quit our jobs, obviously. Pay off all our debts and those of everyone we love. Buy new cars and houses, take vacations. And of course, donate to charity, whether out of sincere concern for an issue or (dare we say it?) a guilt payment to let us sleep easier at night in all that luxury.

No one has ever answered that question by saying: I’d waste it all on bad investments, have most of it stolen by a dishonest accountant, and be murdered by my in-laws for the rest! Unfortunately, those types of things are more often the reality than we’d care to think about. Don’t worry though, we’ve got your back. Here’s what you should and should not do if you win the lottery to keep your dreams on track.

Money Actually Might Make You Unhappy

Conventional wisdom says money doesn’t buy happiness, but we could go even further and say that it might actually make you unhappy. Some studies have shown that lottery winners are actually less happy than control groups with a whole series of everyday things that typically bring joy to people. Interestingly, their results were comparable to paraplegics who had difficulty feeling satisfaction because of a tendency to over-estimate how happy they were in their lives before their accident. 

Well, that having been noted, here are some DOs and DON’Ts to help you be as happy as possible when you inevitably face the oh so difficult burden of being rich beyond your wildest hopes and dreams (oh poor you!). 

DON’T Tell Everyone You Won the Lottery

Yes, you want to tell everybody but RESIST THE URGE! Accept that prize anonymously and tell as few people as possible. Otherwise, you’re going to have long-lost cousins crawling out of the woodwork, “friends” you haven’t seen since elementary school, do-gooder fundraisers, scammers, and everything else you can imagine blowing up your phone, inbox, mailbox, and doorbell. Protect your privacy.

DO Hire Expert Advisors

At a minimum you need a good lawyer, financial advisor, and tax specialist. These are unlikely to be people you know or are related to, because no one you know has experience managing millions upon millions of dollars. Don’t worry about hurting cousin Eddy’s feelings. Go to a reputable major firm that manages millionaires’ and billionaires’ money, pay what it costs, and do exactly what they say to protect your new and vulnerable assets. 

DO Think Carefully About How to Receive the Funds

You’ll have choices to make about whether to receive the money all at once as a lump sum or spread out over years in annuity payments. The lump sum gives you access to all the money, but you’ll take a big tax hit and be tempted to spend too much. Spreading it out locks it up so you’ll have a long-term income stream, but it may earn a lower rate of return than a different kind of investment. But really, how much more money are you trying to get, anyway? Weigh your goals versus the resources you actually need. Don’t accept the assumption that it’s always a worthy goal to make more and more, if the worry and management of it lowers your quality of life. 

DO Give Attention to Security Issues

As much as you try to keep it a secret, there’s no doubt word will trickle out that something’s changed in your life and its not just a new hairdo (though it is fabulous, by the way). And when that happens, you’re going to attract some of the wrong kinds of attention. Sometimes from strangers who are willing to take what you have, sometimes from people you know with grudges and jealousy. It happens. Consult with security professionals to figure out appropriate, but not overly paranoid, ways to protect your property, your loved ones, and yourself from people with bad intentions.

DON’T Radically Inflate Your Lifestyle

No matter how much money you have, it’s important to have a budget you’ve taken time to think through and stick to it. And you need an emergency fund, even as a millionaire, to help you through unexpected emergencies, which now may be exponentially more expensive for you (yacht just sank in a hurricane . . . can anyone identify? Anyone? Is it just me? Oh, I guess it’s just me.)

By far the most common mistake many lottery winners make is to overspend on luxuries. Don’t be a modern day “Beverly Hillbilly.” Just because you have millions doesn’t mean you have to live in a mansion with domestic staff, have a fleet of sports cars, and wear exclusive brands. Design a lifestyle that’s comfortable and familiar, that makes things easier for you, that lets you and your family and friends enjoy being together without all the additional responsibilities of taking care of expensive possessions and property you’re not used to.

DON’T Give Lots of Cash or Loans to Family and Friends

You are going to give some cash and gifts to family and friends. Of course. You’ll want to pay off your mother’s house and your little sister’s student loans. Go for it. But if you go whole-hog and just start giving out tens of thousands to everyone in your family tree and yearbook, you’ll ruin your relationships, 100% guaranteed.

Charity Kills Relationships

Why? Because they’re receiving charity and that gives them a feeling of being in an inferior position. It makes them a supplicant. Things will feel awkward. And no matter how generous you are, they’ll always know you have exponentially more more in your bank account, so what’s with this measly $100,000 you gave them? And even if they’re grateful, what happens when its gone? You’ve created dependency and resentment.

Loans Are Worse

Loans are even worse. They create a long-term obligation. Now the people you love are working every day for you, to make payments on a loan you gave them and could easily forgive . . . but won’t. 

Set Up Trusts

What’s the alternative? Set up trusts for some of these people that pay them a regular return that they can use for some or all of their living expenses, save up for a larger purchase, use for education, or to start a business. Now it happens automatically. You’re no longer involved. You’ve set up a system that blesses them every month without them asking or you deciding. It’s not foolproof, but its better than blowing up your family with money to burn.

DO Pay off Debts

Your ambition to pay off debts is a good instinct. Do it. Pay them all off, all at once. Be debt-free now the rest of your life. Are there any downsides to this idea? Probably. There may be some tax benefits to some debts in your situation that a professional can guide you through. But you’re a regular person, don’t overcomplicate it. Just be debt-free and sleep a little easier.

DO Draw Up Estate Plans

It’s more essential than ever when you have large resources to draw up a will, power of attorney, trust arrangements for property and funds for your children and grandchildren, and guardianship instructions about your dependents. No DIY stuff here. Hire an attorney and have everything drawn up iron-clad to make sure your wishes are respected. 

DON’T Start a Business Without Planning and Research

If you’ve always dreamed of running your own business (or if a friend or family member has), this could be your golden opportunity to do it. But hire professionals first to do market research and put together a business plan that will have a credible chance of making a profit. Otherwise, maybe your business should be more of an enjoyable hobby that you devote a set amount of funds to each month without the pressure to make a profit. Hey, business losses can be a tax write-off, right? 

DON’T Donate Large Sums to Charities Without Research and a Plan

Before writing large checks to your favorite charities, do your due diligence and find out more about them. How do they spend donations? Is their work actually effective? What percentage do they spend on administrative overhead? Do they create dependency by “giving people fish,” or sustainability and independence by “teaching people to fish”?

And be very careful about dumping large resources on small nonprofits or religious organizations that have never managed so much money in the past. Many a church has split over disputes about how to use money. Whether in your life, the lives of others, or in the institutions you support, keep in mind the physicians’ credo: “Do no harm.”

 

 

 

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