The Powerball jackpot for Wednesday, January 13th, has expected winnings of over $1.4 billion. Isn’t that just crazy? What would you do with all that money? Personally, I’ve never had a huge lump sum in my life; my money has always accumulated slowly over time. Even though I’d like to think I wouldn’t go crazy, I probably still might—just a little. So, what should you do if you actually win the lottery?
First, stop playing!
You’ve likely spent a lot on tickets already, and the chances of winning twice are almost zero. Do your finances a favor and stop buying tickets. If you find it hard to stop, think about why you’re playing. Is it the thrill of possibly winning? Well, you’ve already won. Is it to pass the time? Find a new hobby—you have the money now.
Second, do nothing.
Before you go on a spending spree, take some time to do absolutely nothing. Wait for a week, a month, or however long it takes for the initial excitement to pass. Sure, if your fridge is empty, treat yourself to some nice food. But stay away from luxury car dealerships and real estate agents. Big purchases can wait; if you still want that car after thinking about it for a month, it will still be there.
Next, stay discreet.
Ever wondered who would stick around if you became rich overnight? Everyone. You’d even attract new friends who want to party and maybe ask for loans. Keep your winnings to yourself or share the news only with close, trustworthy friends and family. You don’t want this to be the first thing everyone knows about you. After all, you’re the same person you were yesterday.
Pay off your debt.
Got a credit card balance, a personal loan, or a mortgage? Pay them all off. The interest you save by eliminating debt is better than what you’d earn by putting money in a savings account. Plus, it feels great not to owe anyone anything.
Reward yourself.
Didn’t we agree not to buy that Ferrari? Yes, we did. But after paying off your debt and improving your financial situation, you deserve to celebrate a little. Set aside a part of the jackpot—maybe 10%—to spend guilt-free. Enjoy it. As for the remaining 90%…
Invest it.
Many lottery winners end up broke or even bankrupt because they try to live way beyond their means. Sure, you might be able to buy a $5 million house outright, but do you know how much it costs to maintain? Taxes, utilities, and upkeep can drain your funds. Instead, invest your money and withdraw a portion each month. Experts recommend a safe 4% withdrawal rate, which means $5 million can provide you with about $16,666 each month. I bet you can live on that.
Lastly, seek financial advice.
You’ve probably done your best managing your finances up until now, but with this newfound wealth, you’ll need professional help. Find a fee-only financial planner who won’t earn commissions on the products they recommend. They’ll help you make the best decisions for your long-term financial goals.