4 Money Moves to Make the Moment You Win the Lotto


This past June, $612 million went up for grabs in the lottery. As the pot grew, so did the dreams of ordinary Americans, many of whom hoped their lucky set of numbers would be the ones that lead to overnight riches.

Still, no matter how high the payout, a staggering seven in 10 people who receive a windfall blow through it within a few years, according to recent research by the National Endowment for Financial Education (NEFE).

If you're one of the fortunate few who finds him or herself with a winning lottery ticket, and you want to hold on to that cash, check out our list of four must-make money moves for lucky lotto winners.

Try to Remain Anonymous

Instant riches can come with unwanted attention from long-lost friends and relatives, from scammers looking for a piece of the pie, and from incessant salesmen. Unfortunately, there are only six U.S. states — Delaware, Kansas, Maryland, North Dakota, Ohio, and South Carolina — that allow lottery winners to remain anonymous. Still, for winners outside of those states, there are steps a winner can take to decrease the amount of attention they receive.

Several additional states allow prize money distributions to a trust, and allow a third party trustee to collect the funds without disclosing the name of the ticket holder. Some states will also allow anonymity if winners expect a high risk of harm.

If you don't live in one of those states, however, winners typically have 180 days (check the specifics of your state to be sure) to claim their winnings. You can always try to wait it out, before submitting your winning ticket, in hopes that media attention will die down after a good period of time has passed.

Don't Make Any Sudden Moves

Those new to wealth can sometimes be surprised by just how easy it is to blow through a seemingly endless supply of cash. As a lottery winner, you may have the financial resources to make your dreams a reality, but only if you take the time to fully assess those dreams.

The danger zone for money mistakes is six to 12 months after an influx of sudden money, according to the NEFE study mentioned above. Resist the urge to immediately splurge. Set limits with friends and family. Don't immediately quit your job. Instead, take some time to start thinking about how you want your life to look for the long term.

While you wait, stash your newfound money somewhere safe — like in a checking or money market account — until you're better able to take stock of what you now own, and what you want to do with it.

Plan for the Future

A windfall can easily be spent in a single fell swoop — $40,000 on a new car, for instance or $400,000 for a new house. A financial boon may buy boats and houses, but it's the more pragmatic purchases that will make the largest long-term impact.

Take retirement, for example. The sad truth is, the majority of U.S. households aren't on track to to adequately fund their golden years, according to research released by the Center for Retirement Research at Boston College. A savvy lottery winner who foregoes a fancy new car in lieu of a well-managed investment account, meanwhile, could very well set him or herself up for life.

It can be hard to delay gratification, especially when there's an unexpected windfall on the table. Still, consider the numbers. A $40,000 windfall could grow to more than $150,000 if invested for 20 years at a 7% rate of return. A $400,000 boon could grow to a staggering $1.5 million (assuming the same variables). Either way, slow and steady can add up to an even greater fortune, if the money is left to compound over time.

Talk to an Expert

Still, you may not know how to manage a large influx of funds, especially if you've never done it before. (And how many of us have?)

A financial planner can help you make prudent spending choices with your new wealth, while also creating a long-term savings and investment strategy. In fact, recent research in the Journal of Personal Finance has shown that investors who work with financial planners are much more likely to be prepared for retirement when compared with those who make money decisions on their own.

Why? Turns out we're our own worst enemies when markets get choppy. Despite the conventional wisdom we've heard all our lives (buy low, sell high, of course!), we get scared by the storm and sell when the market drops. Then, we calm down and buy when it's back on the rise.

A financial planner, meanwhile, can help keep you calm when markets get rough, improving the odds you'll stay in the market when you most want to bail (even though you shouldn't).

Even if you don't win the lottery (your chances are one in 14 million, by the way), the above advice is sound for any type of financial windfall, be it an employee bonus, a lawsuit payout, an inheritance, or anything else. Stay calm, take time to think over your options, and when you're ready, consult a professional.

You just won the lottery! How will you spend it?

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