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I recently received this question on Facebook. “Damon, what do you believe should be the first steps for the winner of this jackpot (Powerball)? I don’t think Ohio allows for winners to remain anonymous so my thoughts would be to set up a trust and then have the trust claim the prize.”
~ Jay Cee
I responded with a short, quick reply. First thing you do is allocate a portion to have fun!! Then place the remaining money in a general savings account and do nothing for 6 months. The emotion is too high and the wealth experience is too new to make well thought out, rational decisions. During this 6-month period, become educated on money management. Six months from now, the thrill of winning has subsided. You’re less emotional. Plus you now have a baseline understanding of personal finances. At this point, hire trusted advisors to help make informed decisions about your next money moves.
A day later I came across a meme on Facebook shared by Melissa Fox. It read, “How delusional am I? Every day I hope to win the lottery knowing I don’t even play it?” I’d say, VERY DELUSIONAL!! Yet, that delusion is something many of us have imagined. I’m not a lottery player but when I see people in the news who won the jackpot, I secretly wished it was me. I recall working at a large bank. All the bank employees would chip in and purchase lottery tickets whenever there was a huge jackpot. Although it was against my core beliefs to partake in playing the lottery, the idea of my co-workers hitting the big jackpot and retiring without me didn’t sit well with me. As a result, I’d chip in on the lottery. We didn’t win!
Not only is it delusional to not play the Powerball and hope you win, the odds of winning the Powerball are so miniscule, it’s delusional to play the Powerball and hope you win. You have an approximate 1 in 292 million chances in winning the Powerball. To give that perspective, the odds of an individual getting struck by lightning in a given year are estimated to be around 1 in 700,000. That means your chances of winning the Powerball are equivalent to your chances of being stricken by lightning 418 times. There is one thing that comes to mind with worse odds of winning the Powerball. That’s two distinct individuals having the exact same fingerprint. The chances of two individuals having the same fingerprint is 1 in 64 billion. Even identical twins have different fingerprints.
Even with those insane odds, here’s an interesting statistic: 21 percent of employees see winning the lottery as an important part of their wealth-building strategy. If that doesn’t surprise, perhaps this statistic will: Lottery winners have a losing track record of holding on to their winnings. Roughly 70 percent lose it all within five years, regardless of how much their luck earns them.
For that 1 in 292 million persons who luck up and win the Powerball, here’s some steps to take to avoid being a part of the 70 percent of lottery winners who lose all their winnings within 5 years.
Confirm your winning ticket: Double-check your ticket against the official winning numbers and make sure it’s validated by the lottery authorities.
Keep ticket safe: Place the winning ticket in a fireproof/waterproof secured location where it can’t be stolen or lost before you’re able to claim your cash prize.
Maintain privacy and security: Keep your win as private as possible to protect yourself and your newfound wealth. Avoid sharing the news with everyone until you have a plan in place.
Seek professional advice: Consult with a team of trusted professionals, including financial advisors, accountants, and lawyers experienced in handling large sums of money. They can guide you through the process and help you make informed decisions.
Decide on the payout option: You’ll typically have the choice between a lump sum or an annuity payout. Consider the pros and cons of each option and assess which one aligns better with your financial goals and personal circumstances.
Set up a financial plan: Work with your financial advisors to develop a comprehensive plan for managing your winnings. This may include budgeting, investing, tax planning, and estate planning.
Maintain a long-term perspective: Consider your long-term financial goals and aspirations. It’s important to resist the urge to splurge excessively and instead focus on creating a sustainable and secure financial future.
Pay off debts and prioritize financial obligations: Take care of any outstanding debts or financial obligations that you may have. This will help you start your new financial journey on a solid footing.
Create an emergency fund: Set aside a portion of your winnings to establish an emergency fund that can cover unexpected expenses or provide a safety net for the future.
Treat yourself and loved ones: After taking care of the essentials, don’t forget to enjoy your newfound wealth. Treat yourself and your loved ones with well-deserved vacations, experiences, or even thoughtful gifts.
Invest wisely: Work with a financial advisor to create an investment strategy that aligns with your long-term goals and risk tolerance. Diversifying your investments can help grow your wealth over time.
Plan for the future: Assess your long-term financial objectives, such as retirement or building generational wealth, and allocate funds accordingly. This could involve setting up trusts, purchasing properties, or investing in businesses.
Donate to charity: If you’re passionate about a particular cause or organization, consider making a charitable contribution to support their work and make a positive impact on the world.
Everyone’s situation is unique, so it’s crucial to tailor your actions and decisions to your specific circumstances. Take your time making decisions and be cautious about sharing your winnings publicly. It’s essential to prioritize your financial well-being while also considering how you can make a positive impact on the world around you. Professional advice and careful planning will be instrumental in managing your newfound wealth responsibly.
(Damon Carr, Money Coach can be reached @ 412-216-1013 or visit his website @ damonmoneycoach.com)
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