A big lottery win or coming into a windfall in other ways can be a thrilling change of fortune. However, it is also a huge responsibility to manage and grow your newfound wealth.
Your first step should be to put together a crack team, including a lawyer, accountant and financial advisor who have experience with large financial windfalls. Then, you can start forming specific financial plans.
Set Financial Goals
It’s important to keep your goals connected to the things you love and value. This will help you stay motivated and on track. You can make your financial goals more personal by giving them exciting names like “getting ready for MTV Cribs,” or by putting them in action-oriented terms, like paying down debt or saving for a dream vacation.
Before you start spending your winnings, add legal and financial professionals to your team, Irwin advises. These experts can advise you on whether to take a lump sum or annuity payments, and how to manage your taxes and other obligations.
Also, if you decide to share your windfall with family and friends, know the gift tax limits. Otherwise, you might end up lending money to people who can’t pay it back, which could have a negative impact on your future wealth. A good way to avoid this is to set up a trust. This is typically more effective than opening a bank account for each person you plan to give money to.
Pay Off Your Debts
Whether you have credit card debt, student loans or car payments, it’s important to pay them off before you invest any money. This will help you avoid paying high interest rates and give you a peace of mind that your debts are being paid off, so you can focus on investing the rest of your money.
If you can, try to follow the debt snowball strategy, where you pay off the smallest balances first and then move on to the bigger ones. This will give you an extra boost to your savings rate and save you more money over time.
You should also set up a separate savings account for emergencies. This will help you grow your savings at a faster pace and have easy access to your funds in case of an emergency. Lastly, you can start investing your money to secure your future and create more wealth. This can include buying real estate, stocks and diversified mutual funds.
Invest in Property
Investing part of your lottery winnings into property is a great way to boost your income and build wealth. However, it’s important to understand the process of investing in property, including assessing your budget and setting financial goals before making any big decisions. Moreover, you should also consult a financial advisor to assess the impact of taxes on your investment earnings.
Another way to make your money work for you is by donating a portion of it to charity. This is a good way to uplift your community and society at large. Plus, you’ll get tax benefits for your donation.
If you plan on giving a substantial sum of your winnings to family or friends, be sure to set up a trust to protect your assets and avoid costly mistakes. You should also consider changing your phone number and suspending social media accounts to prevent unwanted calls and texts. Finally, you should hire a financial advisor and attorney to help you navigate the stipulations and options that come with winning a jackpot prize.
Donate to Charity
Regardless of how much money you’ve won, it’s always a good idea to give back. But it’s important to do your research before donating any money. It’s important to donate to charities that are doing the most bang-for-the-buck. Oftentimes this means giving to those outside the US.
There’s also a temptation to help everyone in your circle when you win the lottery, but it’s important to put yourself and your family first. You may have friends who are in financial need or distant relatives, but you shouldn’t be going all out to help them unless you can afford it.
Experts recommend that winners assemble a crack team, including a lawyer, accountant and financial advisor who has experience with large financial windfalls. They can help you plan for taxes, pay off debts and set up long-term goals for the money. This way, you can be sure your winnings last a lifetime. Moreover, they can help you find the right charity to donate to.