15 Best Things to Do When You Win the Lottery

Picture it: Tonight's lotto numbers pop up on the TV screen, and one by one they match the digits on your ticket. Your excitement is building. Heart is thumping. Adrenaline is pumping. After a few seconds of doubt and disbelief, you realize you've hit the JACKPOT, and from that moment forward your life will never be the same.

What do you do?

A lot, actually.

Studies show that lottery winners are likely to end up broke and unhappy if they don't play their cards right. To avoid becoming a rags-to-riches-to-rags-again statistic, consider these tips on how to make the most of your winnings without squandering them along the way.

Once you calm down after hitting the big one, you'll want to get your hands on all that money. Not so fast. Get your gold-dipped ducks in a row before claiming that prize.

"Relax, take a deep breath, and make responsible decisions," advises finance manager Nate Masterson. "Acquiring a massive amount of money is guaranteed to increase your stress which, in turn, leads to poor decision-making. More often than not, lottery winners have no experience handling this kind of money, so it's crucial to seek out financial planning assistance from a trained professional."

You may have experience managing your regular income, but when your net worth soars out of the park, it's a whole new ballgame — and you'll want a few strategic players on your team.

"The best thing that someone can do if they win the lottery is to first identify an attorney, an accountant, and a reputable financial adviser," explains Dock David Treece, financial analyst for FitSmallBusiness.com. "It's best to have all of these advisers in the same room together, so that they can work together to structure the best strategies for claiming your prize and long-term management of your prize."

(Remember to smile, too. Doesn't happen often when meeting this trio of heartbreakers.)

A judge recently ruled that a mystery woman in New Hampshire could remain anonymous after winning the $560 million Powerball jackpot — because her privacy outweighed the public's interest in knowing her identity — but that may not be the case in every state. Have your newly hired attorney research the requirements of claiming your prize and devise your plan based on their findings. If you have to fight to remain anonymous, do it. Otherwise, you'll have every person you've ever met (and some you haven't) banging down your door looking for a payday.

"The more people that know how much money you've won, the more requests for handouts you can expect," says Julie Ramhold, consumer analyst with DealNews. "Additionally, letting everyone know how lucky you are puts a target on your back. Scammers, thieves, and worse could suddenly want to track you down in order to make your luck their own." 

Many of us dream of winning the lottery if only so we can have our Johnny Paycheck moment and tell our bosses to take this job and shove it. In fact, according to a recent TD Ameritrade survey of 1,000 investors, 48.1 percent would clean out their desks immediately. You, however, should go about your business like the other 51.9 percent who said they'd keep working — until the check clears at least. Being too hasty can come back to bite you, especially if you're not yet officially declared the winner. Crow doesn't taste as good as a properly timed farewell cake.

Personally I'm an advocate of taking the lump sum payout, for the sole reason that I don't want to wait 30 years for my money. What's worse, if I die before the payments are up, my heirs could be stuck with a hefty tax bill, as the government will expect Estate Tax on the entire future value of the remaining payments. Take it all at once, even though you'll receive less money than if you dragged it out, and you can distribute it through your will as you see fit.

Ramhold makes a decent case for forgoing the lump sum, however.

"First, [taking the lump sum] means you'll be receive fewer earnings overall. Second, a high percentage of lottery winners end up on the other side broke because they blew through all their money. If you take the lifetime payout, you'll receive more money over time, and lessen the risk of burning through it."

In addition to all your long-lost uncles and cousins and BFFs from summer camp buddying up to you now that you're loaded, you'll have another set of eyes on your money: the IRS'. The folks running the lottery will deduct 25 percent and give it to the government before they give you what's yours. Unfortunately, your good fortune will likely have bumped you up to the top income tax bracket — 37 percent for 2018. You are responsible for paying the difference. Satisfy this responsibility — before you can't. Pay the lottery taxes as soon as you receive the wire transfer and move along. 

Before you go on that lottery-winning shopping spree, practice smart personal finance and pay off all your debts. Credit cards, vehicles, school loans, and mortgages should all have a zero balance if you can afford it. You've literally won the opportunity to start over and you can only do that once you clear the proverbial slate of what you already owe.

If you are already debt-free, you can make the smart money moves you've always wished you could, like buying an investment property in a developing area, going back to school, setting up a 529 education savings plan for your kids' college ambitions, or opening a mutual fund. You're already the financial envy of all your friends; now be the envy of yourself.

After your existing debts are satisfied, turn your attention to planning for the future. Max out your 401(k) for the year, and set up an additional, retirement-focused investment account with at least a $1 million, if your winnings allow it. If your jackpot wasn't in the millions, I recommend stashing away 50 percent of whatever's left over after zeroing out your balances. At least this way you'll have a safety net if things don't go according to plan down the road.

James Lake, vice president at Guardian Life, offers his approach to managing this aspect.

"Add up your basic expenses and create a 'personal pension' to at least meet those expenses," he says. "Imagine when you retire and know that, no matter how long you live, your basic needs are always covered. How do you know you are in an optimal situation? The risks in retirement are neutralized."

The secret to staying rich — as plenty of rich people will tell you — is watching what you spend while minding your budget. You may think you have more money than you could ever blow through, but lottery winners end up bankrupt regularly because they had no structure when the dollar signs filled their eyes.

Chuck Mattiucci, senior vice president at Fort Pitt Capital Group, advocates adhering to a budget just like you did when you were still rubbing two nickels together.

"Even though you've gained an influx of money, it's still essential to develop a foundation and stick to a budget," he explains. "Determine how much can be spent on monthly expenses, how much to save and how much can be allocated to discretionary funds. Creating and maintaining a budget is one way to have success and ensure that the money lasts longer than the excitement of when it came into your life."

Move to a new neighborhood, change and make phone numbers private, and bump up the security on social media accounts. That's what I would do if I were a jackpot winner. I'd also cut out all those toxic people who were never around much but suddenly show their faces when I'm rolling in dough. No thank you.

Adds Mattiucci, "Surround yourself with people that have your best interests in mind. With an increased net worth, all types of people can come out of the woodwork to 'support' you, however not everyone will, and some people may even want to take advantage of you. Being savvy about others' ulterior motives is a difficult reality to face when you have a high net worth, but necessary."

You've had a lot going on the past few weeks, what with winning the lottery, quitting your job, straightening up your finances, and dodging all the money grubbers, and now it's time to relax. Pick the one place you've always wanted to go, turn off your phone, hop on a plane (first-class, of course), and chill. All the chaos you left will be there when you get back, but for now just enjoy the lemonade that life has handed you.

I've always maintained that if I won the lottery, I would gather up about 10 of my friends and family and hand them checks that will change their lives. This will sideswipe any awkwardness that might have ensued if they asked for a loan or gift outright, and, really, what's the point of having all that money and the lifestyle that comes with it, if the people you love can't afford you anymore? I'd make them all sign legal documents that dictate how they'd spend it — paying off all their debt, setting up retirement and college funds, and making at least one long-term investment — but whatever is left, they can do what they want. Like send me a thank-you note.

It's easy to shop 'til you drop after claiming all that cash, but it's a trap — a fool's game that will only satisfy your impulses while making a sizable dent in your winnings. Treat yourself to a few things that have been on your most-wanted list — mine is a jet ski — but try to quell your desire to own all the junk money can buy. It might help to consult a confidant when you feel the urge to shop. One person you trust to tell you to “stop being an idiot, you don't need this or that, and to put it back before I punch you.” If you don't have one friend like that, get one. They're great to have around, lottery winner or not.

I prefer donating to local organizations instead of corporate charities because I'm always afraid the latter isn't using my money to the best of its ability. Whether that's true or not, think about investing in your own community — like providing to the local animal shelter or food bank, or helping fund a project that will enhance the quality of living for residents — where you can see your money in action.

What legacy will you leave when you die? As a lottery winner, you have the chance to make a real impact — money makes the world go 'round, after all — so try to live your best life with the luck you've been given. Share the wealth, too. Not with everyone, but at least set up your immediate family — children and grandchildren, specifically — for success through inheritances and trust funds. No obligation, though. If you've got six months to live and you want to go out with a bang — and zero dollars in the bank — you do you. Maybe your luck will rub off on those poor suckers, but at least you enjoyed the ride.

This article by Mikey Rox was originally published on Wise Bread.