Did you know it’s possible to go bankrupt even after winning the lottery? Whether plating with the aim of hitting the jackpot or for the fun of it, you need some financial management tips to ensure you don’t percentage that goes broke.
The first reaction after you’re announced the winner will most likely be disbelief. you ‘ll check your ticket over and over again to confirm that you have the right number. After the good news finally sinks, you’re most likely going to lift your glass with friends to celebrate.
But after the celebratory mood is over, you need to tune back to reality and start figuring out what to do when you win the lottery. If not careful, your luck can turn into misery. To avoid reaching that point, here are several ways you can invest your money if you won the lottery.
Invest in Assets
Instead of turning into a spendthrift after winning the lottery, consider investing in assets that will build equity with time. Even if they don’t increase in value, assets retain their value meaning that you’ll still have money when you need it in the future. Therefore, it’s wise to purchase a house with your winnings, other than buying a fancy car that starts to depreciate the moment you drive it out of the showroom.
The reason many lottery winners and celebrities go broke is that they spend a lot of money on assets that depreciate. Also, before you invest in a property such as a luxurious home, you need to consider other money guzzling factors such as maintenance costs and property taxes.
Take Annuity Payment Instead of Lump Sum
If you don’t possess proper money management skills, consider hiring experts including an accountant, financial advisor, and attorney. Working with a financial planner ensures that you’re able to manage your money ahead of time. You also maximize the returns your money can give you in the long run if you don’t use it immediately.
A professional also advises you on the best way to pick your money. The lottery jackpot is either given on a reduced lump sum over a period of time or on an annuity basis over a period of 30 years. The second option is better especially if you don’t trust your money management skills.
Invest in Index Fund
There’s no better place to store your lottery jackpot than investing in the stock market. You may be tempted to speculate before investing. With the lottery jackpot, however, it’s wise to diversify since you got the money out of pure luck. By putting your money in the stock market, you’re simply putting it away for use at a later date. It also prevents you from the temptation of gambling further since you’re feeling lucky.
Clear Your Debts
If you have accumulated debts in the form of student loans, mortgage, car loans, and credit card loans, there’s no better time to clear them off than after winning the jackpot. The good thing about paying off your obligations stops you from losing too much money on interests. Also not to mention the feeling of freedom you get after clearing off your debts. And once you’re clear what you owe different institutions, make sure you don’t blow off your remaining winnings and end up in debt again.
Invest in Start-Ups
It may seem like a crazy idea but investing in start-ups prevents you from spending your winnings lavishly. Also, investing in start-ups has the hope of paying you off handsomely down the road. Like the index fund, start-ups are speculative but at least maintain a reasonable chance of getting high returns in the end. However, you need to keep your investments below 5% of your overall worth.
The chances of winning the lottery are minimal, but once you do, it gives you a lot of fulfillment and excitement. Since you may never get so lucky again, or it may take years before you do, consider using the above tips to help you avoid going broke.