In 2008 I wrote a book called Son of a Son of a Gambler: Winners, Losers and What to Do When You Win the Lottery. Whenever a jackpot hits record highs, like the Mega Millions lottery did last week, the book climbs to the top of the Amazon charts. I just hope that someone who actually won the lottery is reading the book.
I can boil down my advice to five points:
- Tell as few people as possible (preferably no one) that you won.
- Take a deep breath and make some good, long-term decisions. You don't have to cash the ticket today.
- Work with a financial adviser who works with more money than you have.
- Take the money in annual payments instead of the lump sum.
- Use some of the money to give back to society.
Those are five simple rules that about 90 percent of lottery winners don't follow.
1. Tell as few people as possible (preferably no one) that you won.
Two of three Mega Millions winners live in states that allow winners to collect anonymously (Maryland and Kansas). I hope they do so. If you can keep your jackpot quiet, do so. As I told Rebecca Jarvis during an interview on CBS Morning News on Saturday, "Once you have told the world that received money that you never expected to have, everyone has their hand out, and you are not prepared for it." I once told a young, single, publicly known lottery winner that he had just become the best-looking man in his city. He was realistic enough to know that that wasn't really the case.
2. Take a deep breath and make some good, long-term decisions. You don't have to cash the ticket today.
Some people can't wait to cash their ticket. There have been stories about people camping out in front of lottery offices overnight with the winning ticket. Most lotteries allow you several months or a year to cash a winning ticket. The money will still be there in a month or so. Take some time to figure out what you are going to do with the money and how you are going to do it.
3. Work with a financial adviser who works with more money than you have.
There are financial advisers, estate planning attorneys, and trust officers who have worked with $100,000,000 or more. The scorekeeper for your local bowling league is not one of them. People will often hire a friend as opposed to someone who really knows about big money. A good friend would tell you the situation is too complicated for them and help you find some real experts. A lottery winner has tax, estate, and planning issues that they didn't have the week before.
4. Take the money in annual payments instead of the lump sum.
Roughly 98 percent of all lottery winners ignore this advice, but I continue to preach the mantra. Taking the payments over time allows you to adjust, with the money coming in on a gradual basis. If you make mistakes and lose all your money the first few years, you have 24 more opportunities to get it right. There are also some tax advantages to taking the money over time, as you are taxed on the money as you receive it. That may not be relevant with $100 million, as you are always going to be in the highest tax bracket, but a person who gets $1 million and takes $50,000 a year might be able to save overall.
5. Give back to society.
There are many people who have accumulated great wealth, like Rockefeller and Carnegie in the 20th century and Bill Gates and Warren Buffett in this century, who are giving away most of their money during their lifetimes. People who use their wealth to make an impact on society are far happier than those who use it to show off to the neighbors. There are at least three people who need this advice as soon as possible. I hope they follow it.