Winning the lottery seems like a stroke of luck, but what about life after lotto? Past winners weigh in on losing friends, becoming spectacles and increasing the odds of striking it rich.
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Reign in the spending
Life after winning the lottery may not stay glamorous forever. Whether they win $1 million or $500 million, about 30% of lotto winners lose or spend all that money. They are also more likely than the average person to file for bankruptcy within five years of their win, according to the American Bankruptcy Institute. What’s more, the Massachusetts Institute of Technology found in a study that lottery transfers only postpone bankruptcy, rather than prevent it.
What gives? The excitement gets overwhelming—and spendy, leaving many lottery winners worse off than before. To prevent that, if you win the lottery, it’s a good idea to seek professional advice and invest your money wisely rather than spending it all at once.
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Take second chances
Always play the second-chance drawings. Some games require you to mail in your losing ticket. Others tell you to go online and register the ticket’s serial number. People either don’t know about the drawings or don’t take the time to enter, so your odds of winning the lottery are always better.
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Don’t quit while you’re ahead
Do lotto winners still play the lottery? Absolutely. What happens to lottery winners is that they become sure they’re going to win again. That’s one aspect of life after lotto that won’t change.
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Friends may try to exploit you
“I had one friend who told me this sob story about how behind she was on her local taxes and how they were going to take her house because she couldn’t pay,” says one lottery winner who was scammed by a friend. “After she left, I got on my computer, looked up her tax records and saw that she wasn’t behind. When I printed out that page and sent it to her, well, that was the end of our friendship.”
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A lot can seem like a little
If you win $6 million and find yourself in a room full of lotto winners who won $100 million or more, you might suddenly feel like the poor one. That’s a destructive mindset that can lead to overspending.
Remember: Wealth is relative. Take a cue from self-made millionaires and steer clear of the comparison game. Keep in mind that what may seem like the ideal life from the outside may not be so great in reality.
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Avoid impulse purchases
Impulsive buying can be one of the top ways you’re wasting money without knowing. “After we won the lottery, we bought an eight-bedroom, seven-bath, 10,000-square-foot mansion because we could. It sounded amazing,” says one past winner. “Well, now we’re selling the eight-bedroom, seven-bath mansion because it’s impractical for a family of four.”
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Some people won’t take you seriously
You’re a millionaire—maybe even a multimillionaire. But that doesn’t mean you’ll receive the same kind of respect that wealthy people get if they come from old money. The fact is, people are judgmental. “After we won and moved into an exclusive neighborhood, we planned a huge Fourth of July party and invited all our neighbors,” says a former lottery winner. “None of them came—they thought we didn’t earn our money.”
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Expect endless money questions
“It drives me nuts when people ask where I keep the money, how I spend it and if I still have it,” says a past lotto winner. “No one would dream of asking a CEO those questions.”
Money experts agree: They recommend against using anyone’s financial plan as a barometer and stand by the advice that everyone’s finances are different. Don’t feel bad shutting down money talk when the topic comes up in conversation.
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Friends change with your lifestyle
Life after winning the lottery may bring big changes for everyone in your life. All lotto winners think they’re going to have the same friends and do the same things. But if you have $100 million and you want to fly to Hong Kong for the weekend, you need to either find someone who can afford to go with you or be willing to subsidize someone. And subsidizing people gets old.
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You may be forced into the spotlight
If you think you’re going to win and remain anonymous, you’d better check your state laws. Many states require that you do a news conference and hold up a big check after winning the lottery. If that’s the case, prepare to find yourself in the spotlight—whether you like it or not.
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’Tis better to give
“Now that I can buy anything I want, I’ve learned that what really matters—and what I enjoy most—is being able to do things that help other people,” says one lottery winner. Something small but important that helps, like tipping properly at a restaurant.
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Donate in batches
You may have the urge to give a charity a big sum of money after winning the lottery. A word of advice: Never give it all at once. It’s better to donate $100,000 a year for 10 years so you can retain some control and make sure the cash is being spent wisely.
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Life is pretty great
You haven’t lived until someone picks up the laundry from your front porch and brings it back to you that night, completely cleaned and neatly folded. For all its ups and downs, winning the lottery is awesome.
FAQs
What’s the first thing you should do if you win the lottery?
It sounds tough, but just take a deep breath and try to remain calm. Verify that your ticket is actually the one that won the lottery. Keep it in a safe spot and make copies if needed. And avoid telling people about your windfall until you actually claim the prize.
What is the biggest mistake a lottery winner can make?
The biggest mistake is immediately spending the money on big-ticket purchases that may not serve you well in the future. Making bad investments, such as investing in a failing business, may also make your gains dwindle fast. And if you choose to donate some of your lotto wins (good for you!), avoiding giving all at once. Small batches will help you ensure your money is used to actually make a difference.
How do taxes impact the amount lottery winners receive and keep?
Taxes vary depending on the amount of the lottery, whether you opt for a lump-sum payment or annual ones, which state you’re buying the ticket in and which state you reside in. A standard amount of 24% is withheld by the lottery agency, while the rest is taxable as ordinary income, the rates for which can go up to 37%.
But the lottery is definitely taxable and can affect the amount you receive in hand and are able to use. It’s a good idea to reach out to a certified tax consultant to help you figure it out.
How should lottery winners handle requests for money from relatives or strangers?
Don’t feel pressured or obliged to share your winnings with distant relatives. Simply decline their request and set your boundaries clearly. Open communication also helps to handle money requests from strangers. At the end of the day, the winnings are yours.
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Sources:
- Donna Mikkin, who won $34.5 million in the New York State Lottery in 2007
- Sandra Hayes, a social worker who split a $224 million Powerball with her co-workers in 2006 and wrote How Winning the Lottery Changed My Life
- Richard Lustig, a seven-time lottery game grand-prize winner who wrote Learn How to Increase Your Chances of Winning the Lottery
- Don McNay, a financial consultant to lottery winners and the author of Life Lessons from the Lottery
- American Bankruptcy Institute: “The Lottery Curse: Are Lottery Winners More Likely To Declare Bankruptcy?”
- MIT: “The Ticket to Easy Street? The Financial Consequences of Winning the Lottery”
Originally Published in Reader's Digest
