It is almost undeniable that winning the lottery has become the new version of the American Dream. The odds of winning might be worse than being struck by lightning on a sunny day (that is, one in 292,201,338 for the grand prize), but it’s easy to see why so many people clamor each week to buy lottery tickets. It’s instant and vast wealth, with no skills and effort needed.
Now the Powerball lottery drawing for Saturday, March 23, 2019, has reached an estimated $625 million. That might translate to just a cash value of $380.6 million for the lump sum payment, but this is still easily considered multi-generational and empire-building wealth.
No lotto ticket buyers hit all six winning numbers in Wednesday night’s Powerball drawing. That makes this the seventh largest jackpot in U.S. lottery history. That is more than enough to make anyone join the class of the filthy rich.
Lottery players frequently dream about what they’d do with a windfall of even a fraction of this size. That old boring version of the American Dream just cannot compete against the lottery. After all, it requires a lifetime of hard work, financial planning, advancing in your career and avoiding financial ruin. Winning the lottery changes all that in an instant, and no one even bothers to ask if you have a degree or how your credit report looks to get in the door.
There is a dark side to winning the lottery. It may seem impossible to fathom it, but some lottery winners who have become instant millionaires have somehow managed to go broke after becoming filthy rich. Some have even done it in just a few years. It may seem unlikely that winning $625 million could somehow let some end up back in the poor house. There are immediate risks that are the fault of the winners, and there are ongoing risks that wreck what should have become great comfort for your current and future generations.
24/7 Wall St. does not want to see anyone go broke at all. That’s why we have created a self-help guide of 12 things not do if you win the lottery.
It is imperative to have a game plan in place for if and when you ever become filthy rich. This is not just for lottery winners. Some people become vastly wealthy by an unexpected inheritance, or maybe they win a big legal judgment. Some business owners walk into work one day and find that someone wants to buy their business for more than they ever thought it was worth. This lesson is even pertinent for the armies of the stock-option millionaires that have been made as companies come public.
Keeping a lifetime of wealth requires extensive planning, and it also requires some sacrifices. One lesson is simple enough to say, but harder to accomplish: No one should ever have to get rich twice. Lottery winners have to act fast to protect themselves. There will be endless of temptations that can rob unwitting people of their newfound wealth.
Purchasing a countless number of belongings, cars and homes can erode your wealth quickly. Paying for upkeep and maintenance of those things, followed by poor decisions and falling under the influence of friends and family, are just some of the common pitfalls awaiting those who become vastly wealthy. There are predators that must be avoided at all costs. You could become a mark and a target, and some unlucky lottery winners have lost their lives after winning lotteries. Bragging about getting filthy rich could get you killed.
Most lottery winners will take a lump sum cash option, so in this case the $380.6 million lump sum amount will be taxed at the federal level and at the highest tax bracket. And depending on what state and city in which you live and purchase the ticket, there may be state and local taxes that have to be paid. In some states, that $380.6 million could be $228 million or less (40% combined state and federal taxes). It’s still empire-making money, but a lottery winner without restraint could literally blow through that in a month if they thought it was endless.
Before going all out as a member of the newly filthy rich class, note that a lifetime of safety for lottery winners requires immediate financial planning, ongoing budgeting, learning about taxes and investments, and a slew of other actions. If that seems ludicrous, just look at the number of movie stars, musicians, celebrities and athletes who went from being multimillionaires to being bankrupt.
It’s hard enough to get rich in life as is. Do not ignore the lesson that with great wealth comes great responsibility. Take this one lesson to heart: If it sounds silly that you need to set up a series of strict rules and plans as safeguards to protect your new empire, then you are already at severe risk of going broke if you ever become filthy rich.
Here are the 12 things not to do if you win the lottery.