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Janine Davis

5 Things NOT To Do If You Win The Lottery

By JD Diva
Gambler Scratching a Lottery Ticket With a Penny

Millions across the United States are eager to get their hands on the winning tickets that will make the winner of the fourth largest prize in Mega Millions history. At this writing, some $1.07 billion is up for grabs. But, winning is only half the battle. Financial planning experts say many lottery winners make common mistakes.

And these mistakes oftentimes cost them their fortune. The Mega Millions jackpot has reached the billion dollar mark after 29 straight draws without a winner. And while the $1.07 billion is not the record, similar giant jackpots have grown to be more common in the last few years.

Since 2021, there have been five prizes that top $1 billion — with the largest jackpot reaching $2.04 billion in 2022. Even if the notion of winning the giant jackpot seems unlikely to you, there’s still a hefty amount of money to win if you play the lottery.

The lottery news release says as the Mega Millions jackpot grows, so does the number of prizes won across the other eight prize tiers. For example, 92 tickets sold across the country matched four white balls plus the Mega Ball to win the third-tier prize. Fourteen of those tickets are worth $50,000 each, because they also included the optional Megaplier. The other 78 win the standard $10,000 each.

So, there’s still plenty of money to go around. The key is if you win big dollars, how do you manage and maintain it? Financial experts at Fortune.com say there are some common mistakes people make after winning big.

 A grand prize winner could choose to spread it in annual payments over 29 years, or take a lump-sum option of an estimated $527.9 million,Mega Millions said.

  • Choosing a Lump-Sum Payment

    If you are the lucky winner of the $1.07 billion, you will have the option to spread it out in annual payments over 29 years or take a lump-sum (estimated $527.9 million), according to Mega Millions. Financial experts say it’s a mistake to take all the money at once. They say with that amount of money in hand,  most lottery winners don’t make sound financial decisions.

    With the annuity option, even if you blow through you money the first year, you now have a do over when the next years payment comes.

    Taking the annuity payment delays your tax burden; you’re only paying taxes on the yearly distribution. Taking the one-time lump sum payment, winners are required to pay taxes (apprx. 37%) on all of that money upfront.

  • Overestimate Your New Wealth

    Financial experts warn most lottery winners think they have more money than they actually have. This is the case especially if they take the lump-sum. In the case of the $1.07 billion winner, their winnings get cut nearly in half after taxes. Then if there are multiple winners, each will have their cut which further reduces the amount you receive.

    RECOMMENDATION –  upon winning, contact a tax professional to assist with tax details.

  • Succumbing to 'lifestyle creep'

    This is often times what happens to lottery winners when they get rich fast. They experience ‘lifestyle creep.’ Financial experts say lottery winners tend to make big purchases (houses, boats, cars) with their new winnings, not thinking through what it will cost to maintain.

    Most increase their cost of living to an amount that is not sustainable.

    RECOMMENDATION: Experts say learn what’s worked well for you in the past and the things  you enjoy. They suggest you use money to improve your life.

  • Treating Winnings like 'Monopoly Money'

    Financial experts say it’s a real thing for lottery winners to treat their winnings like ‘monopoly money.’ In other words, they don’t believe it’s real. And they treat it as such.

    One financial expert defines “the Monopoly-money mindset”  as knowing no boundaries. Philip Richter with Hollow Brook Wealth Management says, “It’s hard for many to control their material desires. Having a red Ferrari is great, but it would also be nice to have a blue one.”

    RECOMMENDATION: Develop a financial plan with a professional.

  • Not Consulting with a Financial Professional

    Becoming an instant millionaire or gaining an enormous amount of money in a short time can be unsettling. In fact, most lottery winners are overwhelmed with the instant wealth. It’s a one-in-a-lifetime occurrence for the average person.

    That’s not the case for a wealth manager, CPA’s, financial advisers and planners who are accustomed to handling that type of cash on a daily basis.

    RECOMMENDATION: If you are one of the lucky winners, immediately surround yourself with a team of experienced experts who can help you successfully manage your financial future, including advising you on investments and budgeting.

    “That team should include an attorney, a tax person, and a financial person,” says Pagliarini. “You want to work with people who have experienced this dozens—if not hundreds—of times. And you want to rely on them.”

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