You can be daydreaming about how easy your life will become when you win the lottery, but I tell you – it may not be so easy! Managing such a large reward sum without proper and advanced financial planning will come with its own set of issues. We have compiled a series of steps and financial advice for lottery winners to help you manage your finances after winning a lottery.
To save from that oh-so-terrifying outcome of winning the lottery ticket, it is important to have a robust financial plan directed by expert financial advice.
Financial advice for lottery winners
This is the most important thing that you need when winning a lottery. Get financial advice from a reputable financial advisor. Collect your winnings in the form of either a lump sum or as an annuity. People who choose the lump sum reimbursement are liable to pay tax on the full amount as soon as they receive it.
You will need an accountant to manage your taxes. He or she is the professional who knows how to take the best care of all your accounting tasks. They will handle your tax matters and free you from any trouble you may have with the IRS. Once the government deducts the tax amount, there are a few more types of taxes that you will need to pay.
Get Financial Advice
Once the taxes are paid, you now need to focus on accomplishing your financial goals. You will need to look for an experienced financial advisor/financial planner for this job. They will come up with a solid financial plan. Based on your short-term and long-term financial needs, they will suggest the best investment strategies that will help grow your money.
However, if you choose the annuity option, you will not have to immediately deal with the entire amount. You will be entitled to pay incrementally. Also, as you would not have to manage the huge reward sum, there is no need for any major financial planning.
Be Careful When Choosing A Financial Advisor
Not all financial planners would have the same expertise, skillset, and knowledge. Anyone who seeks to hire a planner should ask the right set of questions to gauge their technical competencies and capabilities of addressing specific financial requirements. Seek the assistance of the CFP Board’s website to find the best financial planners for your job.
Invest Your Money At The Right Places
You need a proper financial plan to manage your finances. It will save you from accidental theft or reckless spend thrifting of your wealth. It is a good practice not to store all the amounts in one place. Unfortunately, if a person gets unauthorized access to your account, then you may even lose it all. An effective investment strategy protects you, as well as your loved ones.
Some of the ideal investment options available for lottery winners to park their money are:
- Keep the money in your bank account. You can open a long-term FD (fixed deposit) that will keep accruing interest on it.
- Try investing in stocks.
- Buy assets.
- Set up a mutual fund, hedge fund, or similar types of investments.
- Invest in a business.
- Donate it to a charity, an NGO, or any other community.
- Give it to your close ones as a “Gift.”
- Buy a new vehicle, immovable property, etc.
Specify Your Financial Objectives
You can use your reward sum to fulfill a wide range of financial objectives. It could be clearing off your debts, funding your house’s repairs/construction, buying a car or any home accessory, saving for your child’s marriage or future education, and more. So, make a list of all your financial goals based on your priorities and plan to spend it fulfilling all these objectives.
After you have cleared off immediate debts and other financial objectives, you now need to plan for a financial investment strategy. While you do this, you should not forget about creating a contingency fund. This emergency can meet your immediate and sudden financial needs, such as medical and healthcare expenses, etc.
Get Legal Advice
You may also need the support of a good lawyer who would help you safeguard your wealth, anonymity, and assets. As lottery winners have got plenty at stake, it is important to get a legal expert’s assistance to save you from any unfortunate probable event. Some lawyers deal specifically with lottery winners. You can do thorough research to find expert assistance.
Registering a win in the lottery can be a life-changing process. Take the right steps to hang on to the lottery winnings. Ask who you would require hiring to fool-proof your finances. Get financial advice for lottery winners from a financial planner to ensure things move as per your planning.
Take a good amount of time to form decisions that can help safeguard and grow your money. Learning about the successful finance management strategies that past winners have adopted will help you a lot.