What to do when you win the lottery? That’s an easy one, right? Break out the champagne and balloons, invite the neighborhood over, and party! And the moment you recover from the party, you’re going to book a luxury round the world cruise for you entire family. Good ideas, but after an initial splurge, you should be aware that managing a large amount of money is not easy. Financial planning can help you use your money to achieve your goals. One of the first decisions you will have to make is whether to receive your money in annual payments or if the option of selling a structured settlement is the right choice for you.
Here is a list of things to consider when you begin thinking about how to use your money:
- Don’t quit your job right away
Not only will it be a while before you actually see your money, but work also keeps you grounded. As many as 48% or almost half of all lottery winners continue working even after their win. Not so much because they need the money, but because work gives life structure and direction. Most people know, and if not, they they find out the hard way, that for someone who suddenly comes into a lot of money through a lottery payout, it can be very easy to lose control.
So don’t send in the resignation letter just yet, even if you’ve been composing it in your mind for years. Take a leave of absence while you come up with a plan for your new life. And after an initial splurge on yourself and your friends and family, be sure to plan how to use your money wisely and productively.
- Find a trusted financial advisor
Another piece of folk wisdom that happens to be true is that if someone who’s not used to having a lot of money suddenly acquires a fortune, chances are they will lose it just as fast. That’s because it takes knowledge and experience to handle large amounts of money.
That doesn’t mean handing over your plans for your money to someone else. But a reliable financial advisor can lay out the options for you, advise you on the feasibility of your goals, and help you to create the financial instruments you need to succeed.
For instance, you may want to invest your money. You may have the choice of receiving your money in annual payments known as an annuity, or to sell your annuity settlement in exchange for a lump sum. A financial advisor will be able to guide you through the pros and cons of selling a structured settlement.
- Pay off your debts
The average American household owes $15,355 in credit card debt and a whopping $129,579 in total debt. For most people, it’s almost impossible to pay off debt and achieve financial freedom. One of your goals may be use your lottery payments to pay off your debt. To do so, it may be easier to sell your annuity in exchange for a lump sum, and use part of the money to pay off your debt.
Depending on the amount of your win, you may have enough to meet several goals. Reducing or eliminating debt should be one of them.
- Decide how you want to receive your money
Is selling a structured settlement the right choice for you? Most lottery payouts are in the form of annual payments over a period of years, which could be from 20 to 30 years. You may have the choice to sell your annuity for a lump sum payment. While the lump sum will be taxed at a higher rate than an annuity, it will give you control over your money, to use as you wish. A study has found that as many as 92% of those who sell their structured settlements are happy with their choice.
Once you’ve made some choices and decisions, outlined your priorities, decided whether or not
selling a structured settlement is right for you, that’s when you can relax, and enjoy your good fortune.