Since claiming a prize worth millions of dollars had a direct impact on your life in many legal and financial aspects, it is better not to assume you can handle it yourself. The first thing you should do is hire professional help.
The hiring list should include a lawyer, a financial adviser and a public relations adviser – these are the bare minimum that is required to maintain your sanity and your wealth. Those professionals should help you set up a plan on how to collect the money, where to place it, how to deal with taxation, how to invest wisely and how to keep your life as normal as possible.
Anonymity is Key
Any guide will tell you the same thing - if your country or state allows it, do not waver your anonymity. People finding out about your sudden wealth will bring you nothing but trouble and hassle. Choose your friends wisely, and make sure only your inner circle is trusted with the details.
Winners who cannot legally choose to remain anonymous, as is the case in some US states like Florida, should do some preparations prior to claiming the prize. After coming forward, there will be no way to protect your private life and details about your past, and your present is bound to be the topic of great media interest. This can impact your reputation and impact your well being in the future. While you cannot claim the prize without surrendering at least part of your privacy, in some cases you can set a fund or a small company and use a lawyer to collect the funds on its behalf.
Annuity vs. Lump Sum
One of the first big decisions to make is whether you collect your prize in a lump-sum or receive the payment over a number of years. The main factor to consider here is how much tax you would pay in each case. The advantage of collecting the prize in annuity is to have a stable large income over the years. It can also help you avoid some classic rooky millionaire spending mistakes. It’s fair to say that this decision is not only about taxation, but has a lot to do with the age, financial needs and the decision making process of each individual. There's no one right answer, so you will need to figure out the best thing for you. Be sure to involve your advisers on this one!
The more money you have, the more you have to lose, which makes you more exposed. People looking to make a quick buck or that hold something against you might search for reasons to send unwanted lawsuits your way. It's better to be prepared to protect yourself then not see it coming. Build an asset protecting strategy with your legal and financial team to make sure no one gets in the way of your happily ever after.
Pay Off Day
One of the first things you should take care of are unpaid debts or loans. You are no longer short on cash and having unpaid debt can expose you to legal threats and creditors coming your way if they hear of your new fortune.
Now imagine you don’t pay off your loans, and end up losing a lot of money in a bad investment so that you have no money to take care of the debts you could have already paid off. That is not a good idea! Now is the time to settle up and save yourself some interest and legal hassle.
Learn to Say "No"
This is a word you will have to learn to use when constantly being asked for money—it’s inevitable when your name gets out! Request might come from close family or distance family, friends, acquaintances, and basically everyone around you who knows of your wealth. Sometimes you might even have to say "no" to yourself.
Saying "yes" to all might be the easiest, but is a sure way to bankruptcy. Give every request or offer the proper consideration, but know you cannot please everyone. When letting people down try and do so gracefully.
Living on a Budget
Planning of buying a new home or a fancy car? Hold on, you just won. Some winners spend their money very quickly before the dust has even settled! The smart thing to do is wait at least six months before committing to any massive spending, justified as they may be, since you might just still be shocked by the experience of winning and can’t consider every detail clearly.
Odds are you will be tempted to spend senselessly, now that you have more money than you could ever dream of. But money comes and money goes, and without proper planning for those millions in your bank account you might wake up one morning and wonder where it has all gone.
Avoid that by having a planned budget that is suitable to your current financial status but don't go over it just because you can! Try to find a decent balance between spending money on the things you really need and just simply splurging. The money is there for you to enjoy it and improve on your quality of life, but you want it to last for the long run.
Now that you are rich, you might want to give something back to your community or invest in charitable projects, but donations are no different than any other expenses you may have. Creating a separate budget plan for donations is a smart move, otherwise you might be inclined to give away money to every person who knocks on your door.
Don’t forget that most donations will qualify you for some income tax deductions, so being generous and philanthropic is not only good for your karma, but also your finance! But act wisely, otherwise it can also come at the expense of your financial status in the future. Opening a fund is a good idea to help you handle and sort out requests for donations coming your way.
The financial adviser you hire should be involved with any investing plans you may have. The smart thing to do is to put a hefty portion of the money you plan to invest in a safe bond. The stock market might make you more money, but is also unstable and risky.
Would you rather preserve your fortune or risk it for a chance to make more? Think about it – do you really need that much more than what you have already won? Never make a hasty investments prior to proper consultation.
One investment you shouldn't question is a good health plan and a health savings account for you and your family. Health is the most important expense you could possibly have and extensive insurance can save you a lot of money down the road.
Another smart choice to make is to set aside money for your kids, if you have any. If you can provide them an easier life by having a fund set for them as they grow older, for collage or buying a house, you should defiantly do so right after you win. Any money you set aside now for this purpose is money that will not be subjected to investing mishaps.
Don’t Quit Your Day Job
Or at least don’t rush it. Making life changing decisions is something to avoid at the first couple of months. True, you are wealthy enough to quit working and who wouldn’t want to do that? But keeping the appearance of “business as usual” plays a big part at remaining anonymous and keeping things real. It’s easy to get carried away with the wonderful new world that is now within reach, but being hasty—especially if you like your job—probably isn't the best move..
If you don’t want to work for a living that’s fine, but figure out a long term plan on what to do with all your free time. After you get tired of lavish vacations and travelling around the world, you will find out that life without a job or purpose are pretty meaningless, even when you have all the money you need.
We, who did not yet win the Mega Millions or Powerball jackpot, can only dream of the good life and inform ourselves with everything to know, waiting for the day that our lucky numbers will come up one after the other to brighten our lives and our future. It starts with buying a single lottery ticket, and who knows where it ends!