Six most common lottery winner mistakes and what you should do instead
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Introduction
You’ve won the lottery, congratulations! You might be feeling elated at first and thinking that your winnings will solve all of your problems.
But then reality hits: you don’t know what to do with that much money! And that’s where you can run into the most common lottery winner mistakes.
If you’re like most people who win large sums of money in lotteries or scratch-offs, you’ll probably want to use it as quickly as possible.
However, doing so could lead to some serious financial mistakes down the road if handled improperly. In reality, many people who win big at the lottery end up more miserable than they started with.
In this article, we will aim to identify the most common lottery winner mistakes and what you should do with your winnings instead.
What are the most common lottery winner mistakes?
Not hiring a lawyer and financial advisor to help you manage your winnings
One of the most common lottery winner mistakes you should avoid is not hiring professionals to help you manage your winnings.
A lawyer can help you avoid making unwise decisions with your money, and they can also help you navigate the legal issues that come with lottery winnings.
Attorneys, or even a trusted financial planner, will also be able to assist in tax planning, as well as helping to avoid scams and other potential problems associated with winning large amounts of money.
If you are fortunate enough to win the lottery, it is important that you hire a lawyer immediately. You will want to do this even if you don’t think there is not anything wrong with your winnings.
Depending on the country you win in, there might be other legal obstacles that can make claiming your winnings that you may not know about. It may be wise for a lawyer to look over all of the documents associated with your claim.
It’s important not only that they know the ins and outs of how taxes work but also that they have experience with people who won large amounts of money in a short span of time.
Not taking time to consider the future implications of your newfound wealth
Another common lottery winner mistake is not taking time to consider the long term implications of their winnings. You have to think about what it means for your life and how you’re going to live it from here on out.
For example, if someone wins $1 million in lottery tickets, they may want to buy a new car or house or maybe even hire an accountant who can help them manage their finances.
Perhaps they may even think they are better than other people because they don’t spend much money on frivolous things like trips away from home or fancy dinners out every night.
But those are not the only things wealth changes. It’s a common lottery winner mistake to keep a mindset that only thinks of their present circumstances, and not consider things like inheritance, or changing tax brackets, or even simply how this new wealth can affect their personal relationships.
Navigating relationship minefields like this can be a tricky, awkward affair and this leads us to one other common lottery winner mistake, which is not keeping their winnings a secret.
Not keeping your winnings a secret.
You should not share the fact that you have won the lottery with just anyone. You might be tempted to do so because of the excitement that comes from winning the lottery; however, this is a mistake. You will want to keep your winnings a secret as long as possible.
The excitement of sudden windfall leads many people to making common lottery winner mistakes. They give away money on impulse and then regret it later.
Don’t give your money away impulsively. Think about where exactly this money will go before making any decisions or handing over cash or checks.
That said, it is also a common lottery winner mistake to keep all these winnings to yourself for too long a period.
Holding onto the new wealth for too long.
Another one of the most common lottery winner mistakes people make with their newfound wealth is hanging on to them too long. They get paralyzed with the sudden influx of choice that they get stuck trying to figure out what they should do with their winnings.
It’s natural for someone who has won a large amount of money in a short amount of time to want some time alone with it before making any big decisions. In fact, it is highly advised.
But many people take this wisdom to mean that they should leave their winnings sitting in a bank account. This is something not exclusively a lottery winner mistake, but many people who do not know how to handle large amounts of money.
Ignoring inflation is a very serious lottery winner mistake, as people can lose out on a lot of money by not doing anything with their money. Especially in an environment like 2023, when inflation is a global problem.
What is inflation?
Inflation is the rate at which goods and services get more expensive over a period of time. The International Monetary Fund expects global inflation rates to average at nearly 9% for 2022.
This means that if you’ve won $1 million at the start of 2022, and did nothing with that money for the full year, then your winnings would have lost nearly $90,000 in value due to how much prices have risen over the course of the year.
Spending in the wrong areas
If you are already reading this, then perhaps you might not need to be told this. But another common lottery winner mistake is that they spend your winnings on things that are not necessary.
It is natural to want to buy something you have always wanted as part of winning the lottery, however you should not buy anything simply for the sake of buying it.
If you’re struggling to find something to buy, ask yourself if this purchase would make your life better or worse. If it’s going to make things worse, then don’t buy it!
This is a big one, and it’s easy to get caught up in the excitement of winning the lottery. If you’ve won the lottery, now is not the time for impulsive purchases—you should think carefully about what you’re going to purchase with your windfall and make sure that it’s something everyone in your family will use (or at least enjoy).
This doesn’t mean buying something like new shoes every day, but rather checking out sales at discount stores and finding ways to spend less money on things that don’t really matter much anyway. This also means that you shouldn’t buy big ticket items like new cars or houses as a result of winning the lottery, especially if you already have them.
Consider waiting until after taxes before spending any large sums on yourself. This is where a trusted financial planner or financial advisor can help you. You can avoid many of these common lottery winner mistakes by taking proper precautions and making smart decisions about how to handle your windfall.
Not having a concrete plan on how to invest their winnings
It is important to have a plan about what you should do with your money. A financial advisor can help you with this and make sure that your winnings are invested wisely, so that they continue growing over time.
Don’t be afraid to ask questions and speak up when necessary; having an open dialogue with your advisor will ensure everyone is on the same page moving forward.
What should I do with my lottery winnings instead?
Take time to consider the future implications of your new status and how you want to spend it, in order to make sure that what you do with your winnings is legal and ethical—and, most importantly, wise.
Be informed of the best ways to invest your winnings
We have written before about what to do with your lottery winnings. Many common lottery winner mistakes stem from an ignorance about how to handle large sums of wealth.
It might make sense for you not only to invest your winnings wisely but also hire someone who knows what they’re doing with investments.
If you really need to make big ticket purchases, like houses or cars, having a professional there to give counsel on the best ways to do it is also valuable. By leveraging their expertise and experience, you can turn your lottery winnings into something more valuable than just a pile of cash—you can turn it into an entirely new stream of income!
Consider investing in something that will pay off in the long run. You could use your winnings to pay off debt and live within your means, or even start a business! Whatever it is you decide on doing with these funds will come with its own set of challenges and rewards—but at least now there’s no risk involved!
The best way to avoid problems with your lottery winnings is to plan ahead.
Before you even buy that ticket, think about what you’ll do if you win. Consider how much money you will need and whether or not it would make sense for you to take a lump sum payout or an annuity—this can have a big impact on the total amount of money you receive in your payout.
The most important thing you can do with your lottery winnings is pay off debt and live within your means. This may seem like a no-brainer, but it’s surprisingly easy to forget when you’ve won the lottery.
If you have any consumer debt such as credit card bills, student loans or car payments, it’s time to get rid of some of those bills as soon as possible.
You’ll also want to consider paying down any other debts that aren’t associated with consumer spending—like mortgages or other real estate purchases—that will help improve your financial health while providing extra cash flow in the long run.
If you must buy something, start with something that will give you security and peace of mind, like a mortgage-free house or a new car paid off in full.
Do not make any life-changing decisions right away.
Don’t quit your day job. It’s a common lottery winner mistake to think that lottery winnings is all the money you will ever need in life. That is a dangerous thing to assume, as you can be left without an income stream in times of emergencies.
Work with a financial advisor to identify your financial goals and create a strategy based around that. Your money can then be used to fully establish a diversified portfolio that can give take you one step at a time towards those goals.
Don’t think of your lottery winnings as the shortcut to your dreams, but the headstart you need to start working your way towards them. The most common lottery winner mistakes often forget the long term implications of wealth, and so they only consider that which is right in front of them.
Just because you have money doesn’t mean you have to spend it all right away. You might want to consider saving some of your winnings for a rainy day, or even just leaving some in the bank until later on down the road.
But as long as you inform yourself, surround yourself with trusted people with the expertise to manage your winnings, then you can use your good fortune to create a better financial future for yourself.
We hope that this guide has given you some insight into what you can do with your lottery winnings, even if they don’t turn out to be as big a jackpot as you might have hoped for.
You’ll find that there are many ways to use your new found cash flow and we encourage anyone who wants some advice on how to manage this newfound wealth, whether it’s through investing or personal finance tips, contact us today.
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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
