Nearly everyone dreams about what their life would be like if they won the lottery. With Powerball up to $1.5 billion it’s hard to imagine how much your life could change in an instant. So, if you were to win the lottery what’s the first thing you should buy?
(Note: I asked, “What’s the first thing you should buy?” as opposed to, “What’s the first thing you would buy?”.)
If asked, “What’s the first thing you would buy?” many people would answer:
- Pay off debts
- Buy gifts for family
However, in order to protect your winnings you should be asking, “What’s the first thing I should buy if I win the lottery?” The answer to this question is more time. No, I’m not insinuating that you should try and buy a fountain of youth, Holy Grail, or magical herbs to extend your life. If you win the lottery the first thing you should buy is more time to protect yourself from the common mistakes that lottery winners make.
How to Buy Yourself More Time
Many states require that the winner of particular lottery jackpots be publicly announced. This attention can cause a lot of unintended consequences for lottery winners. After winning the lottery it is common to be contacted by media outlets, solicitors, scammers, and other people looking to cash in on your winnings.
Buy a new phone number
Once your name becomes public many different people will begin searching for your home, business, or cell phone number. These numbers may be easily available via phone books, social media, websites, and other databases. Additionally, family, friends, and associates may willingly give up your contact information.
This is why it is important to purchase a new phone and phone number before claiming your prize and publically announcing that you won the lottery. Give your new phone number only to a select group of people that you hold in the highest level of trust (Ex: spouse, kids, parents, lawyer, etc.)
Hire a team of experienced professionals
Before claiming your prize you should hire a team of professionals that can help protect you and your winnings. Winning the lottery has a way of changing people. Individuals that you may have once trusted may prey on your generosity through guilt trips and other means. Hiring an objective group of professionals who put your interests first is crucial if you were to win Powerball.
Hiring a lawyer is essential after winning the lottery. A lawyer can advise you on how to protect yourself from legal threats that may be accompanied with your name entering the public space.
Lawyers can also help you set up wills, trusts, and other important legal documents to protect your new and current assets. It’s a good idea to have a lawyer look over any legal documents before you sign them that may jeopardize your winnings.
Establishing a comprehensive financial plan is critical if you were to win the Powerball jackpot. A financial advisor can help you develop a budget, establish an investment portfolio, and buy insurance.
Financial advisors can help you stick to a financial plan that won’t leave you broke in a few years. Ask your advisor about gift taxes, and how they would apply if you want to give money to family, friends, or organizations. Advisors can also refer you to other financial professionals such as insurance agents, bankers, and other wealth managers.
Working with a reputable accountant is important in order to help you avoid obstacles that you may face in regards to tax obligations. After winning the lottery you will be required to pay federal taxes, and may be obligated to pay state and local taxes depending on your location.
A trustworthy accountant can help you navigate many tax complications that may arise from winning the lottery. The U.S. tax system is too complicated to navigate alone so consider delegating this responsibility to an experienced accountant.
Hiring a public relations expert can help you prevent some negative backlash from winning the lottery. A public relations specialist may be able to prepare statements to the media, and deflect negative attention from you.
Although the odds of winning Powerball are astronomical preparing yourself for extreme wealth changes is always a good idea. Do not make important life decisions based on impulsive thinking. Buy yourself more time and create a detailed plan for the future.
Right Financial Advisor’s Nick Bredow, contributed this report.