One lucky individual may have had a life-changing experience this weekend if they won the $1 billion Mega Millions grand prize.
While it’s fun to dream, the odds are so slim that it’s probably more likely that someone will trip over a baseball glove in their garage and die from banging their head on the lawnmower (that’s maybe just my garage). While winning the lottery isn’t in the cards for most people, what can be learned from those rare moments when a wad of cash – albeit much smaller – falls into one’s lap?
First, keep the news close to your vest. Last year, Missouri passed House Bill 402, which allowed resident lottery winners to choose to remain anonymous. Given the national media coverage of such a large payout, staying out of the limelight is an advantage when trying to maintain some normalcy in life. Anyone receiving a substantial sum of money should try to maintain a similar level of anonymity. Whether it’s selling a business, inheriting a pile of cash from Uncle Penny-pincher, or settling a big lawsuit, avoiding the unnecessary dissemination of this information is sure to pay off.
Second, take deep breaths and make decisions slowly and deliberately. In the case of the lottery, winners have 180 days from the date of the draw to claim the prize. In all other situations, there is usually no schedule at all. Buying or building a dream home, perhaps in an exotic location, or buying a fancy car can be a desire, but it doesn’t have to be done quickly. In fact, any major purchase should be delayed for at least three to six months when cooler heads are likely to prevail.
Additionally, the long-term implications of any decision must be carefully considered. Will a new Lamborghini look too ostentatious at your current address? Does moving to a new ZIP code give you a bigger house, but now you don’t see any friends from the old neighborhood? Does moving to a tropical paradise ultimately alienate you from your family or from a religious community that is important to you?
A lot of people would quit jobs they don’t like if the lottery or some other bonanza came their way. Yet, just as retirees need to think about how they will spend their time if they are not working, the newly rich should answer the same question. If it’s not turning a key or driving a truck or going to the office every day, what will occupy their time? The old adage, “An idle mind is the devil’s workshop,” comes to mind. Maybe volunteering at a local nonprofit or working part-time that they find enjoyable is an option. Either way, slowing down and thinking about decisions is of the utmost importance.
Finally, call a professional. In fact, work together. A lawyer with experience helping people with new wealth would be invaluable. A trusted accountant would be equally important. And rest assured that as a financial planner, one of this advisor’s first priorities would be to hire a paid-only trusted financial planner. Just like a lawyer representing himself in court has a fool for a client, some decisions are just too important to go it alone. The benefit of working with a financial professional who is unbiased, knowledgeable, and able to point out risks or pitfalls that may have been glossed over because of rose-tinted glasses would be money well spent.
Although lottery fortune is unlikely to change the life of anyone reading this column, there are many other situations where unexpected fortune can occur. However, lightning rarely strikes twice. Whether it’s $1 billion or $100,000, make decisions with the care and diligence they deserve. Oh, and if I happen to be the big winner, you’ll find out when you read my next column in the Lifestyle section under “Great Travel Adventures!”
Tim Sullivan is the owner of Clarity Financial LLC, a fee-based consulting firm in Colombia, a CFP practitioner and member of the National Association of Personal Financial Advisors, and has earned Enrolled Agent designation from the IRS.