You selected six numbers out of 53, plunked down your buck, and beat the 22,957,480 to one odds against you. You’re a millionaire! It’s unbelievable! It’s wonderful!
But what do you do after the champagne toasts are over?
Your answer to that question can mean the difference between being set for life or becoming a riches-to-rags statistic. So once you’ve convinced yourself your good fortune is for real, it’s time to get practical.
Here are three things to consider before you collect your check.
You may not be as rich as you think. Remember, you’re going to owe taxes on your newly acquired wealth. A 25 percent withholding tax comes right off the top. Sound like a lot? You might owe even more. Whether 25 percent is enough to cover your tax bill depends how much you won as well as the rest of your financial picture. Calculating an estimate of the total that will be due before you start spending your winnings is a smart move.
And yes, the Internal Revenue Service will know you won. There’s a reporting requirement for gambling winnings of $600 or more.
Get a plan—before you get your cash. Be realistic about your saving and spending habits. If you take your winnings in one fat check, will you have the discipline to set the biggest portion of it aside for your future? Or will you become the ultimate consumer, buying clothes, cars, houses and jewelry? Of course you’ll want to have fun fueling the economy with part of your windfall. It’s okay to go wild—with a limit. But if setting limits is not your style, choosing a series of annual payments could save you from disaster.
Handle the paperwork. You meant to make a financial plan, learn about investing and create a will—some day. Well, some day has arrived. Putting your financial house in order is vital for the protection of your family’s well being. Besides, without a plan, how will you be able to support the standard of living you want to become accustomed to for the rest of your life?
Having a plan doesn’t necessarily mean turning all your financial affairs over to a professional adviser, though it’s likely you’ll want to consult one. But whether you choose to do it yourself or hire a money manager, an understanding of money and investments lets you control your future. You’ve already proven that you’re lucky. Educating yourself proves you’re wise, as well.