How to Avoid Blowing Your Winnings Within a Few Years

With sound decisions, you can ensure your winnings don't vanish within a few years.
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Three glass jars in a row with various amounts of coins in. One jar is labelled "Travel", another is labelled "Education", the third is labelled "Savings"
  • Author:
    Shaun Greer
  • Published:

We all have that dream. Whether we're cringing at this month's bank statement or daydreaming about how to escape the rat race.

Wouldn't it be nice to hit the Powerball jackpot and see those problems vanish?

Believe it or not, it does work that way for some lucky people.

Winning the lottery certainly makes people happier. But, we've all heard the horror stories about those who blow their winnings in the space of a few years.

The Story of Sharon Tirabassi

Take Sharon Tirabassi as an example. In 2004, Sharon, a single mother, cashed in her winnings from the Ontario Lottery and Gaming Corp. for a rather enviable sum of CA$10.16 million.

Sharon got to work spending her cash quickly. She bought designer clothes, fancy cars, a big house, took exotic holidays, handed out cash to friends and family and threw one lavish party after another.

10 years later, Sharon was back on the bus, heading off to her part-time job and then returning home to her rented house in the evenings.

Makes you shudder, doesn't it?

Fortunately, there are a few steps you can take to avoid blowing your winnings within a few years. The key is to not make any financial decisions right away. It's an emotional time. You need space to process what's happened. And you need to be thinking long term.

In fact, for the first 90 days, don't make any decisions on how to spend your winnings.

Here are three more top tips to make sure your winnings don't vanish in the blink of an eye.

1: Don't Make Major Life Changes

If you were to think about what you'd do after winning the Powerball jackpot, chances are your first thought would be to quit your job and get a nicer house. Don't do that just yet.

In fact, experts suggest you don't make any life-changing moves immediately.

While winning millions of dollars will leave you feeling like you don't have a worry in the world, the reality is very different.

There are several reasons you shouldn't make big decisions immediately. For starters, you need to keep the structure in your life, and quitting your job and changing your lifestyle isn't actually good for you, studies report.

When John and Lisa Robinson landed on a windfall of $327.8 million, they kept their jobs. They were thinking long term from the start and realized they needed to save for their future.

And then there's David Kaltschmidt who said he'd be retiring, but he'd already planned that. So, he continued to live the same life he always had, with his first major purchase being a replacement for his broken truck.

It's advised that Powerball winners sit down with advisers and set a realistic budget to ensure their funds go the distance. You'd be surprised by just how quickly a couple of hundred million dollars can disappear if you don't have sensible spending habits.

2: Pay Off Your Credit Cards

This one seems obvious, but so many winners don't even think about getting rid of their debt first. Instead, they head off to the nearest car dealership or high-class neighbourhood to start flashing the cash. But, reducing the debt on your credit cards ought to be your top priority.

Once that's done, don't start running up debt on your freshly cleared credit cards. It's just a vicious circle that will leave you with empty pockets sooner than you think.

Instead, stick your money in a couple of steady income-generating investments - if you feel comfortable doing this, of course.

Better yet, when you're free from debt, sit down with a professional investment adviser and develop a long-term financial plan that's in line with your established goals and desires. Determine how you can get this money to do what you'd like it to do, especially later on in life.

3: Set Aside a "Fun Fund"

Once your 90-day no-spend period is up, set aside a little money that you won't use to pay off debts or invest. In fact, just five or 10 percent of your winnings could be a handsome amount to enjoy with friends and family as you start ticking off your bucket lists.

Make Your Winnings Work for You

Whether you chose your Powerball combination using special numbers or via Quick Pick, there's nothing that's going to top the feeling of beating the odds and winning the jackpot. With careful planning and sound decision-making, you can hang onto your jackpot winnings and create the ultimate retirement plan.

The whole idea is to make the money work for you, for life.

For more practical advice on how to manage a large jackpot win, check out What to Do When You Win Powerball.

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