Is it best to dive straight into the cash when you win the lotto or set more long term goals?
When you win a large prize on the lottery such as the jackpot, there becomes an issue that every single winner has to deal with once they get their money. Do you rush out and get a new house and car, or do you bank your winnings and continue on as usual to a certain extent? Should you take your winnings and get what you want, or use the money to maintain what you need?
All change!
Some winners go the route of extreme instant change. As soon as they get their prize money they will pay off all their bills, buy a new house and new car, and then get lots of toys and take trips. They deal with what is important to them now without looking forward into the future. They may spend too much to the point that within a year or so they are shocked to see their winnings dwindled way into things that now seem not that important to have.
Other winners go the route of setting long term goals. Immediate issues are taken care of exactly as they had been done just before winning the money. Banking routines don’t change and the money sits away tightly secured and protected. But they might miss out on some things like a new car or a trip or paying off all debts which might take a small chunk out of all the winnings. They need to have all that money available for that proverbial rainy day.
There are pros and cons to each method. Instant changes let us take care of the pressing issues in our lives that are causing us great stress and pain both emotionally and physically. Being able to repair our car now or buy a new one enables us to get back on the road and be able to do our errands, travel back and forth to work, get to medical appointments easily, and get back our freedom of travel. We can now afford our prescriptions that keep us healthy and alive. We can get those collection agents off our back. We just make the deadline to pay our electricity bill before it gets disconnected. At the same time we begin looking for that big house we always wanted.
But in doing all this we just might overspend and realize a good portion of our winnings is gone. There actually may not be enough left to live off of for many years into the future. We may end up having to sell our house and car just to survive.
Take a breath
The best way to deal with the sudden influx of wealth that winning the lottery brings is to take care of issues immediately but put off everything else until later. Pay all your bills and debts and get to the point where you don’t owe anybody anything. Then put the rest away to build up interest over the long-term. If you want to get a new car or house, take it slow and get what you need, not what you want, to keep purchases low so as to not blow your principal.
If you live in a ratty old apartment or house, it’s ok to get a nicer place, but you don’t need a mansion. It’s ok to get a new car, but you don’t need a Porche. Get what you need. After a few years, when you have built up some interest over your principal funds, you can upgrade your lifestyle a bit. But be conservative and keep it at a reasonable cost.
By dealing with your winnings in a combined fashion of both instant and long-term goals, you can upgrade your lifestyle while keeping the majority of your winnings working for you for the rest of your life.