While most financial advice varies, most advisors make these suggestions to Powerball jackpot winners.
There are times throughout your life that you probably receive unsolicited advice. And those who win the Powerball jackpot will tell you the unwanted attention can bedownright awful. Friends and long-lost family come out of the woodwork to tell you about stocks worth investing in, houses to buy, and shiny new cars they think you should buy for them. You almost need therapy just thinking about the constant barrage of “do this with your money” and “don’t do that” orders.
The truth is, when it comes to managing your finances, the only advice you really need is that of a financial advisor professional. Someone who doesn’t have an interest in your pocket will have an objective view of your financial position. And these experts know how to turn some money into a lot of money. That’s why we thought it would be helpful to compile the most common suggestions financial advisors recommend you do with your Powerball jackpot.
1. Don’t Take the Lump Sum
Mark Cuban, of Shark Tank television fame, says don’t opt for the lump sum payout with the Powerball jackpot. Instead, the Dallas Mavericks owner says to start an annuity plan that pays you over time. This will prevent you from spending all your wealth in one place. Winning the multi-million dollar prize doesn’t automatically make you a savvy investor. Know your limits and weaknesses and set yourself up for long-term success with sustainable living payments.
2. Definitely Take the Lump Sum
You read that right. Other financial advisors insist Powerball winners take the lump sum payout upfront. But like Mark Cuban, they also suggest investing in your own annuity plan, structuring payments over time, and allocating plenty of savings. You can then use those stipends as your “play money” to buy things, invest in the stock market, or spoil family, knowing you still have a nest egg to sustain you. The Rule of 72 suggests that investing in a conservative index fund with an approximate 10% annual return can nearly double your wealth in about seven years.
3. Give Yourself a Cooling Period
Before you spend a dime, stroke a check, or pay a bill, take some time to reflect. Set a timeline for yourself that allows for a cooling period. Winning a Powerball jackpot and all the media frenzy that sometimes goes with it can be stressful. And you don’t want to make any financial decisions with anxiety and stress in your world. Financial advisors suggest winners take time to make lists of short and long-term goals, along with wish list ideas. Then take those lists to a financial professional who can help you make the decisions need to meet your goals in a fiscally responsible way.
4. Be Mindful of the Gift Tax
Most Powerball winners want to immediately take care of mom’s house or buy new cars for the kids. But before you give anyone any cash, remember there is the gift tax. Some sources cite the U.S. threshold for gifting without taxation is $15,000. So, dropping Aunt Suzy a check for a cool million will cost you extra in IRS gift tax requirements.
5. No Reason to Remain in Debt
Most financial advisors will authorize you to take care of any outstanding debts right away. While you may want to take your time and plan for other ways to spend your fortune, there’s no reason to be in debt during your process. Pay off auto loans, high-interest credit cards, and even your mortgage.
6. Emergency Preparedness Funds
Before a dime of your Powerball jackpot is allocated to anything other than debts, remember to prepare an emergency fund. Financial advisor professionals generally suggest setting aside at least a year’s worth of living expenses or six months if you must. These funds can be invested in a low-risk account where they will go untouched and likely forgotten unless that emergency arises. You’ll be surprised how quickly the money disappears if you’re not careful. And having a reserve nest egg set aside will buy you time financially if you find yourself in a bind.
Not all advice you get is valuable. But when it comes to winning the Powerball jackpot, the advice of financial advisor professionals can be game-changing. Now that you know precisely what to do with all your millions, all you have to do is win.