5 Big Mistakes That Can Cost Lottery Winners Millions

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Winning the lottery is a dream for many. Keep reading to learn how lottery winners sometimes get it wrong — and lose money along the way. 

Just this month, a single player hit one of the largest Powerball jackpots ever and now finds himself $1.76 billion richer and with about a million decisions to make. For any of us who can’t imagine having that kind of money, it seems like a dream come true. But for some past lottery winners, that dream turned into a nightmare. That’s because there’s no book that tells us how to handle such a large windfall. Here are five of the biggest mistakes a lottery winner can make.

1. Losing the ticket

Unless they can prove they had the winning ticket, a person is out of luck. It’s recommended that anyone who plays the lottery should take a picture of the ticket, front and back. Then, they should put it somewhere secure, like a safety deposit box or personal safe. Also, they should save copies of the pictures they took to the cloud.

Some experts recommend signing your name on the back of the ticket immediately, so no one else can find it and claim it as their own.

2. Telling the world they’re rich

Ideally, lottery winners would tell only those who need to know they won. However, that appears to be difficult for some. In their excitement, they tell the entire world that their lives have changed. Suddenly, people they barely know or haven’t seen in 30 years contact them with sad stories of financial need and amazing investment opportunities.

It’s your better bet to enter a lottery that allows you to remain anonymous.

3. Believing they can handle the money by themselves

Although the percentages vary depending on the source, there are plenty of stories of lottery winners who’ve lost their fortunes. Here are some of the professionals they should have hired:

A financial advisor: A great one can help a lottery winner keep their feet on the ground, as well as help them manage their wealth and to accomplish their goals. For example, if a lottery winner wants to buy a small town in Idaho, there’s a good chance their financial advisor will point out the reasons it wouldn’t be a good idea.The right attorneys: An estate attorney or family law attorney can help a winner draw up a new will, create a trust, and, if needed, write a prenuptial agreement.A tax attorney: This attorney will help a lotto winner pay as little in taxes as legally possible. This person will also keep them right with the IRS by making sure their taxes are properly prepared and filed on time.A certified public accountant (CPA): A CPA can further ensure that the winner is good with the IRS and give them tax-saving ideas through the years.

4. Thinking they don’t need a budget

There’s a reason why you’ve probably heard several stories about people filing for bankruptcy after claiming to be super rich. They never learned to properly manage their budget.

Just as we all need a solid household budget to stay on track, lottery winners need to know where their money is going and decide when it’s time to stop spending.

5. Giving into guilt

An article in Grunge talks about lottery winners feeling guilty about suddenly becoming rich. In fact, there’s a name for the phenomenon: “sudden wealth syndrome.” Money can solve some problems and make life easier, but it doesn’t do a thing to help people maintain their emotional well-being. And once someone is down, it’s easier for others to take advantage of them.

Lottery winners experience attention they’ve never had and suddenly hear from people who wouldn’t bother to talk to them before. They’ll also hear so many sad stories that they’re likely to be worn down.

This is where a great financial planner and CPA can come in. As long as the lottery winner is willing to listen to professional advice, they’re likely to make fewer decisions based on emotions.

Perhaps the lesson to be learned is this: If you’re dreaming of winning the lottery, also take time to imagine what you would do if you won, including hiring good people to help you invest wisely and keep money in the bank.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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