Jackpot

  • Here is some straightforward advice just in case you ever come into a large chunk of money. Most folks think of the lottery or an inheritance when I discuss this topic, but more times than not it has to do with death. A loved one dies and then what?

 

  • Take a big, deep breath. There is a lot at stake with receiving a large chunk of money. This is the point where you DO NOT want to do anything rash. If someone has died, you are feeling sick. Money is an after thought. If death is not involved, dollar signs are blazing out of your eyes as if you were a cat waiting to pounce on a bird! Pause and gather your senses.

 

  • Don’t tell anyone. If at all possible, do not tell anyone anything. The fewer people who know that you have come into a large amount of money the better off you will be. If that is not possible, consider changing your phone number. The calls are going to start coming. Here is a simple tip to deal with all comers who are calling either to “help” you or they need your help. Tell them that your money is tied up with your financial advisor.

 

  • Have you planned for this? Usually the answer is no. You must start to think about who you trust to help you with this large chunk of money. This is very important. Do you need an accountant? Do you need a lawyer? Do you need a financial planner? The big question is, who can you trust? Take your time before entrusting your money with an “expert.”

 

  • Hold onto your job. Do not quit anything until you have thought matters through. I know some of you hate what you do. I know telling your boss to SHOVE IT would feel great. Pause and think. What is wise is taking a little vacation time to start reviewing your options. A simple rule of thumb would include not changing jobs for at least 6 months.

 

  • The MONEY. You may have the option of receiving an annuity (money paid over many years) or a lump sum payment. There is no right answer for this one. You must give some real thought to this and while you are at it, take a good look in the mirror. Are you the kind of person that needs an annuity to keep you from blowing it? Many life insurance companies offer an annuity if requested. Is that right for you?

 

  • When you receive your large lump sum amount you will be forced to deal with many issues. Taxes will take up a large part of any lottery winnings. Life insurance proceeds are not taxed. Inheritances may or may not be taxed based on the amount and the estate tax at the time. This is the point where a good accountant can save you many thousands of dollars. Of course, a bad accountant can cost you many thousands of dollars, too. After you receive the money place it in a bank account of your choosing and leave it alone for the time being. More times than not, placing it in a money market account at the bank would be wise. I would avoid a CD or any other bank security that ties up your money. It is VERY likely that the banker will push you to place the money in the investing side of the house. Stay away from all of that crap. Place it in the money market account and LEAVE IT BE.

 

  • What is your financial situation today? Your habits and behaviors have taken you to this point. What does your net worth statement show? Are you in the plus category or the minus category? Are you deep in debt? The reason I ask these questions is to identify whether you can handle a big chunk of money. If you are deep in debt, then you need help.

 

  • You are rich, so what. That does not mean you are successful. It does not mean you are SOMEBODY. All that it means is that you have a lot of money. You do not have to go out and buy a bigger home, a bigger car, a bigger this and bigger that just to show everyone how successful you are. You do not have to show us “common folk” how rich people live by furnishing your house with exotic pictures and buying a collection of antique cars. Just chill out and don’t try to impress the masses.

 

  • Start putting together a plan. Here is where an honest financial planner can be worth it (focus on fee only planners and avoid fee based planners). Do you get rid of all of your debt? How do you fund the kid’s education? Identify the right person and this process can go smoothly. All the while it is imperative that you understand where your money is invested and what its costing you.

 

  • If you have received life insurance proceeds, watch yourself. Those proceeds are meant to replace the income of the person who has passed. How you manage that money will either provide for the future of your family or run short and hurt the people it was meant to help.

 

  • The vultures are circling. Do not underestimate this point. Let’s face it; they are looking to help themselves. If they are contacting you, you probably should avoid them. Reputable accountants, lawyers, and financial planners do not “go hunting.” You must learn to say NO.

 

  • Stay skeptical. Whoever it is, do not let smooth talking, well-dressed people with fancy sounding titles convince you to trust them. Now let’s take a look at some comments from others who have come into large amounts of money.

 

This I’ve learned: Don’t ever tell anyone you’re a lottery winner. Gerald Reif, Won $4.8 million before taxes in the Wisconsin lottery

 

Everybody dreams of winning, but nobody realizes the nightmares that come out of the woodwork. William Post III, bankrupt lottery winner

 

It’s supposed to be a happy thing, but not really. Anonymous woman who won $7.2 million

 

A stranger wrote a demand to buy a farm with “lots of sheep”. A family member who I haven’t seen in 30 years requested $150,000 for a sketchy business. A neighbor hand delivered a multi-page list of requests asking for payment of credit card bills and vacations. Anonymous winner

 

The $4 million that people read about turned out to be more like $1.3 million (The $4 million amount is the annuity option). Jack Scimeca, lottery winner

 

I wish it would never have happened. Anonymous lottery winner

 

Latrell Sprewell made over $96 million as a professional basketball player. He turned down a $21 million contract for 3 years complaining that he could not feed his family with that. Now he is broke.

 

Mike Tyson filed bankruptcy. He made over $100 million in his career.