What If You Won the Powerball Lottery?

January 15, 2016

As I type this, the Powerball lottery jackpot stands at $1.1 billion. Yes…that’s BILLION with a B: 1,000,000,000 – nine zeroes. As a CERTIFIED FINANCIAL PLANNER(TM) professional, I can attest to the fact that that’s a whole bunch of money! It’s fun to listen to the radio and hear what people would do with that kind of windfall. As with almost everything, there is both good and bad to what could be viewed by most people as an all good scenario. 

In a prior role, I was able to work with quite a few lottery winners. Most of these people were average everyday people who had good luck on the day they bought their lottery ticket. That’s the good news…or at least the start of it. They were often able to help out friends and family in need, upgrade their standard of living and initially feel like they were making a positive impact in the lives of others. The key word is “initially.”

The Downside to Winning

What I saw more times than not is that the initial joy was eventually replaced by the feeling of excess, both internal and external, and it led to most of them going through all of the money within 5-10 years after being an instant millionaire. The internal excess that I mentioned was all about their level of spending. It’s okay to upgrade your house, but if you buy 3-4 houses you are also paying 3-4 sets of property taxes, utility bills, insurance bills and maintenance. That’s a way to blow through money very quickly.

If you buy a few brand new luxury cars and some very nice jewelry, the funds dry up in a hurry. Add to that the external excess, not just close friends and immediate family with financial needs, but everyone you’ve ever met since 2nd grade knowing that you’re a new millionaire and asking you to help them out of a bind because of that one time, when you were 11, they called your mom because you fell down and hurt your leg and now they want their kindness to be repaid! (It would be funny if I were joking, but that actually was the way one person who asked for help from one of my clients put forth their request.) Stories like that are all too common and most people want to be helpful and not seem mean or selfish so they often help those who have a really flimsy case for assistance. But once the money is gone, it’s gone.

If They Could Do It All Again

There is often a sense of remorse about how the money was misspent when it was abundant and I’ve heard more than a few lottery winners state that they wish they had never won it. Life was simpler prior to winning and they didn’t get to see the ugliness that comes from a sudden increase in wealth. What would you do if you won the Powerball or had some other “sudden wealth” event in your life? Here are a few suggestions:

  1. Find a few financial planners and work through your financial priorities prior to getting the check!
  2. Pay off any and all debt.
  3. Put the rest in the bank (or a few banks) for safety.
  4. Talk with two or three planners to get proposals on what they’d do with the money.
  5. Get your estate plan in place.
  6. Refer anyone who asks for money to your attorney or financial planner so that YOU aren’t the bad guy. Your “business managers” are.
  7. Relax and enjoy it. This should be a good thing!