Top 10 Things To Do With a Lottery Win (or Inheritance)

Its true. Many people win the lottery, or are lucky enough to inherit large sums.

Now what?

The first reaction is to pay off bills, share with family and give to charities. Even quit your job.

Well, don’t quit your job quite yet. Here is a good rule of thumb. If your annual cost of living is $100,000 you will need to  $2.5 million invested at a 4% guaranteed annual return to replace your income. So you will need to win a lot more than that to actually improve your lifestyle.

Of course you can keep your job and pay off your debts, maximize your RRSP  and fully fund tax exempt growth of the windfall through insurance. You will now be able to retire years sooner than originally planned. But 2.5 million is not a really big number any more especially if you figure the future value of money over a 20 or 30 year time line.

But what if you win the really big one? Say, $5,000,000.00 or more?

You might want to think of a couple of more issues that are critical to you and your families’ well being. Things like Family Security, Privacy and Litigation. Even publicly stating that you plan to give it away will not lessen your risks in these areas. In fact in the public forum most people will not believe you will follow through with that strategy, regardless of your good intentions.

So here are the Top Ten things you do:

1. Sign your ticket and place it in a safe place, maybe a safety deposit box.

2. Arrange a secure place to live which may include new school arrangements. Perhaps a tutor. Plan on 6 months or more before planning to move back to your home. (maybe you rent it out).

3. Arrange your mail to be delivered to a post office box or to your lawyer.

4. Have your home closed up for an extended absence. Do not forget about utilities and property taxes.

5. Arrange competent security that will minimize the risk of kidnapping or other threats.

6. Arrange in advance the investment portfolio that will best suit your needs and profile.

7. Arrange an immediate “leave of absence” from work.

8. Claim your winnings with as little fanfare as possible and have them deposited to your account.

9. Once in a safe place you can now complete your financial planning and career moves.

10. Ensure you include church and/or charity in your plans.

Some notes to the top10 list of things to do will include:

A. Care should be taken as to what debts are paid off since some may attract a lesser interest cost than your earnings from your investments.

B. Once spent,  lottery winnings are gone – forever. Instead, plan on living off the “earnings” from the winnings – not the winnings themselves. Always use a return of 4% or less per year in your planning.

C. 10 million in winnings will provide $400,000 per year in income at a guaranteed rate of 4% per year.  This amount of income will allow you to live a remarkable lifestyle and if your investments can average a higher return then you will be able to enhance that lifestyle and acquire valuable property without encroaching upon your principle.

D. We all do something – every day. Now you have the opportunity to do what ever you dreamed of doing including your vocation. One vocation that is in dire need of help is charitable organizations. Perhaps you will want to start up your own to target a special need. Giving back to your community is a social and ethical responsibility and what a great job that would be.

E. Although you probably don’t expect it, your relationships will change, as will your family obligations.  The people you associate with will increasingly be those that you surround yourself with in your new lifestyle. It is important that you know in advance and prepare for the changes you will experience.

Done properly, this is a once in a lifetime opportunity to build a legacy – if you maintain control of your money. Have a plan, goals and objectives and then surround yourself with trusted and knowledgeable advisors.  You should have someone in accounting, finance and law who have the experience you will need to make the most of your opportunity.

E. & O. E.
MA Schneider Insurance Agencies
Mark A Schneider cfp clu cfsb
Chartered Financial Consultant

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About The Author

Mark Schneider
Mark Schneider is one of Canada's leading Chartered Financial Planners. For over 30 years he has helped hundreds of regular Canadian families grow small fortunes through consistent planning and wise advice. He holds the following designations: CFP, CLU, CHFC, CFSB