Well kids, I’ve got to hand it to you.
Even though I FORBID IT with as much vigor as a father defending his daughter’s virginity, y’all went ahead, bought a ticket, and now you’ve won the lottery. Yes, all of you. Man, I have the luckiest readers in the world, and not just because you get to be on the receiving end of great stuff like this here word vomit.
In all seriousness, we all know that the average player is 27 different kinds of screwed once they’ve won the lottery. They have no idea what to do with that kind of capital, probably because any disposable income they might have had before went straight into more lottery tickets. And who am I to squash the retirement plans of single moms everywhere? They work hard stripping, dammit.
It isn’t just these moms who need an action plan. There are thousands of sob stories out there of someone who won the lottery, cashed out a bunch of stock options, or got an inheritance from great aunt Hortense and then promptly pissed it all away. I don’t want readers of the ol’ FU machine to suffer that same fate. Who else is going to buy me Subway when I need six inches in my mouth? My dad hates me and I’m pretty sure my wife poisons my dinner.
So let’s get started.
Step 1: do nothing
Look, I know it’s tempting to brag to all your friends about how much richer you now are compared to them. But for the love of all things holy, keep your trap shut. I cannot stress this enough.
If you’re the recipient of an inheritance or some stock options, this shouldn’t be terribly hard. Winning the lottery is another beast altogether, since your name will likely get out there at some point, especially if you’ve won something big. No, they don’t publish the winners of $50 in scratch tickets in the newspaper. It’s reserved for real news and pictures of cute kitties.
Your friends aren’t trustworthy, no matter how much you might think they are. So don’t tell them squat if you can avoid it.
If word gets out, you’ll have 1,482 investment guys calling you and offering their services. You’ll be tempted to hire one, because the last thing you want to do is piss away your new found wealth. But there’s no reason to go nuts hiring these guys. They prey on guys with lots of money and very little investment knowledge. They’ll have you in high-fee products faster than you’d think possible.
Instead, stick the money into a bunch of GICs. The CDIC insures GICs of up to $100,000, so if you’re feeling really frisky, you’ll want to spread it out among a bunch of different banks to make sure a bank failure isn’t going to end up costing you. I probably wouldn’t bother; rather, I’d just put it into a few banks that offered a good balance between a high rate and credit worthiness. In other words, don’t stick it all in Home Capital’s GICs.
Step 2: think about your options
Next, I want you to really think about what’s important to you.
Obviously, you want to make sure the money doesn’t get pissed away. It can’t help anyone if you spend it on strippers and blow.
It isn’t just enough to have a goal of not pissing away your money though. You need to really think about what you want to do with it. Goals could be creating a foundation to help poor kids, using the money to start a business you’ve always wanted to try, or something like that. Not pissing the money away isn’t a viable answer.
Don’t just write one or two things on this list. It should be pretty detailed, encompassing things like taking care of your kids/parents, paying for things like an education for your kids, and budgeting in some fun stuff like getting a bigger house or a dune buggy. Or a hooker. Hey, I’m not here to judge.
This process should take a few weeks if you do it right. Take the time to really think about what’s important, and whether you want to leave a big legacy when you’re alive, or whether you want to spend it while you’re here.
During this time, the people who know you’re suddenly rich will come begging for a handout. If they’re not on the list, tell them to pound sand. The list will help keep you strong when people come with their sob stories. Lord, will they come. Hard too.
NOT WHAT I MEANT JEEZ.
Step 3: Implement those goals
Once you’ve figured out what you want to do, now is the time to figure out how to fund it.
For an easy example, say you won $2 million, and you want to spend $100,000 per year on various things. We all know a reasonable withdrawal rate is between 3-4%, so this means you run the risk of running out of money some day.
Next, go interview a handful of investment guys. Tell them what you want to do in detail, how much you figure it’ll cost, and how much you figure you’ll have to invest. Tell these investment guys you want a detailed plan on how they’ll invest that money to help you achieve those goals. Insist on that plan in writing.
Most investment advisors work on commission, and might not be very excited about providing a plan without securing the investment dollars first. And most fee-only planners probably will insist on getting paid beforehand as well. At this point in the process, it might be wise to spend a little money on a few different opinions. If they won’t write anything down for you, at least you can get a feel from talking to them. Most will be bullshit artists that can be easily avoided.
This is also a pretty ideal time of your life to start learning about this kind of stuff. Investing your own money can save quite a bit of money in fees. Most folks who have won the lottery need a hobby to keep them busy. Yours can be investing. Even if you don’t invest all of the money yourself, at least learn enough to figure out whether your advisor is doing a good job.
Step 4: stick to the plan
I get that sometimes life throws you curve balls and you might want to change the plan. That’s all fine and good, but don’t do it willy-nilly.
Take time to decide whether you want to really change the plan, or whether you’re just bored. Talk it over with your advisor or some other trusted ally. If it’s going to cost a lot, crunch the numbers and see how it’ll affect the future. You might have to take out some other things from the plan.
That’s about it. Admittedly, this is a boring plan, but that’s because it’s mostly designed to maintain wealth. Maybe I’ll do another one of these on how to really grow your wealth once you’ve won the lottery. Or maybe my laziness will win out. Oh, the suspense!