Did you know, about 44% of lottery winners spend their entire winnings within 5 years?
Although I can’t offer you 1.5 billion dollars in lottery winnings, my office does work very hard to get top dollar settlements for our clients.
Unfortunately, for some people it may not be long before they are broke again. Whether it’s winning the lottery, receiving a large settlement, or inheriting a sizable amount, if you don’t know how to manage your money, you may go broke fairly soon.
Here are 9 tips I give my clients after they get a large settlement:
1. Keep it confidential
Announcing that you’ve come into a large sum of money could immediately make you a target. Keep it as confidential as possible. Otherwise, be prepared to dodge everyone from friends, family and even scammers, who will see you as their own personal bank.
2. Do not deposit into a checking account
No matter how responsible you think you’ll be, everyone is subject to an impulse buy every once in a while. Keeping your lottery winnings, settlement money, or inheritance money somewhere where it is not easily accessible will save you from yourself the next time you pass by that expensive car dealership.
Place your money in a savings account, money market account, or take a monthly annuity.
3. Learn money management
Lottery winners, athletes, heirs…these are people who may have lots of money today, but no money tomorrow. Don't think it won't happen to you!
Unless you already have knowledge and experience in managing large amounts of money, you should seriously consider either hiring an adviser or taking a class in finance management.
4. Be wary of friends and family
Don’t take advice from friends and family. Especially those that wouldn’t mind a new car.
5. Don’t loan money to anyone
Banks charge fees and perform credit checks for a reason. Unless you have these skills, don’t loan money to anyone. You probably won’t get it back.
6. Don’t spend money you don’t have
Don’t borrow money to finance a purchase if you know you’ll be coming into money soon. Spending money before you have it is always risky.
7. There's no harm in waiting
Just because you can buy a house at the drop of a hat, doesn’t mean you should. Maintenance and taxes on a new, expensive home can escalate.
As with any large purchase, do your research, consider how this purchase will affect you in the future, hire a real estate investor, wait 2-3 months or even a year before making any major decisions.
8. Evaluate your insurance
The more money you have, the more someone can sue you for. If you've come into a large amount of money, now is the time to evaluate your health insurance to ensure you are protected in case of an accident.
9. Don’t invest
Not unless you completely understand what you are investing in. Most of the time, the return may not be worth the risk.
The best way to make a small fortune is to start out with a large one.