June 24, 2008
Won The Lottery
What would you do if you won the lottery?
I know the standard answer — give x amount to charity, invest the rest and live off the interest for the rest of my life…
Yeah right!
95% of all lottery winners declare bankruptcy within 5 years of accepting the money.
The reason? People who don't have much money don't know how to quantify large amounts of money. To them $10,000,000 is the same as an infinite amount of money. The "There's no way anyone could ever spend that much in their life!" syndrome. There's always people willing to take your money for any frivilous thing you can think of.
But more pertinent to reality - What if it isn't the lottery? What if it's an unexpected inheritance of a couple thousand? Or 'merely' a raise of $100 per month?
Here's what I'm going to tell you to do - treat any increase in income as a lottery win. Invest it - in your business, in stocks, in yourself - it doesn't matter, just invest it and benefit from the proceeds. Invested and compounding, money can change $100 into $200 and on into thousands.
So if your plan is to invest the money when you win the lottery (not that I'm encouraging anyone to play - you're better off with the entertainment value of actually burning or smelting your cash). You need to start working your plan today so you're prepared when you have much larger amounts to deal with later.
And who knows, maybe you'll end up with a comfortable life and excess cash - even if you don't win.
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Filed under Freedom, Self Improvement by Steven Lohrenz
Comments on Won The Lottery
B Smith from Wealth and Wisdom @ 3:40 pm
I always find it sad that the majority of lottery winners go bankrupt. You are right about lack of knowledge. If you can't handle $30k per year how can you handle a million?
I'd take 10% for fun and put the rest aside in a safe investment (money market, CD, etc). I would not touch it for one year. I'd spend the year getting acclimated to the money and learning where I want it to go.
Matia @ 4:30 pm
I am not sure it's a lack of knowledge that causes lottery winners to lose it all. I think it is a lack of planning and a lack of self-discipline. If you just spend your money until it is all gone now, and live paycheck to paycheck… that is the kind of mentality that makes the money slip away. At the beginning of every month, you need to have a plan for every dollar you have… put a name to it… do that every time whether you have $1000 dollars or a million… then the money will do what you want it to do. Oh, and cutting up the credit cards, and paying cash for everything helps, too. {Drinking the KoolAid - ala Dave Ramsey}
BTW, loved your post about trying to help your parents unload some of their stuff. Still struggling with my own stuff.
Steven Lohrenz from Make Money Online @ 12:08 pm
I have to agree, it's a lack of planning and lack of discipline. Most people spend everything they have. You have to start the good habits today and take it day by day. If you don't have the good habits, bad habits tend to take over.
Carnival of Financial Learning #5 | Financial Learn @ 1:41 pm
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Sage from Rhode Island Truck Driving Schools @ 6:08 pm
I agree with Matia. Lack of planning and discipline can essentially be detrimental in anything. In attempts to save and watch where she spends her money, my roommate now withdraws x amount of cash each month and uses it to go shopping. It really is an effective way to see where you money goes. I think she's been successful thus far!