Often winning a lottery sounds so exciting that many people smile with joy at the very idea of holding a jackpot ticket in their hand. Few even think about how they will spend the lottery money even before winning. What would you do if you won a lottery someday?
Most of us believe that winning a lottery lets you attain financial freedom for the rest of your life. But unfortunately, hitting a jackpot can turn into a lifelong misery if you don’t know how to utilize your prize money. Buying a car or a luxurious mansion can seem like a good idea but can put you into more debt. This article talks about the seven ways you can spend your lottery money wisely without ever falling into debt.
Here are 7 ways you can spend your lottery winnings
- Pay off your debts
- Take your time to reflect
- Seek help from trusted financial consultants
- Think about your family’s future
- Set aside money for retirement
- Start an emergency fund
- Low-risk investments
1. Pay off your debts
The first and foremost thing you should do before you enjoy spending your lottery money is to pay off all your past debts. This includes your personal loan, mortgage, housing loan, car loan, credit card, medical debts, etc.
You must understand that debt often comes with a high-interest rate. That means, paying off all your debt at the earliest can save a large sum of money that goes away with the debt’s high-interest rates. You can start your payoff with high-interest debt because it keeps on accumulating in large numbers.
Paying off your debt may seem difficult, but it will give you a sense of freedom when you don’t have to worry about paying others to be able to own your assets.
2. Take time to reflect
When it comes to managing your lottery money, don’t take instant decisions. Take time to reflect and find out ways to use the money smartly. When you are declared the lottery winner, you may receive a lot of unwanted attention and publicity. There might be people trying to lure you into scams for their own benefit.
It is best advised to wait for a couple of days or months, and stay undercover from your social circle. By taking some time to reflect you can come up with the right financial and personal plans to spend the money or invest wisely.
3. Seek help from trusted financial consultants
It is good to seek help from trusted financial consultants to spend your lottery winning wisely. By seeking advice from multiple professional financial consultants, you can get help in making better decisions about your financial goals. A financial consultant can help you in making the right financial plans.
They will inform you about the tax threshold and advise you on your savings and investment portfolio. You can also consider having an attorney/lawyer on your team to handle a case if someone files a suit against your claim.
4. Think about your family’s future
It’s time to think about your family’s future. It is the best time to invest in buying real estate. Imagine owning a vacation home, purchasing a car, or becoming a homeowner. Now you can.
You can even plan on saving funds for your children’s and grandchildren’s school and college. But, it is important to note that you must keep a check on your spending while buying luxurious entities. Buying too many luxurious goods can put you into debt and can become a liability.
5. Set aside money for retirement
You must save money so that you and your family will be able to support themselves financially in your later years.
You can consult your financial adviser to calculate how much money you need to set aside for retirement.
In addition to allocating the funds for you, your financial advisor may also suggest some good investment options for your retirement savings, such as mutual funds, individual retirement accounts, or low-risk investment schemes. These retirement funds can support you and your family in paying your medical bills and other expenses in the future.
6. Start an emergency fund
You may think that setting aside some amount from the prize for an emergency is not a smart move. But it is important to have an emergency fund. No matter how cautiously you spend your money, you are prone to unexpected circumstances or disasters that could still wipe out all your money.
With an emergency fund acting as a protective backup, you will get to keep your peace of mind. It is good to set aside at least six months’ cost of living expenses in a high-interest savings account. This account type helps in growing your money slightly faster than the usual savings account.
7. Low-risk investments
After paying off all your debts, setting up the retirement and emergency funds, now it’s time to think about investing the money in risk-free or low-risk investments. You can take help from your financial adviser about investing the rest of the money. You can invest in low-risk options such as stocks, bonds, and bills.