Pattie Lovett-Reid: What to do if you win the lottery
Okay, I admit it: I did it. For the first time in my life, I bought a Lotto Max lottery ticket.
I was standing in line picking up a few things at a local drug store and the woman ahead of me bought a ticket, and I thought: why not? You just never know. In the meantime, my financial planning background started kicking into gear. What if I actually win, and will winning the jackpot make me happier?
My immediate reaction was that if I win, I could finish the kitchen renovation, which is proving to be more expensive than anticipated. So the obvious boost the bank account would be very nice indeed. However, beyond that, would my life’s overall happiness change? I would argue probably not, and my hypothesis is supported by research out of Stockholm University and New York University that found lottery winners report improved life satisfaction after a $100,000 but it doesn’t mean they are happier.
Here is the difference: life satisfaction often refers to our quality of life, while happiness measures our day-to-day feelings. You have heard it before: “you can’t buy happiness.”
However, if I do win (and for the record, I’m a very lucky person), here is a little personal financial advice I’ve given to others – so I better practice what I preach.
- Charities will come knocking your door. One of the wonderful things about wealth is the ability to help others. However, you cannot respond to every request. So taking the time to establish your philanthropic goals will help determine who and which organizations will benefit from your windfall.
- The next step is to look to a team of professionals you know and trust and who you can look to for guidance. This is where a good tax planner, accountant, investment advisor, or certified financial planner come into play. And I’m not going to do anything with the winnings until I have spoken with all three and developed a plan. For the first time in your life you might also have to think about security for yourself and your family when you go out into public.
- And then there's the big question to be asked: will I continue to work or not? It’s personal and can often depend on how much you love what you’re doing. Do you like the people you work with, and how is it you want to spend your days? Of course the size of the jackpot comes into play as well. But I can answer this question right now – yes I would continue working.
Finally, we have all heard the stories of lottery winners striking it big only to find themselves facing financial hardship down the road. Don’t trust only your own judgment and get a second opinion.
Winning the lottery is a great thing, but the fundamentals of financial planning still come into play: I need to live within my means even if my means are now a little richer than they were before.
Develop a plan, stick to the plan, and recognize those who have failed to do so in the past have, in some cases, paid the consequences and gone broke.
I will keep you posted on the draw for $60 million on Friday night.