Life might seem like a dream after you win the lottery, but the fact of the matter is that there are a lot of tough decisions that need to be made. Consequently, making the wrong decisions can lead to rather unfortunate financial consequences.
First, there’s the matter of deciding how you’d like to receive your lottery payments. You can choose between a lottery annuity settlement, or a lottery lump sum payout. The former is typically more advantageous, because of taxes. An annuity pays out the sum over time. The Mega Millions annuity, and the Powerball annuity, for example, pay out as one immediate payment, with about 30 more increasingly large, annual payments following. Off the top, the lottery typically withholds 25% for federal tax, and another 6-9% depending on where you live and what your tax bracket is. Because tax rates typically change over time, an annuity usually yields more money, as less gets taken out for taxes.
A lump sum payout, though, can also prove to be fortuitous, depending on what’s done with it. If invested correctly, it may actually prove to yield more money than an annuity. For example, if left alone to accrue interest over years, it can grow to a higher amount than an annuity would pay out.
And then there is the second big decision, that can lead to financial prosperity or ruin: what you do with the money. Unfortunately, there are many mistakes that can be made. Just consider the mistakes some have made after winning the lottery.
Throwing the ticket away
Englishman Ian Galtress lost a one million pound lottery ticket, because he wasn’t careful enough. He had purchased his girlfriend a ticket for the very same lottery he’d won. Hers was only one digit away from his, and he mistook the winning ticket for her losing ticket, and accidentally tossed it.
Literally blowing it all
Michael Carrol won the 2002 jackpot in England, and became known as the “lotto lout” for his extravagant purchases. He bought houses, and cars, and then had demolition derbies in the backyards of the houses he bought with the cars he purchased. Naturally, such reckless spending eventually left him penniless.
Losing it to non-disclosure
Denise Rossi won $1.3 million in the California lotto, and, not wanting to share it with her husband at the time, left him without a word of her new fortune. Though he knew something was up, he agreed to a divorce. When he discovered her winnings, he filed a lawsuit against her, and got every single cent of her winnings in the trial.
If you win the lottery, be careful with your money. If you know of any other crazy stories about lottery winners, feel free to share in the comments.