7 Biggest Mistakes Lottery Winners Make
Experts say the sudden windfall of cash can come with some serious issues.
Whether it's picking the correct numbers for a big jackpot or buying the right scratch-off ticket, we all have a dream of winning the lottery. But even if you did strike it rich, there are still a few things that could go wrong after the fact. If you ever find yourself fortunate enough to be dealing with a sudden windfall of cash, read on, because experts say there are a few mistakes lottery winners tend to make. Remember these tips to keep your luck from running out.
RELATED: Math Professor Who Won the Lottery Reveals His Tips for Playing.
1
They don't seek professional financial help soon enough.
Getting your finances in order can be a tall feat even when you have a manageable amount of money. It gets more complicated when you cash in a winning lottery ticket and suddenly become much richer.
"Find a fee-only financial advisor, CPA, and a lawyer and enlist their help," Robert Farrington, founder of The College Investor, tells Best Life. "Seeking professional guidance can make a huge difference in managing the newfound wealth."
RELATED: 5 Secrets About Playing the Lottery, According to Experts.
2
They get confused about how much they owe in taxes.
In additions to learning how to navigate new financial waters, there's another big part of taking home the jackpot that can catch some winners by surprise. According to David Kemmerer, tax expert and CEO of CoinLedger, some of the most common mistakes stem from confusion around taxation.
"Many people don't understand just how much lottery winnings are taxed," he explains. "The figure is around 24 percent or even higher (between federal and state taxes) once you win over $5,000."
Because this often means you'll walk away with far less than you've actually won, he says this is also why it's good not to make any big plans for this money before you know how much you'll have access to.
RELATED: 4 Casino Games That Will Always Take Your Money.
3
They don't wait long enough to start spending.
Money may burn a hole in some people's pockets—especially if it's an unexpected cash prize. But according to Farrington, those who've struck it rich should wait at least a year before they begin putting their winnings to use.
"A common mistake lottery winners make is overspending," he says. "The sudden influx of wealth really encourages indulging in extravagant purchases without a well-thought-out budget. Without financial discipline, lottery winners can quickly spend all of their winnings."
In most cases, being patient can help winners avoid getting too far ahead of themselves. "Not spending any winnings for a year until there's a comprehensive understanding of the new wealth, how it works, how it's taxed, and the implications of spending it will help lottery winners avoid the pitfalls of overspending," Farrington says.
4
…Or they wait too long to put the money in the right place.
On the other hand, some lottery winners can feel overwhelmed by all the newfound choices they face and get stuck trying to decide what to do with their winnings. Experts say this is the kind of silent mistake that can take a toll down the line in the form of missed earned interest on investments or other opportunities.
"It's normal to want some time to think after winning a lot of money quickly, and it's actually a good idea. But a lot of people think this means they should just leave their winnings in a bank account forever," Eric Croak, a CFP and president of Croak Capital, tells Best Life. "This isn't just a mistake lottery winners make, but a common issue for anyone who isn't used to handling a lot of money."
RELATED: Why You Should Always Buy $10 Scratch-Offs to Win Money, Gas Station Worker Says.
5
They let it get to their heads.
Suddenly finding yourself several rungs higher on the financial ladder can be a significant self-esteem and confidence boost. But some experts warn that money can go just as quickly as it comes if you begin spending your winnings too quickly and recklessly.
"This is known as 'Lifestyle Creep,' and it is generally ego-based," Steve Davis, CEO of Total Wealth Academy, tells Best Life. "The ego drives us to buy nicer cars, houses, clothes, watches, and so on because we want to impress other people with our success. In most cases, they are people who don't even care."
Fortunately, he says there's one psychological solution to this problem. "The only way to control it is to stop caring about what other people think," he suggests.
6
They quit their jobs too quickly.
It's not a stretch to say that most people play the lottery with the specific fantasy of being able to throw off the shackles of their nine-to-five jobs. However, Croak says doing this can have some unintended personal consequences.
"While the thought of never having to work again is nice, leaving your job as soon as you win the lottery can have unexpected results," he cautions. "Apart from money issues, having a job or career gives you a routine, social connections, and a sense of purpose."
RELATED: The 12 Best Casinos in the U.S. If You Love to Gamble.
7
They don't realize it can come with some profoundly negative consequences.
Many people dream of becoming suddenly wealthy with a winning lottery ticket so they can leave all of their stresses behind. However, experts warn that one of the most surprising consequences of getting the big prize can actually be that it makes people feel worse off than before.
"An overlooked pitfall instantly millionaires face is struggling silently through radically shifted social dynamics and drastic identity loss," says Liam Wilson, editor-in-chief of Lottery' n Go.
He explains that coming into money can sometimes drive wedges in the spaces in our lives that truly enrich us—and can often lead to feeling isolated or alone.
"Lotteries promise emancipation from financial burdens, but emotionally, radical paradigm shifts still weigh heavily," he says. "Well-meaning friends and family members often subtly resent newfound affluence, creating awkwardness and distance. And winners also wrestle imposter syndrome entering unfamiliar elite circles."
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
