Let us say you do win a huge amount in the lottery. You go to deposit the check at the bank, who quickly changes the indifference shown to you all these years. Even some coffee surfaces when you sit down to talk to the officer.
All smiles, the bank offers you things you never imagined banks offer. Their dream, of course, is that you keep all of your money there.
Never do that.
For once, the 2008 crisis was terrible, but there might be more financial doom coming. The FDIC only covers deposits up to US$ 250,000, so if you keep your money at a bank that fails, bad news for you. It is mostly all gone, or it might take a long time for you to recover some of it.
So the best strategy is to do business with several banks, always checking their financial status. Do not deposit in very small banks, no matter how nice is the manager. These continue to fail in droves. You might not hear about it, but yes, a lot of them are closing. Very large banks might still be bought by other larger banks, so there is a way out. Small banks simply are sacrificed.
As for investing in the stock market, and other types of securities, learn more about it. Don't fall for the first financial advisor that comes your way, and never, ever, invest in a single investment company, irrespective of how good the return. Remember Madoff, there are still a few of them up and around.
Don't grant powers of attorney to such financial advisors, even (or better yet, especially) if they are relatives. You might soon find that a good chunk of your money is gone...
Tuesday, January 22, 2013
Do not exaggerate your winnings
The first mistake a lottery winner makes is exaggerating his winnings. In other words, feeling, and behaving as if he has won much more than he actually did.
If you have never had more than 50 grand in a bank account it is easy to feel like you own the world, if suddenly you have access to 2 million dollars, for instance.
However, let us say you are in your 20s, and you win a net 2 million dollars. That is not a huge amount of money to stop working, for instance. If you make US$ 50,000 a year, 2 million dollars is just about the amount of money you will make during your professional life before you retire.
Sure, taxes will take a whole chunk of your earnings. But the point is, depending on your age, you have to realize that the money is sufficient for you to live a comfortable live, no more, no less.
2 million is not sufficient for you to buy a Ferrari, travel first class all over the place, quit your job and buy a huge house. If you do all of that, the 2 million is gone!
That also means that for most people, winning two million means you will have to continue working, unless you are pretty much near retirement age. On that case, you are obviously near paying off your mortgage (if you have not done so already), and you can certainly afford quitting your job.
If you have never had more than 50 grand in a bank account it is easy to feel like you own the world, if suddenly you have access to 2 million dollars, for instance.
However, let us say you are in your 20s, and you win a net 2 million dollars. That is not a huge amount of money to stop working, for instance. If you make US$ 50,000 a year, 2 million dollars is just about the amount of money you will make during your professional life before you retire.
Sure, taxes will take a whole chunk of your earnings. But the point is, depending on your age, you have to realize that the money is sufficient for you to live a comfortable live, no more, no less.
2 million is not sufficient for you to buy a Ferrari, travel first class all over the place, quit your job and buy a huge house. If you do all of that, the 2 million is gone!
That also means that for most people, winning two million means you will have to continue working, unless you are pretty much near retirement age. On that case, you are obviously near paying off your mortgage (if you have not done so already), and you can certainly afford quitting your job.
So you won - or want to win - the lottery. What now?
If you won, congratulations. If you want to win, join the masses.
There is nothing wrong with either. However, the question begs. How come so many people that do win the lottery, end up poorer than they started with.
This site will shed some light into it. Since I am not really after your money at all, and AM NOT OFFERING ANY SERVICE, you can rely on impartial thoughts. The one thing you have to realize, once you do want the lottery. Everybody around you (and even people that do not know you) want a piece of the action.
Most people dream of winning the lottery, making up lists of what they would do with the money. These are mostly parts of other dreams, and many of the items on the list are far from the reality of even a lottery winner. For instance, owning a plane.
Others make up lists promising to donate money to charity, hoping to win sympathy from God.
The reality is, most of the few people who do win large sums of money in the lottery, are not at all ready for it, did not do any homework, and end up in trouble, just like you professional athletes and entertainers manage to lose millions upon millions of dollars, and end up poor.
Most of the advice here is not sexy, not hedonistic at all. The aim is to help you manage your money prudently, without paranoia, however, understanding that the one event that was your life's dream can turn out to be a long nightmare.
Read on.
There is nothing wrong with either. However, the question begs. How come so many people that do win the lottery, end up poorer than they started with.
This site will shed some light into it. Since I am not really after your money at all, and AM NOT OFFERING ANY SERVICE, you can rely on impartial thoughts. The one thing you have to realize, once you do want the lottery. Everybody around you (and even people that do not know you) want a piece of the action.
Most people dream of winning the lottery, making up lists of what they would do with the money. These are mostly parts of other dreams, and many of the items on the list are far from the reality of even a lottery winner. For instance, owning a plane.
Others make up lists promising to donate money to charity, hoping to win sympathy from God.
The reality is, most of the few people who do win large sums of money in the lottery, are not at all ready for it, did not do any homework, and end up in trouble, just like you professional athletes and entertainers manage to lose millions upon millions of dollars, and end up poor.
Most of the advice here is not sexy, not hedonistic at all. The aim is to help you manage your money prudently, without paranoia, however, understanding that the one event that was your life's dream can turn out to be a long nightmare.
Read on.
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