On Tuesday, Mega Millions will be giving away a record-setting $1.6 billion, or $905 million in cash, and on Wednesday, Powerball will award $620 million to a lucky winner. The chances of actually winning the Mega Millions jackpot, however, are one in 303 million. If only one individual wins the Mega Millions jackpot, they will become one of the 1,500 richest people in America.
If you do win, experts advise treading lightly. It’s a good idea to keep your payout quiet, also you may want to consider hiring a lawyer, designing a financial plan and taking off for a few days until the novelty wears off. As most people know, winning the lottery can be a double-edged sword. In fact, studies show that nearly one-third of lottery winners declare bankruptcy, which is usually followed by depression, drug and alcohol abuse and separation from family and friends.
“You assume money makes you happy or takes care of all your problems. But money doesn’t do that,” says financial planner Jim Shagawat. “And it can cause friction with family and friends.”
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Winners are counseled to first secure the ticket and then hire a reputable financial planner. Winners must decide if the opt for a lump sum payout or an annuity, and also if they will choose to remain anonymous. In most states, winners stand to lose about half of their windfall in taxes.
Jason Kurland, a New York attorney specialized in lottery winners says, “The biggest mistake I see is people who try to do this on their own right from the get-go. Those are the ones who put themselves out in the open, who can’t limit their exposure, and are now an easy target for people, whether it’s a bogus charity coming to you or someone with an investment that’s a [supposed] no-lose situation.”
Some lottery players oftentimes have a clear idea of how they would like to spend their money, even before knowing if they have won.
“We talked about opening a school,’’ says Mike Gaspay from California. “Obviously you could buy whatever you wanted, but what would be a worthwhile thing? It would be amazing to be able to create a homeless shelter, solutions, actually doing things for the community. It seems like just buying stuff would get so boring.’’
“I would buy my own island,” says Tiffany Cullen, who manages a 7-Eleven in Florida.
“Other than paying off bills and taking care of family, I think I’d have the most fun going around and doing surprise good deeds for people,” says Michelle Connaghan from Nebraska. “And I’m sure we’d take some pretty awesome vacations while we were going around doing our surprise good deeds.”
In some cases, already having millions is no reason to sit out the drawing. Boxer Floyd Mayweather, whose net worth ranges from $700 million to nearly $1 billion, has spent $2,000 on tickets ahead of Mega Million’s billion-dollar draw.
Although some lottery profits are spent on worthwhile causes, many criticize the system as being a tax on the poor. In the US, people who make less than $10,000 spend on average $597 on lottery tickets a year, nearly 6% of their income. African Americans spend a disproportionate amount on games of chance, more than five times as much as white people.