Winning a massive sum of money can be a once-in-a-lifetime opportunity, but it also comes with significant responsibilities. When Powerball lottery winner Eddie Chopourian claimed his $1.58 billion jackpot in 2022, he said, ‘This is a dream come true.’ However, he also emphasized the importance of financial planning, stating, ‘We’re going to try to stay humble and make wise decisions.’ Chopourian’s words of caution are spot on. Here are the 5 money moves you need to make when winning a life-changing sum of money.
1. Assemble a Financial Team
When you win a significant amount of money, it’s essential to surround yourself with a team of trusted advisors. This includes a financial planner, tax professional, lawyer, and investment manager. A good financial team will help you navigate the complexities of managing your newfound wealth and make informed decisions about investments, taxes, and estate planning.
While some people may recommend hiring a financial advisor right off the bat, it’s crucial to take your time and do your research. Look for advisors with experience working with high-net-worth individuals and a proven track record of success. Your financial team should be able to provide you with personalized guidance and help you create a tailored plan that meets your unique needs and goals.
2. Take Advantage of Tax-Deferred Vehicles
When you win the lottery, you’ll likely receive a large lump sum payment, which can be subject to taxes. To minimize your tax liability, consider investing in tax-deferred vehicles such as 401(k) or IRA accounts. These accounts allow you to contribute a portion of your winnings to a tax-deferred account, reducing your immediate tax burden.
Tax-deferred vehicles can also provide a steady stream of income in retirement, which is essential for maintaining your lifestyle and achieving long-term financial goals. By investing in these vehicles, you can create a tax-efficient plan that helps you grow your wealth over time.
3. Create a Budget and Prioritize Needs Over Wants
Winning the lottery can be a dream come true, but it’s essential to create a budget and prioritize your needs over wants. Consider setting up a budgeting system that accounts for your income, expenses, and savings goals. This will help you make informed decisions about how to allocate your funds and avoid overspending.
When prioritizing your needs over wants, focus on essential expenses such as housing, food, and healthcare. Consider investing in a emergency fund to cover 6-12 months of living expenses, and allocate a portion of your income towards long-term savings goals, such as retirement or education.
4. Invest Wisely and Diversify Your Portfolio
When you win the lottery, you may be tempted to invest in get-rich-quick schemes or high-risk assets. However, it’s essential to invest wisely and diversify your portfolio to minimize risk and maximize returns. Consider working with a financial advisor to create a diversified portfolio that includes a mix of low-risk and high-risk investments.
Low-risk investments, such as bonds and dividend-paying stocks, can provide a steady stream of income and help you build wealth over time. High-risk investments, such as stocks and real estate, can provide higher returns, but also come with greater risk. By diversifying your portfolio, you can create a balanced plan that meets your unique needs and goals.
5. Give Back to Your Community
Winning the lottery can be a life-changing experience, but it’s also an opportunity to give back to your community. Consider donating a portion of your winnings to charity or setting up a foundation to support causes you care about. This can help you make a positive impact on the world and leave a lasting legacy.
Giving back to your community can also be a tax-efficient way to manage your wealth. By donating to charity, you can reduce your tax liability and create a positive impact on the world. Consider working with a tax professional to explore charitable giving options and create a giving plan that meets your unique needs and goals.
What to Watch Next
As the Powerball drawing approaches, it’s essential to stay informed about the latest news and trends in the world of finance. Here are a few things to watch next:
- The impact of tax policy changes on high-net-worth individuals
- The latest trends in impact investing and socially responsible investing
- The role of technology in managing wealth and investing
By staying informed and staying ahead of the curve, you can make informed decisions about your finances and achieve your long-term goals.
Conclusion
Winning a life-changing sum of money can be a once-in-a-lifetime opportunity, but it also comes with significant responsibilities. By assembling a financial team, taking advantage of tax-deferred vehicles, creating a budget and prioritizing needs over wants, investing wisely and diversifying your portfolio, and giving back to your community, you can manage your newfound wealth and achieve your long-term goals. Remember, financial planning is not a one-time event, but an ongoing process that requires careful planning and attention to detail. By staying informed and staying ahead of the curve, you can create a brighter financial future for yourself and your loved ones.
