A sea-facing bungalow, a fancy car to drive, luxury holidays, and what not!
Probably this is how everyone thinks of spending their lottery money. However, the odds of one winning the jackpot is even less than getting struck by lightning, but still, if against all odds you win the jackpot amount, then what?
According to a survey in 1978, many people were just as happy (or sad) after winning the lottery as they were before. That means no feeling of satisfaction or happiness, then what does this lottery money do?
Also Read: 6 Smart Ways to Manage a Windfall
Well, it makes people spend mindlessly. Managing a windfall as big as a lottery winning can prove detrimental if financial planning isn’t done right to the T. Here is more on why most lottery winners never stay rich:
The Showcase Amount vs The Actual Amount
The few crores of jackpot money is enough to entice numerous people to buy a ticket. However, once you win, the total amount of money gets taxed. In India, lottery winning does not seek any tax deduction and is taxable at a flat rate of 31.20%. For instance, if you win ₹ 1 crore as the lottery amount, the amount you receive will be taxed directly, and, in one go, you will only be left with a lot less than what you expected. To avoid misjudgments in planning their finances, one must always consider the tax payable.
Avoiding or Quitting your Job
First thing that various people do after winning the lottery is, leave their job, which knocks off their primary source of income. Overall, this move proves financially fatal as there is no fixed income left. Winning the lottery is an additional income source, and should be just that! Leaving your fixed income will never be a good idea.
You suddenly find a bag full of money; what would you do with it? Spend it without a thought mostly. Right? The biggest culprit in making one go bankrupt after winning a lottery is reckless spending and a lack of planning. Making unnecessary big-ticket purchases without thought is as cruel as putting money to no use. To avoid this, monitoring all expenditures and start cutting off all the unnecessary ones is crucial.
With the receipt of a big chunk of money, many take a leap towards investments without doing proper research. Many winners fall for investment advice from acquaintances, friends, or relatives and not financial advisors, potentially leading to poor investment avenues.
Not Taking a Financial Advisor’s Advice
Most lottery winners make the colossal mistake of taking major financial decisions based on hear-say of their close ones rather than seeking professional help. This blunder could cost most winners a significant amount of their money, potentially leading to bankruptcy. Discussing significant financial decisions like big-ticket purchases and investments with a seasoned financial advisor is crucial.
Pressure To Share It
Winning the lottery makes most people feel obligated to share it with friends and family, which is obviously virtuous. However, being aware and mindful of the requests and ensuring that a show of faith doesn’t end up being an obligation.
Creating a solid financial strategy is extremely crucial when it comes to managing a windfall as significant as a lottery winning. It is essential that every money move is scrutinised, every expense is measured and every investment is analysed. Winning the lottery, in most cases, is a once in a lifetime opportunity. Don’t let lack of planning and strategy a factor for bankruptcy.