You hit the jackpot, now what?
What’s the jackpot – winning lottery ticket, bonus from your employer, an inheritance, legal settlement or any large lump sum of money that you may receive, unexpectedly.
You brought your $2 Powerball ticket and it hit. You are the number 1 pick in the NFL Draft. Your Great Aunt passes away and left you millions. You got a major promotion and a huge bonus at your job. You sold your business for a nice 8 figure sum. Your lawsuit finally settled.
Your pot of gold has just arrived! Do you know what to do next?
The Media is full of stories about about massive powerball lottery winners, CEO bonuses and athletes getting colossal payouts. Often times they blow it, especially the lottery winners along with the athlete and entertainers.
Not sure about you, but I am really tired of hearing about lottery winners and athletes that are broke just 5 to 10 yrs after receiving sums of money that could feed an entire African nation for a year or more. These payouts could have lasted a lifetime or more, if they would have done a little planning.
So if you think I am going to talk about “making it rain” in the club, or giving a way Bentleys, you are correct. However, we will examine, what other alternatives approaches could be taken.
First things first, take an assessment of everything you own and owe.
Do you have a mortgage?
Does your momma have a mortgage?
Does your father have savings?
Will your little sister need braces?
All of your assets and liabilities need to be figured out. I suggest you do this, yourself at the beginning of the process, so you can have a sense of ownership in this process. Far too often, people delegate their money tasks, that should be handled by them and only them, like check writing.
Then take the time to think about what is actually important to you. Dream a little. Do you want to go back to school? Start a business? Travel the world? Ultimately, money cannot buy you happiness, only clarity can do that. Do you love what you are currently doing? You may have to make a career switch in the very near future. Athletes are always at risk of getting injured, so you have to consider that.
Assemble your “dream team”- accountant, lawyer, financial Advisor – they will be your core team. This is just the beginning, you
will probably need specialists, like an estate planning attorney. You want to work with people you know, like and trust.
Understanding how they are compensated is critical. There are way too many lawsuits that entertainers have filed against former advisors, that could have avoided on the front end, if they would have understood their role and their compensation. Again, never let anyone have free reign over your finances, by signing your checks or making payments for you. It is understandable to give a person access to an account with a limited amount of funds, for expediency, but never all of it. Also get regular reports on disbursements and income. Remember familiarity breeds contempt, so think like a boxer and protect yourself at all times.
Taxes and …… Estate taxes…
I can’t stress this enough!! Big Brother is watching and Uncle Sam wants his CUT!! Period! Many a fortune are reduced due to paying to much in taxes. As your income increase, so does your tax bill. Be ruthless in this area, but never illegal. Understand what you get taxed on and where you can take deductions. Plan this well in advance. You can never, plan too much for taxes. You don’t have to be an expert, but you should have a working knowledge.
Know that Uncle Sam wants his cut from you while you are dead or alive. You are truly on the “most wanted list”. Estate tax is brutal, so if you are concerned about creating generational wealth, you need to plan for this well in advance of your demise.
Expect a visit from your long lost cousin Jed. Yup, your long lost cousins will be calling you pretty soon. So know what you are going to do, when this situation arises. New found riches can be both a blessing and a curse. this is when you see who really has your best interest at heart. When you find your pot of gold you have to know what you will do with family, because there will be some that you want to help, think about how many people brought mamma a new home, but know that if you help too many people like MC Hammer it could land you in the poor house.
Don’t stress and relax!
At the end of the day, you have “The American Dream”.
So breathe easy!