Whether you win a billion dollars or just a couple hundred thousand, there’s no doubt that a jackpot lottery can change your life. But there’s also no doubt that those millions can quickly disappear. That’s why it’s important for winners to do their research before spending their prize money. A few bad decisions can lead to bankruptcy and a lot of heartache. Here are some tips that can help you avoid those mistakes.
Lottery jackpots are based on the number of possible combinations and the probability that someone will match all those numbers in a drawing. As the jackpot grows to apparently newsworthy amounts, more people will buy tickets, which drives up ticket sales and the odds of winning. But if the jackpot is too small, then ticket sales will decline. It’s a fine balance that lottery officials must strike in order to keep their game popular.
Some states increase or decrease the odds in order to boost their prizes, but this can be dangerous. In addition to being a “regressive tax” on poorer people, increasing or decreasing the odds can make it more difficult for some players to win, which will also reduce ticket sales. Some experts believe that the best way to increase the chance of winning is to change the rules, which will require more people to purchase a ticket in order to hit the jackpot.
Many people use a favorite number or a set of numbers that represent the birthdates and anniversaries of loved ones when choosing their lottery numbers. But doing so increases the odds that you’ll have to split your winnings with other people. Instead, opt for numbers that are less likely to be picked.
Responsible lottery winners dump any cash they aren’t using into safe investments such as real estate, stocks and index funds. This allows them to preserve and even grow their wealth. Those who don’t follow Richard Lustig’s advice risk losing much of their winnings within years of their big payday.
Most lottery winners have the option to choose a lump sum or 30 annual payments. The former may be a better choice, but it can come with hefty taxes and other hidden costs. Moreover, it’s important for winners to understand that high-dollar assets come with recurring maintenance and insurance costs.
If you win the latest Mega Millions jackpot, for example, you’ll receive a first payment of $23.3 million in the first year before taxes and then 29 annual payments that increase by a percentage each year. If you die before all the payments are made, your estate will inherit the remaining amount. This is known as an annuity. In most cases, a winner can decide on the payout option when they purchase their winning ticket. But it varies by state, according to Shean Fletcher, a wealth advisor in Kansas City, Missouri. For example, California requires the name, location and purchasing details of lottery winners to be made public. Other states allow winners to opt for anonymity, but they must sign a written document saying so before receiving their prize money.