How to Prepare for a Windfall: Imagine Winning the Lottery
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Although there are some things I’d worry about if I won the lottery, hitting the lottery jackpot is a fantasy that crosses our minds all the time .
But, if you don’t know already, there seems to be a curse on many winning ticket holders – most end up in a worse financial situation than before beating the slim odds of the lottery. Such is the story of those who were “lucky” enough to have received such a sizable windfall.
A windfall is a sudden, unexpected financial gain – like “money fell into your lap”.
The common perception of a windfall is that it’s free money and is therefore meant to be squandered away liberally when it is better used to solidify one’s financial position. It is often difficult to resist because it truly can be an immense upgrade in buying power. And, we don’t normally prepare for windfalls because we don’t expect it – but we do dream about it.
Little do you know, dreaming about it can be the way to prepare for a windfall.
In the few minutes that I doze off, imagining that I selected the life-changing 6 numbers that’ll turn me from rags to riches, I also fantasize what I’d do with all that money – I can bet you’ve done the same.
As we enter a sweet daydream, we come up with ideas that fill our bodies with hope and joy. In fact, sometimes I prioritize the ways I’d use the money – and that would serve as a template of what to do in the event of a windfall.
What would I do with the money:
- Pay off all my debt.
- Save enough to live off interest income.
- Purchase a few houses for rental income.
- Buy a nice house and car for myself.
- Start a business.
- Build a large investment portfolio.
- Participate in philanthropy.
If a large sum of cash fell out of the sky, think of what you would do first with that money. As you can see, I’d pay down all my debt from student loans and credit cards. It seems to be the instinctual move for me. Next, I’d use that money to make me more money. And finally, I’d donate some (don’t let wealth make you lazy and uninspired) and then splurge a little.
Others who may not have great money management skills could go on a stray path and immediately think of treating friends and family with new toys. That is the textbook method of have a windfall hurt you rather than help you. Here, a few lessons in financial literacy and setting financial goals are more important.
Does the Amount Matter?
Whether it is $1,000, $100,000, or $1,000,000, a windfall merely accelerates the completion of your financial goals. No matter what amount the windfall happens to be, my very first move is to clear my debts. More money only opens more opportunities.
Setting concrete figures (percentages help for varying amounts) for your goals makes it easier to manage. Most lottery winners head off towards an aimless direction and end up losing it all without knowing where it went. It wouldn’t have mattered if it was $1 million or $1 billion because they had no idea what to do with it.
So, close your eyes and imagine winning a $10 million lottery. What are your initial steps with this money? How will you make this money work for you? At what point can you have fun and help others?
(Photo credit: IrisDragon)