It’s the moment we all dream about.
You check your Lotto numbers—and you’re a winner. You know that your life is about to change.
It’s unreal, exciting, and stressful at the same time. And that’s okay; these are all common feelings.
While you may have enough money to never have to think about money again, all you can think about is money. But winning the Lotto comes with its own pitfalls. Believing you'll never have to worry about money can lead to distorted thinking and reckless spending.
Being charged with a significant sum can be stressful and disconcerting.
But there are ways to handle the new life change. This article outlines what we recommend you should—and importantly, shouldn’t—do to enable you to enjoy your winnings to their full potential.
A Liston Newton adviser can help you manage your finances, big or small. Contact us today to discuss how we can provide you with the support to ensure your wealth remains safely managed for the long term.
Take a deep breath
You could be tempted to make a quick decision—resist that urge.
Stop, take stock of your situation, and take a deep breath. The important thing is to relax, and avoid making any rash decisions.
Give it time to settle in
While you may have come into more money that you ever thought possible, it’s important not to panic. A large sum of money like this is a serious matter, but it doesn’t have to take over your life.
Take a good amount of time to develop a new-found-money mentality, and let the scenario really sink in. Now is the time to seriously consider all your options about what you want to do and achieve. Some financial experts suggest a couple of months, or even taking a whole year, as you develop your well-thought-out plan.
Ideally, for the first couple of months you should remain calm, and not hand out all your money in a mad panic. Don't rush into any drastic actions such as quitting your job, buying a new home abroad, trading in your current car for a Ferrari, or taking a spur-of-the-moment holiday to Africa.
You’ve got plenty of time now, so think slowly, and just let it sink in before making any decisions.
Don’t immediately tell everyone you know
You might be determined the money won't change you, but it may change the way others view you. A large sum of money can make you a person of interest to new "friends" and investment spruikers. Think hard about who you really want to know before you broadcast the news of your new-found wealth.
Get to know your relationship with money
While winners receive a large novelty cheque upon visiting the Lotto offices, the real money is paid into their bank accounts two weeks after the draw. So you shouldn’t quit your job straight away!
For most people, the reality is that even winning the lottery doesn't mean they can retire. You might be a new millionaire, but only just.
A windfall can be life-changing—but that doesn't mean you have to up-end your life overnight. You’ve got time now. Experts suggest leaving the bulk of it in the bank while reality sets in, and take the time to write a wish list and a budget.
Using this time allows you to think about your relationship with money. Your past behaviour is a good indication how this money will be managed, so get to know your weaknesses.
Are you a spender or a saver?
- Spenders: you need to know your limits
- Savers: you need confidence that you can make fundamental changes to your life and enjoy this wealth
Put together a support team
It’s important that you understand your relationship with money so you can put together a team of professionals to provide you with advice, guidance, and support to meet your needs.
Handling this responsibility could be quite overwhelming. Experts recommend that you engage the following professionals, depending on your new-found level of wealth:
- A financial adviser
- An estate lawyer
- An accountant
- Experts who can assist you in mapping out a strong long-term strategy to support how you handle your money.
But just because you have money, doesn’t mean you can be careless. It’s important to carefully interview every member of the team you're putting together before hiring them, to ensure they’ll act in your best interests and meet your needs.
Make a plan for your money with financial advice
Depending on your win, if it’s invested properly with the right tax structure and the right protections, it could set you up for financial freedom. It can give you the ability to make working optional.
So it’s important to sit down and carefully plan where you want your money to take you. It should be a plan that’s based on your objectives, and what’s important to you in life. Most importantly, it shouldn’t keep you up at night.
You’ve received an amazing opportunity, so you want to make the most of it, and enjoy it.
How Liston Newton Advisory helps lottery winners
Our process for advising lotto winners starts by understanding what’s important to you. We then define your financial goals both before and after your win.
We do this review so we can take into account all aspects of your financial life, including your current assets and liabilities. This enables us to start putting a framework in place that shows you what’s possible, and what isn’t.
When we work with lotter winners, we help you consider:
- Should you extinguish your debt? Surprisingly, this may not always be the best option.
- Do you have enough money to quit your current job? Some people still want to work, just in a different occupation.
- Your investment structure. We help you make it as tax-effective as possible.
- What sort of lifestyle you want to live. How much was your windfall? This will determine how we’ll help you manage your money.
- Do you want to give any away? We can guide you in setting up foundations or charities, and advise on how best to donate.
- How to organise your estate plan. Now that you have money, do you want to leave the capital to your family? You want to make sure it goes where you want it to, and that it can be transferred safely to your next generation.
- What to do with your insurance and superannuation. Do you still need insurance? Should you keep contributing to super? We help you answer these questions.
- Whether it’s possible to invest the money and live off the dividends and interest.
- We can help you determine what sort of investments you’re interested in, how to weigh up all the options available, and understand the importance of proper asset allocation.
- How you want to be in the day-to-day management of this money.
Options for investing lotto winnings
When considering investing a large lump sum from a lotto win, it is crucial to spend time on determining the best asset allocation for your financial objectives.
Below is a snapshot of some of the choices available to you, and the likely returns – based on long term historical performance
[table][tr][th]Asset class[/th][th]Category[/th][th]Estimated growth p.a.[/th][th]Estimated income p.a.[/th][/tr][tr][td]Cash[/td][td]Defensive[/td][td]0%[/td][td]0.5%[/td][/tr][tr][td]Term deposits[/td][td]Defensive[/td][td]0%[/td][td]1.5% - 2%[/td][/tr][tr][td]Hybrids[/td][td]Defensive[/td][td]0%[/td][td]3.5% - 4.5%[/td][/tr][tr][td]Australian shares[/td][td]Growth[/td][td]4%[/td][td]4.5%[/td][/tr][tr][td]International shares[/td][td]Growth[/td][td]4.5%[/td][td]3%[/td][/tr][tr][td]Residential property (metropolitan)[/td][td]Growth[/td][td]5%[/td][td]3%[/td][/tr][tr][td]Commercial property (metropolitan)[/td][td]Growth[/td][td]3%[/td][td]4%[/td][/tr][/table]
How do I pick a good financial adviser?
When you talk with a potential adviser, you should prepare for a two-way interview. They’re taking on a big responsibility for you, so you need to ensure they’re suited to the task.
Ask them any questions you want to know the answer to, including:
- What are their qualifications and experience
- How have they helped people in a similar situation?
- What is their investment philosophy?
- How do you invest your own money?
- You need to feel comfortable with your financial adviser and trust they will look after your interests, so make sure you get all the information you need when meeting with them.