Winning the lottery can provide a short-term financial gain--or a lifetime of financial security. How you invest your windfall will have a huge impact on your future finances, so it is important to invest wisely. Depending on the amount of your win, you may find that you are able to live quite comfortably off of the investment income your winnings provide.
- Skill level:
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Things you need
- Brokerage or mutual fund account
- Spreadsheet program
- Financial records
Gather all of your financial documents, including any bank statements, brokerage records and mutual fund information. Your lottery winnings should be viewed as a part of your overall portfolio.
Add up all of your financial assets using a spreadsheet program and your computer. Be sure to include any accounts you own, putting each account on a separate line. Include a line for your lottery winnings as well.
Multiply your total assets, including your lotto winnings, by 4 per cent and 5 per cent. This is the amount of money you can reasonably expect to draw from your nest egg each year without much risk of running out of money.
Check to see how your current assets, if any, are invested. If most of your current assets are invested in stocks, you might want to invest your lotto nest egg a bit more conservatively by using a government bond fund or certificates of deposit from your bank. If most of your portfolio is invested conservatively, investing some of your windfall in quality stock index mutual funds can be a good move.
Exercise caution when working with a financial adviser. Many lottery winners are uncomfortable managing their own money, and as a result they turn to a financial professional. While working with a professional can be a good idea, it is important to find one who has your best interests at heart. Seek out a fee-only financial adviser (see Resources) and pay for a few hours of her time. Fee-only financial advisers are compensated solely by their clients, and they earn no commissions from the products they recommend.
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