Three Tickets to Paradise?

Unless you recently had an experience like Mark Watney, and have been off-planet a while, you have heard that the $1.5 billion Powerball jackpot – the largest lottery prize in history – was won on Wednesday and will be split three ways. The ‘lucky’ winning tickets were sold in Munford, Tennessee; Chino Hills, California; and Melbourne Beach, Florida, according to state lottery officials. The odds of winning the record jackpot were a staggering 1 in 292 million.

PowerBallHow much did the winners receive? The Tennessee family has elected to take the lump sum. After taxes, they’ll receive $187.2 million.

What would you do if you had won the most recent Powerball lottery? Or the next? What would you do if you were fortunate to receive any significant financial windfall? I have often wondered what I would do if a generous billionaire, a Bill Gates or Warren Buffett, gave me $500,000. Or maybe $1,000,000? While I am sure I would not have known what to do with it 12 or 13 years ago, I absolutely know what I would do with the money today. Being financially literate is not something that comes with a financial windfall. It is something that should be attained while you are working toward achieving financial freedom; and it is knowledge that will serve you well should you be lucky enough to stumble into a financial windfall.Financial Windfall

I remember hearing various stories of his tribulations over the years; and I recently read a “where are they now” story of Jack Whittaker, winner of the $314 million Powerball in 2002. At the time, it was the largest lottery jackpot in history. Within six years of winning the lottery, Mr. Whittaker had been robbed multiple times, lost a granddaughter to drugs, lost a daughter to drugs, been sued, been arrested for a DUI, and his wife had filed for divorce. His story would seem to validate that money itself does not guarantee happiness or endow common sense.

Perhaps not surprisingly, Mr. Whittaker is not alone. The National Endowment for Financial Education, a Denver-based non-profit, estimates that about 70% of those incurring a financial windfall lose the money within a few years.

Before I became financially literate, I would have done what most people would probably do with a financial windfall: buy a new luxury car – or two, buy a new house, buy new cars for siblings, buy a house for my parents, quit my job, and on and on. Now? While I would certainly consider some of those things at some point, I would not do anything initially. That is right. I would not do anything with the money for at least six months – one year.

After all, my wife and I live comfortably, my mother lives comfortably, and there would be absolutely no reason to act hastily. I would not quit my job. While I do not know the exact windfall that would prompt me to quit my job immediately, it would have to be significantly more than $500,000 and probably more than $2,000,000. During that six month – one year period I would conduct a thorough review of my portfolio and carefully assess how to incorporate the new money into my retirement plans.

Would you immediately buy cars and houses for yourself and family members? Would you buy a few small things but wait for some period of time before making any major purchases? Would you not make any purchases for a designated period of time? Would you engage the services of a financial planner?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

20 Comments

  1. James, I would get a FA, but I would def. quit working and move because of my safety.

    I probably would blow about 50,000 to get it out of my system and then start to use my common sense.

    I knew this lady that came into about 400,000 dollars, but she only paid half on a 80,000 dollar house and took trips.

    Her boyfriend dried her up of money and left her and she was sick.

    Mo money mo problems.

    • “Mo money mo problems.” Indeed, particularly if you are not financially savvy and have a plan for how the money should be best deployed to maximize returns.

  2. $10 ($6 By Myself, $2 in a friend pool & $2 in an office pool) didn’t get me off track, especially for a chance at such an enormous jackpot.

    I was going to write a post for A Richer Understanding of the sound bites at home, on social media and at work about the Jackpot. The majority of folks would pay off debt, take care of family and friends and buy a house. What was missing (my point of view) was a financial planner, accountant, attorney … anyone able to help you navigate through such a huge windfall. When we are not used to having / managing an enormous amount of money, it undoubtedly will bring problems.

    I would absolutely assemble a team, pay off debt and purchase a new home. Most importantly I would give back, but also invest in businesses to continue to generate income. I would continue to work my current job (through my two-week notice) 😉

    • “The majority of folks would pay off debt, take care of family and friends and buy a house. What was missing (my point of view) was a financial planner, accountant, attorney …” That is so often the case. People have definitive ideas about how the money would be spent in the near term and give no thought, or very little, to how to manage the money to achieve long term, perhaps multi-generational, wealth.

      Thanks for stopping by, my friend and I’m looking forward to the next entry in the A Richer Understanding series.

  3. I would take an Alaskan cruise, invest a significant portion and quit my job (I think:) Sure is fun to dream, even if the odds of winning are so unlikely.

    • The wife and I – along with my parents – did the Alaska land (Fairbanks, Mt. Denali) and sea (Seward to Vancouver) tour a few years back. A phenomenal experience. Highly recommended! ” … the odds of winning are so unlikely.” Exactly why savvy individuals educate themselves as much as possible, develop a detailed, robust plan and focus like a laser on its execution.

      Thanks for stopping by, my friend.

  4. I would quit my job darn near right away with a 1.5B payout, but probably not for a $1M payout even though that is enough for us to reach financial independence. I think if I received $1M, I would hire a housekeeper.

    Other than that, it’s tough to predict how I would use the money. I would probably just stay the course, and maybe consult with my CPA on tax implications.

    • Like you, with a windfall in the $1M range, I would likely not change a lot and simply incorporate the money into my existing plan. Perhaps the most significant effect would be that it would allow the wife and I to retire a few years earlier.

  5. I would hire a planner, and make no major decisions right away. I would pay off all my existing debt. If the windfall was big enough I want to start a charity or foundation to help others with their money.

    • A great approach. I definitely like the idea of starting a charity of foundation to help others better manage their money. Thanks for stopping by, my friend.

  6. I’d definitely put together a team right away. I’d get a good accountant, lawyer, and financial planner. I’d also hire a personal assistant as I’m sure there would be a lot of tasks to hand off to, at least in the beginning. If I won a HUGE jackpot like the recent one I’d use a portion of the money to start a venture capital fund and my “work” would become trying to find the next startup that will grow into a huge company.

    • It sounds as if you have already given it some thought, my friend. That is key. There isn’t necessarily one ‘right’ way to handle receiving a windfall. The key is to have some type of plan – preferably one that is merged with an existing plan – to ensure the money is managed in such a way to secure your, and your loved one’s, financial freedom.

  7. I would absolutely not quit my day job for a prize less than 2-5 million. The reality is that 1 million dollars is not what it used to be and even if I bought nothing and invested the entire amount into a freedom fund I would only be maxing out at 25-60k a year in income. That wouldn’t even cover my current expenses, much less when my children head to college!

    Now, that million would certainly provide a nice nut to build off of for the next 5-10 years while I got all the other ducks in a row in order to retire early!

    • “Now, that million would certainly provide a nice nut to build off of for the next 5-10 years while I got all the other ducks in a row in order to retire early!” Exactly. Adding a windfall to existing savings and the knowledge [financial literacy] to know what to do with it would be most welcome and would simply allow me to proceed a little easier down my planned path.

      Thanks for stopping by, my friend and adding to the conversation.

  8. On the same note James, over the next 30 years, $30 trillion is expected to change hands in the form of “wealth transfer” to the millenial generation. How families plan for this (educating their children) is critical.

    • Indeed. Great point, my friend.

  9. Most people’s reality is that the only windfall they will ever get is the one they create for themselves. That being said quit trying to beat the odds (264,000,000 to 1 in the last drawing) and start creating your own windfall.

    • Exactly. If your ‘plan’ is to win the lottery to secure your financial future – or take a magic pill to improve your physical well-being – you probably need to rethink your approach to finding prosperity and successes in life. The only real answer is developing a detailed plan and executing it over a long time period. Thanks for stopping by, my friend.

  10. I would probably buy a few small things and let my Savvy husband take care of the rest. He is very good with finances. Although I would like to jump in and buy everything that I want, I think your approach is the best. Just sit back and put some thought to it first.

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