What This Financial Advisor Recommends Lottery Winners Should Do

With the Mega Millions and Powerball jackpots hitting huge numbers this week, you may be starting to dream about all the things you’d do if you actually won. But if you actually do win, what would that look like?

There’s a lot of advice out there about signing your ticket and finding an attorney and a financial advisor—all things you should do. But since we’re dreaming about winning, we sat down with Northwestern Mutual Wealth Management Advisor Andrea Williams (who has actually worked with lottery winners in the past) to ask what advice she would give to a lottery winner. Here’s what she told us.

What to do as soon as you win the lottery (and one thing you shouldn’t)

Williams offers this basic—but critical—housekeeping checklist that anyone who wins should take care of first:

1. Sign your ticket.
2. Make a copy.
3. Interview experts you’ll need to consult with—like a financial advisor, a CPA and an attorney. You’ll need to eventually hire these experts, but make sure you find the right person for you.

These actions will ensure that you’re safely set up to claim your winnings before you actually do so.

8 steps to take after you win the lottery

Change your relationship with debt.

If you’re like most Americans, you probably have some debt, and you probably view debt negatively. When you become a millionaire, you’re likely to find that your perspective on debt will change.

First things first: If you have bad debt, like credit card debt, pay it off and put it behind you. Bad debts like this are a reality for most folks, and it’s where much of our negative feeling toward debt comes from.

But not all debt is bad. In fact, debt can be a tool when used properly. For instance, if you own a home and have a mortgage with a low interest rate, it might make financial sense to keep the mortgage (even if you could now pay it off tomorrow). That’s because you might be able to invest the amount you would have used to pay your debt and make more money than you pay in interest each month.

Get clear about who gets what.

Whether it’s family, friends or even just local groups looking for donations, people are going to come out of the woodwork looking for gifts and loans. Be really clear early about how you intend to divvy up your money. Even with huge sums of money, it can be easy to be too generous and not have enough for yourself. It’s a good idea to work with a financial advisor to put some guardrails in place and determine what is for you, what you intend to give away, and what you want to leave as a legacy for future generations. This will help to make conversations with the people who approach you easier.

Get ready to do estate planning.

While nearly everyone can benefit from some basic estate planning, when you have significant wealth, it’s important to plan for how that wealth will get passed down to your family. Without a well-thought-out estate plan, your family may wind up with a massive tax bill.

I often tell folks about my first job. I worked for the Wrigley Company. When I got there, I thought maybe I’d be able to get free Cubs tickets (their stadium is named after the Wrigley Company, after all). But I quickly learned the Wrigleys no longer owned the Cubs. They were forced to sell the team in the early 1980s to cover a large estate tax bill. It was an early lesson in my life about why this is so important.

An estate plan funded with life insurance can ensure that your family will have the money needed to pay for estate taxes, so they don’t wind up having to sell something they’d like to keep in order to pay a large, unexpected bill.

Consider how you’ll give back.

When you have significant wealth, you can either let the IRS siphon a portion of it to areas the government deems appropriate, or you can give it away to causes that you’re passionate about. I would personally establish a charitable entity. There are many different kinds, but generally, when you establish a charity, you’re able to control how your money is used for the things that are most important to you. In addition, a charity can help you manage the impact of taxes, which is key when you have significant wealth.

Buy property.

If you’re renting, buy property. If you own your home, consider upgrading to a new one or maybe getting a vacation home as well. When you rent (and I’m sometimes surprised that even some of my wealthy clients still rent), you send your money to someone else each month—you’re paying someone else’s mortgage for them. Buying property gives you a place to live without sending your money to someone else. Instead, you’ll own an asset that will typically increase in value over time.

Hire someone to invest your money in the markets, but also invest on your own.

Investing your money allows you to make money with the money you have. A professional advisor will help you balance risk and reward—protecting your money while also using it to generate income and/or grow it over time. But you don’t have to just turn over your fortune to people and let them manage it. When I work with clients, I emphasize the importance of education. I think anyone, especially someone who has come into significant wealth, should learn as much as possible about financial topics like investing.

I really like a book called The Psychology of Money by Morgan Housel. It’s not about how to get wealthy; instead, it covers how wealthy people stay wealthy.

In addition to learning from your advisor and books, I think one of the best ways to become more knowledgeable about investing is to do it yourself. So set aside some money that you’d be willing to lose—we’ll call it “tuition.” Research companies that interest you. You can build a relationship with what’s going on with that company in the news and how it impacts the stock price. It helps you to better understand some of the factors professionals consider when managing portfolios. And ask your advisor questions along the way.

Consider an annuity.

This one is a little nerdy (financially speaking). Everyone’s situation is different, but I’ll typically recommend that lottery winners purchase an annuity to guarantee future income. Because of how they won their money, it’s not uncommon for lottery winners to turn to gambling. With an annuity, you take a portion of your winnings to make a payment to the annuity provider. Then that company will make regular payments back to you—depending on the type of annuity, the payments could last for the rest of your life. This could help to protect your money—ensuring that you have the equivalent of a regular paycheck from your winnings. It could also have some tax benefits and no limit on the size of the deposits. A financial advisor can work with you to make the best recommendation for your situation.

Hire a life coach.

You’re about to come into life-changing money. You probably have all sorts of ideas about what you’d like to do with it. But one of the things I frequently see is that people limit their goals. Even the most successful people in the world sometimes think smaller than what they’re capable of. Find someone who can help you take a 300,000-foot view of your world to help you get clear on what’s important to you and set bold goals.

When I meet with clients for the first time, I’ll frequently ask them: “If we were to get together for coffee five years from now and you’re telling me everything that’s going on in your life, what needs to happen in order for you to feel really good about the progress that you’ve made over the past five years?” These conversations are so important because they’ll help you get really clear as you start having conversations about what you’ll do with your money.

The goal here isn’t just to dream big. It’s about focusing on what’s most important to you and dreaming big with clarity. Pursuing your dreams with purpose is what sets us up for a really great conversation at that coffee date five years from now.