A recent study found that 70 percent of lottery winners go bankrupt within the first few years. Have you ever wondered what you would do with a winning lottery ticket?

Ask your spouse or partner – it can lead to an enlightening discussion. Most people buy a new car. And not just any car, but the biggest and most expensive SUV or truck they can find. Next comes a new house.

Reality Check

Motor vehicles are depreciating assets; their value diminishes over time. Houses, on the other hand, do appreciate but they are super expensive. Most lottery winners buy the biggest house they can finance, only to find that they can’t keep up with the payments.

One thing many people don’t realize is there’s a huge difference between the jackpot and your actual winnings. You can win a million dollars and walk away with less than $400,000. That’s because the jackpot is based on annual payments but most people opt for the smaller one-time payout. Then there are taxes. 

Despite the fact that the vast majority of lottery winners take home $500,000 or less, most still buy an expensive vehicle and a new home.

A half-million bucks is nice, but it’s not going to change your life. Many middle-class households earn that in five years or less. It’s not enough to quit your job and go on a spending spree.

What should you do? A wise approach would be to indulge yourself in a little luxury and then invest the rest. What kind of luxury? Take an amazing vacation or buy a normal car. With decent investment returns you can retire sooner and enjoy a better lifestyle.

The Last Word

Winning the lottery is a dream come true, but for many it becomes a nightmare. It’s not unusual for lottery winners to experience failed marriages, new or worsening addictions, and estranged family members. That’s a high price to pay for a short-lived infusion of cash. If you play the lottery, take the time to educate yourself and be prepared to do the right thing.

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.