The third drawing for the national Powerball lottery is set for Wednesday night — and the jackpot is at a record high: an estimated $1.5 billion.
What’s bound to bring instant gratification to the lucky winner could also bring destruction down the road.
Financial experts find that a windfall such as a lottery win can lead to some big mistakes. Here are three of them:
1. Expecting the money will solve all your problems
At the end of the day, money does not solve financial problems — in fact, it often exacerbates them.
“Money often makes obvious our tragic human flaws, putting a spotlight on what we don’t know,” explains Robert Kiyosaki in his book “Rich Dad Poor Dad.”
“That is why, all too often, a person who comes into a sudden windfall of cash — let’s say an inheritance, a pay raise, or lottery winnings — soon returns to the same financial mess, if not worse, than the mess they were in before.”
Just consider the many people whose lives took a turn for the worse after winning the lottery.
2. Assuming someone else will take over for you
“The biggest mistake people make after winning the lottery is assuming that ‘someone’ else will take care of them, ” explains Robert Pagliarini, certified financial planner and author of “The Sudden Wealth Solution.”
“Rule number one is to take control! This doesn’t mean you have to have all the answers, but it means that you accept that no matter what happens, it is your responsibility. This shifts the focus from others to yourself. It’s that ownership mentality that makes all the difference.”
This doesn’t mean you have to deal with the cash windfall all on your own. It’s smart to immediately put together what Pagliarini calls a “financial triad”: an attorney, a tax person, and a financial adviser.
“Of course, get help,” he tells Business Insider. “But no matter what, never forget that it is your responsibility and that it is up to you.”
3. Thinking money will make you happy
“You’ve won money, not happiness,” emphasises Ric Edelman, Chairman and CEO of Edelman Financial Services. “If you’re not happy now, winning won’t make you happy — it will just make you rich. This is why so many lottery winners end up divorced and jobless. Get good financial and legal advice now so you never wish you’d never won the lottery.”