The 10 dumbest things you can do if you win the $US1.5 billion Powerball

If you hold the winning numbers of the national Powerball lottery, currently worth $US1.5 billion, you don’t want to go down as one of the many winners who blew it all.

We spoke to Robert Pagliarini, author of “The Sudden Wealth Solution” and who has spent 20 years working with sudden wealth recipients, about the dumbest things people do after coming into a windfall of cash.

The odds of winning are slight — one in 292.2 million, USA Today reports — but if on the off-chance you’re the lucky recipient, avoid these dumb, yet common, mistakes:

1. Assuming other people will take care of everything. “To create lasting wealth, you have to have an ownership mentality. This means taking full responsibility for the decisions and the consequences.”

2. Saying “yes” to everyone. “You have to develop the ability to say ‘no’ and to say it often. The winner will get flooded with requests for loans, gifts, and investment ideas — being able to say no is the best tool you have to create lasting wealth.”

3. Taking advice from friends and family. “Work with experts who have learned what it takes to create lasting wealth. They have seen what works and what doesn’t. Listen to their advice. Avoid using friends or family unless they are experts in the financial, tax, legal, and psychological issues around sudden wealth.”

4. Not considering the annuity option. “Research shows nearly everyone takes the lump sum, but that may not be the best move. In fact, the annuity may be a much better option.”

Read up on the difference between the two options and take this quiz to determine whether you should take the lump sum or the annuity.

5. Trying to help too many people. “Helping others the wrong way can lead to disaster. Don’t make promises, and make sure you have a system in place for handling money requests.”

6. Isolating yourself from others. “We are social creatures and this is a stressful event. Have at least one close confidant you can talk to and consider working with a psychologist or therapist.”

7. Not having a media plan. “Make sure you develop a media plan before you cash in the winning ticket. Get a spokesperson and consider camping out at a hotel instead of going home where you know your front yard will be flooded with reporters and TV cameras.”

8. Making too many decisions too quickly. “The first thing to do is to take a very deep breath. Research tells us that when we are under stress, our brain responsible for planning and long-term decision making shuts off and the part that takes over is the part that is responsible for our fight or flight response. The more we can ground ourselves and not get caught up in the frenzy, the better our decisions will be.”

9. Thinking you’ve actually won $1.5 billion. “You haven’t. Don’t get stuck on the headline number. In behavioural finance, this is called anchoring, and it can cause you to think you have a lot more money than you actually do. Remember, the lump sum is about 60% of that number and then taxes will take another 50%.”

10. Thinking that because you didn’t ‘earn’ the money, it’s not worth as much. “One client called his sudden wealth ‘monopoly money’ because it didn’t feel real. If you value the lottery winnings less than if you’d earned it, then you will spend the money quicker, give it away faster, and invest it more recklessly.”

NOW WATCH: Here’s Mark Cuban’s advice for whoever wins the $1.5 billion Powerball

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