How I’d Spend Lottery Winnings

We’ve all, at one or more points in time, imagined ourselves to have a monstrous amount of money. Delightful dreams of supercars, mansions, and models have condensated in the minds of many people. Perhaps not everyone cares for such rewards, but not a single person looks forward to barely making rent every month or eating only morsels of food per day. Having money does not guarantee life satisfaction, but struggling to put meals on a meager table, clothes on a crummy body, and shelter over a stressed head is a surefire way to morph into the morose mollusk known as Squidward; you know, the gloomy character from the animated series SpongeBob SquarePants.

There are four main ways of making money. The first method is to become an employee and trade your time for money; the second is to become a sole proprietor and trade your freelancing service for money; third, create a viable business and become an employer; fourth, become an investor and print money while you sleep. The first two strategies can be considered to be active income; the last two, semi-passive income. Don’t let the scheming, get-rich-quick raccoons fool you into thinking that “passive income” exists. Semi-passive income is great to have, but passive income is as real as Roger Rabbit. Even if you are an employer or investor, you still must work. The former must oversee his business, while the latter must keep an eye out for trends involving his wealth. Starting a business and deciding where to invest your money takes much mind power.

In addition to the four primary ways of making money, there exist some ancillary ways to make money, one of which is to earn a prize. You have the options to sign up to go on a game show, enter a radio show raffle, and/or play the lottery. As implied by the title of this post, we will hone in on the third option. Loads of people have played a lottery game at least once in their life. In fact, about half of Americans purchase a ticket per year, with a sizable minority of them being regular buyers. Also, lotteries have existed for hundreds of years. The prominent appeal of such a game is the luck aspect. Perhaps you will be the one to win millions of dollars. Regular players of the game hope for the prize, thinking about how they’d spend the spoils, critically or carelessly.

In spite of never having played the lottery, I did occasionally wonder how I would handle having loads of money in my bank account. However, I have not mentally crystallized my allocation of large sums of money. Currently, I have only a rough outline of my plan should I ever play, and actually win, the lottery. So, what would I do with the money? It depends on how much I’d win. 

Before I elaborate on my plan, there are three considerations that need to be acknowledged first: 1) the choice of a lump sum vs. annuity, 2) the choice to remain anonymous, and 3) the diligence to remember that the IRS will come for its share of the money. 

If I ever win the lottery, then I’ll most likely take the lump sum of money. If I win around a billion dollars or more, then I might consider taking the annuity payments. Whether annuity payments are divided evenly or not depends on the area and lottery corporation. If you played in a location for which the jurisdiction divides the annuity evenly for the game, then each annuity will be effectively worth less than the last due to inflation. On the flip side, annuity payments are not taxed. 

Another choice a lottery winner must make is whether or not to remain anonymous. Some people are in love with the prospect of being on TV and showing off potential winnings to their friends and family. Other people would experience stage fright upon being showcased to millions of people. I personally would decide to remain anonymous. Why? Simple. I’d prefer that people I know not come out of the woodwork and con me into giving them a portion of my winnings. I wouldn’t tell even my immediate family, since I don’t fully trust that they’d keep quiet. One ought to also keep in mind that their phone will blow up with calls from investors and scammers should they decide to reveal themselves to the public. There’s also cases of homicide, abduction, and kidnapping. 

That said, not all states allow you to claim the winnings in stealth. California, New York, and Pennsylvania are a few states that prohibit winners from remaining anonymous as of 2024. Massachusetts allows you to claim prizes via a trust. Missouri and Wyoming allow you to remain anonymous without strings attached. The point to all of this trivia is that it would behoove players to do their homework and understand the rules of the jurisdiction in which they purchase a ticket. 

If I bought a ticket and resided in a state that flat out refuses to allow winners to remain anonymous, like Connecticut, then I’d employ the following strategy: Keep going to work. Prepare to leave my apartment by packing my items in suitcases and boxes. Delete my social media accounts. Sleep at a hotel close to a Lottery Headquarters. Claim the prize. Appear in a televised interview if I must. Wear a silly mask if allowed. Then, finally, leave the state right after I claim the winnings. My suitcases and boxes would already be in the trunk of my car  on my way to the office. In Connecticut, winners have up to 180 days to claim their winnings.

The strategy above, I assume, is sufficient for games played and broadcasted at the local and state levels. However, what if one plays a national lottery such as the Powerball or Mega Millions? Moreover, what if such a person wins, say, $750,000,000? If you played in a state that does not allow any form of anonymity, then boy are you screwed? You will be on national television should you win. Such money puts a bullseye right on your torso. You definitely would need to think about hiring security for your own safety. Congratulations! Your life just got worse. You have not a blessing, but a curse casted from the Netherworld. Good luck…

Now to the third consideration – taxes. Some countries, such as Germany and Sweden, require no tax payments for prizes. I just so happen to not live in any such country. I live in the U.S.A. A portion of the winnings of American lottery players are taken by the federal government before it even reaches their bank accounts. Many states will also take an additional portion of the winnings. What’s more? The IRS takes only 24% of the lottery winnings. This means that if you earn enough money to be in a tax bracket for which you must pay more than 24%, then you are responsible for paying the remainder of the tax when you file for your taxes. For simplicity’s sake, act like only half the money is yours. You may need to hire a tax attorney. 

With the three considerations out of the way, how would I actually spend the money? As stated, it depends on how much I’d win. The more money I win, the more ways I can spend it. How about we start off with a mere $10,000? In keeping with a snippet of advice above, I’ll act like I have $5,000 to spend. I’d likely take one-on-one swimming lessons so that I’d learn how to navigate in the water. I never learned such a skill as a child. I believe that swimming is a practical skill that anyone should have. Yes, it’s a skill. People who could swim right after they began forming complete sentences as toddlers are most prone to taking this know-how for granted. 

I’m not a particularly materialistic person. Consequently, I’m biased toward paying for experiences and skills over physical items.

With a $100,000 lottery prize, I’d have $50,000 to spend. That five-figure amount would go towards paying my FAFSA college loans. The average student loan debt is over $30,000. As of now, my debt is even higher than the average, but still five digits. Any debt makes you a slave, since you are beholden to the lenders that let you borrow the money. Once the $50,000 is paid to my lender, the federal government, I will be so much closer to being free. My monthly payments will decrease drastically. 

Having $500,000 to spend, while significant, is not quit-your-job type of money. With half a million dollars, I’d pay off my loans completely, buy a medium-tier car like a Honda Civic or Nissan Altima without taking out a car loan, and buy a simple house without taking out a mortgage. Right now, I am not a homeowner. Many people in this economy struggle to save up enough money for a down payment since housing prices are currently through the roof. If I had a mortgage, then I’d use a portion of the half million dollar to pay it off in full. Not having to deal with monthly mortgage payment, rent payments, or car notes leaves some breathing room, since those are the most expensive drains on one’s wallet. 

However, I would still keep my day job. From a crow’s-eye view, $500,000 is not a whole lot of money. After paying off any loans/debts, mortgages, and car notes, one still needs an income for the remaining costs of life – food, insurance, internet service, etc. 

Here’s where the situation gets more interesting. Having $5,000,000 to spend can set one for prosperity or ruin, depending on how well they allocate the money. Something else to consider: it’s never a smart idea to have millions of dollars sitting in a bank doing nothing. A typical FDIC-insured bank insures up to only $250,000 per person. FDIC stands for Federal Deposit Insurance Corporation. So, I’d look for a bank that can insure more than a quarter million, such as Kleberg Bank, and set up an account under said bank. Remember that banks make their money through investments. A poor investment leads to a loss of customers’ money.

How would I spend the $5,000,000? After paying off my debts and buying a house and car, I would search for multiple properties to buy out of pocket in a landlord-friendly state. I would become a landlord so that I could generate multiple streams of income. Each property I buy would be about 50 to 100 miles away from the last to minimize the losses incurred via a natural disaster like the infamous Hurricane Helene of Hades.

I would hire property managers to scope out the area for potential tenants. I’d choose houses in middle-class or upper-middle-class neighborhoods. Why? To increase the likelihood of getting better quality tenants. Generally, the more someone pays for something, the more they appreciate it. Tenets paying the market-value rent for a place to live in a nice neighborhood are more likely to be less troublesome than those paying less in a low-class neighborhood. A competent property manager will screen tenants for employment history, credit scores, references, etc.

I would likely never rent to Section 8 tenants if given the opportunity. I’m confident that plenty of welfare tenants are decent people, but the probability of getting a respectable tenant is higher if a landlord selects from only the pool of tenants that don’t use taxpayer money to fund their livelihoods. What landlord wants to deal with a trashed property that needs serious repairs due to being inhabited by riffraff?

This is BIG money. I’d probably diversify the assets I split the $50,000,000. Which assets? I’ll cross that bridge when I come to it. 

By watching YouTube videos and reading news articles, I’ve seen enough people go broke within a few years of winning seven to nine figures worth of money. Common mistakes such individuals make include handing out money to everyone they know like candy, buying mansions that they fail to maintain and pay taxes on, going on a bunch of vacation trips, funding other people’s half-baked business ventures, gambling, and falling for scams. 

You might have difficulty imagining how anyone could end up right back where they started with such winnings. That’s understandable. Perhaps the financial acumen possessed by such people is far inferior to that of average people. Keep in mind that the lottery selects for people who ignore the laws of probability. Also keep in mind that many people who play the lottery are poor. A person on the lower end of the socioeconomic ladder is less likely to be educated and, in turn, less likely to know that wealth can generate more wealth by existing. Accustomed to surviving day by day, this type of person thinks little about investing and portfolios, if at all. 

So there you have it. This is my blurry ideation of my plan should I ever win the lottery. The irony is that I’ve never played the lottery in my life, not even once. I’ve bought tickets only a couple times as a gift to someone I know. It is nevertheless beneficial to have an idea of how to capitalize on luck and multiply blessings. If life is ever extremely unfair to your advantage, then use that as a springboard to propel yourself to the stars. Why not? You will attract abundance if you create honey with nectar. Don’t let the sweet liquid go to waste.

If one ends at the same place they started even after winning millions of dollars, then they ultimately have only themselves to blame. No one of sound mind wants to be this person.