If you think winning a lottery can solve all your financial problems, think again. Most people who run into a lot of money in a short span, not only lose all the money quickly but also squander all their other assets like home, career, family, stocks, etc. If you are wondering how this is possible, this post is for you.
What Is a Windfall Gain?
A “windfall of cash” or windfall gain is a sudden influx of high income due to reasons like scarcity, luck or intelligence. Most often, people experience a windfall of cash by winning a lottery or inheriting a massive sum of money/real estate property from their relatives. Windfall gains don’t always lead to misery. However, when a financially naive or unprepared person receives a huge sum of money, they most probably spend it all without thinking it through. This happens mainly due to being overwhelmed or –as I said before–not being prepared to handle such a huge sum.
Tips to Invest a Windfall of Cash
1) Put Your Cash in a Certificate of Deposit (CDs)
When investing a large amount of cash in an asset it is key to make sure that you always have access to the money you invested. The best way to do so is by putting a major portion of your winnings in CDs in banks or credit unions. When you invest your money in CDs your money always remains safe. In the US, CDs are insured by the Federal Deposit Insurance Corporation (FDIC) for banks and by the National Credit Union Administration (NCUA) for credit unions.
2) Do Not Quite Your Day Job
Going to work each day will not only keep your mind occupied by also ensures that you always have benefits like social security, 401k, and medicare. Most people after winning a lottery quit their jobs. For them, going to work seems like a chore they would rather avoid performing. I understand that after becoming a multi-millionaire, it can be tough to blend with your colleagues who still work for a paycheck. But, it’s just one of the few things you have to cope with.
3) Invest Your Rewards in Real Estate
Experts at MarketWatch say that 2020 is going to be a good year for home buyers and renters. Like every other home buyer, you don’t have to pay mortgages from your monthly paycheck. In short, the interest rate is none of your concerns. Although, you do need to invest in a property that is in-demand and will offer a good return on investment.
How Did Andrew “Jack” Whittaker Manage His Windfall Gain?
Andrew “Jack” Whittaker was a president of a construction company in West Virginia. He already owned a lot of property and was one of the wealthiest men in town. In 2002, he won a $315 million Powerball jackpot. Although he managed the money well by diversifying it in several areas, he lost it all due to personal problems caused by being so rich. Read this article by Time to know about his case.