6 Things You Must Do If You Win the Lottery

You probably think if you win the lottery all your money problems disappear, right?


Even rich people – millionaires included, can be broke. It’s not about how much money you have but how you manage your money. Knowing what to do if you win the lottery and how to manage your money is the key to financial success and happy life after winning the lottery.

If you play the lottery in the hopes of winning, keep reading to learn what you should and shouldn’t do.

What Happens When you Win the Lottery?

Most people think if they have the winning lottery ticket they must run out and claim it.


You have time and you should take every second offered to you. Instead, take a deep breath, put your ticket in a safe place, like a safe deposit box, and consult with your professionals including a lawyer and your accountant.

Before you do anything, find out how much time you have. Most states give you at least a few months, if not a year to claim your winnings. You won’t lose your money, and if you take your time, you’ll make smarter decisions regarding what to do with it.

What Should You Do Immediately after Winning the Lottery?

After you get over the excitement or shock that you’re a lottery winner, take these steps.

1. Make several copies of your ticket

Once you turn in your ticket, you’ll turn in the original. It’s always a good idea to have extra copies on hand in case you need more professional advice or just to have a copy of the rules yourself.

2. Safely store your ticket

Don’t leave your ticket lying around your house. Invest in a safe deposit box or home safe to store it. If you scan the ticket or copy it, make sure it’s saved in an encrypted file. You can’t be too safe.

3. Call in your troops

Don’t try to manage the lottery winnings yourself. Talk to your attorney (hire one if you don’t have one) and accountant. Together, you’ll figure out the rules, the best way to accept the funds, and what precautions you should take before accepting them.

4. Consider a blind trust

You’re likely going to be inundated with phone calls, requests for interviews, and other publicity. There are ways around it (more on that below), but if you want complete animosity, you may want to consider a blind trust. Talk to your attorney about this option.

5. Make a plan

Don’t just accept your funds and try to ‘wing it.’ Instead, make a plan. Think about your goals for the money. This will help you choose how you accept the payout too. If your needs are more immediate, you may consider a lump sum payout, but long-term needs/plans may allow you to spread out the payments.

6. Keep quiet about your earnings

Winning the lottery is one of the most exciting things to happen in your life, so it’s natural to want to shout it off the rooftops, but don’t. Keep it quiet until you know your plans. Don’t quit your job just yet either. What if you’re mistake, or the winnings aren’t as much as you thought? You could find yourself without a job and without enough money to get by.

What are your Options for Payout after Winning the Lottery?

You have two options to claim your lottery winnings – lump sum or annuity. You can see how they change the amount you receive using this calculator. The advertised winnings you see are based on an annuity payout. If you choose the lump sum, you’ll receive considerably less.

Lump Sum Payout

A lump sum payout means you receive your entire winnings in one payment. You’ll pay taxes on the entire amount at once, and typically receive less money than you would if you spread the payments out. 

Annuity Payout

An annuity payout means you spread the payments out usually over 29 years. You pay taxes only on the amount you receive each year and at the current federal and state tax rate. If the tax rates decrease, you pay less taxes. If they increase, you pay more.

In addition, the money you don’t receive is invested and may accrue interest. This is how lottery winners who take the annuity payments receive more money in hand than those who take the lump sum.

7 Things to do with your Lottery Winnings

When you win the lottery, you usually get a lot of money. What are the best things to do with it?

1. Pay off your debts

If you carry consumer debt, especially high-interest debt, pay it off. Credit cards, personal loans, auto loans, and sometimes even your mortgage should be a thing of the past. Why pay interest when you have the money available to pay the debts off in full?

But, if you have a large mortgage with a low-interest rate, you may consider keeping it. The interest can be a deduction on your tax returns, which you’ll want as many deductions as possible when you see the tax bracket lottery winnings puts you in.

2. Give money to charity

If you’ve never been well off enough to give to charity, now is a perfect time. You won money that wasn’t yours, so why not share the wealth with those less fortunate? If you give to qualified charities, you may be eligible for tax write-offs too.

3. Create an emergency fund

Even if you have a lot of money, you need an emergency fund. Anyone can experience a disaster that wipes out their finances. Don’t get so confident in your assets that you don’t think any emergencies could hurt you.

Take at least 6 months of expenses and set it aside, but if your earnings are large, consider setting aside even more money just in case.

4. Buy insurance

Spending money on insurance is probably the last thing you’d think of when winning the lottery, but it’s more important than ever now. People will come out of the woodwork and try to sue you for the most mundane things.

Carrying insurance will cover these nuisance suits and protect your assets. Talk to your accountant and lawyer about the right type of insurance for you.

5. Invest in your retirement

As exciting as it is to have a lot of money right now, think of the future. Investing in your retirement now takes the pressure off you during your golden years. Plus if you set the money aside now, you’ll get tax breaks and you won’t have to worry about overspending, leaving yourself with nothing during retirement.

6. Create a college fund for your children

It’s never too early (or late) to set up a college fund for your children. Consider a 529 savings plan either in your state or a neighboring state. Figure out which one has the best tax incentives and put money aside for your children. 

The nice thing about 529 plans is friends and family can contribute to it too. If you’d rather have your child’s college education funded versus giving them material gifts now, suggest donations to the fund for holidays and your children’s birthdays.

7. Have some fun

Each of the ideas above seems boring, right? You just won the lottery, can’t you have fun? You can, but first take care of your responsibilities.

When you pay off your debts, create an emergency fund, set up your children for college, and invest in your retirement, you’re free to do what you want with your money. Maybe you have a dream vacation planned or you have always wanted to own a vacation home.

Look at your list of plans and decide which you want to accomplish first and see how it fits within your budget.

5 Things NOT to do with your Lottery Winnings

1. Don’t invest it

You might think investing your big winnings is a way to earn even more money, but why gamble it? If you put the money in a high-yield bank account, you’ll earn interest and keep the money growing. There’s barely any risk of loss versus the losses you could incur if you invest and the market crashes.

2. Don’t be everyone’s bank

Once people realize you’ve won the lottery, they won’t have a problem asking you for financial help. Don’t feel bad saying ‘no.’ You aren’t everybody’s bank. You may find you have to isolate yourself a little more than before just to avoid the pesky requests. 

2. Don’t try to manage it alone

No matter how savvy you think you are with your finances, get help. You probably didn’t have this kind of money before and it’s easy to blow it without realizing it. Get an accountant or financial advisor on your payroll so you learn how to manage the money not only so you don’t run out but also so you don’t get killed with tax liabilities.

3. Don’t assume you can quit your job

Don’t assume you can quit your job. Don’t quit your job, at least yet. Give it 6 months to a year and see how things go. Are you able to manage the money responsibly? Did you pay off your debts and set yourself up financially in other areas?

Will you have enough money coming in that can carry you for 30 – 40 years depending on how far away you are from retirement and old age?

4. Don’t stop budgeting

Don’t assume you’re independently wealthy and can do what you want now. Still budget. Millionaires budget because if they didn’t, they’d be broke. It’s easy to think you have a ton of money and can do what you want, but no one can.

Give your money jobs. Have goals and try to achieve them, such as becoming debt-free, investing in a house, setting up an emergency fund, or having $x for retirement.

FAQs – What to do if you Win the Lottery

How long after winning the lottery do you get the money?

The state you bought the ticket determines when you’ll get your lottery winnings. If you win less than $500, you can often get it the same day. But, if you win a lot of money, you may have a waiting period of around 15 days before you can claim the funds. Just be aware of the required claim period – most states allow 90 – 365 days to claim your prize but always read the rules to make sure.

Can you stay anonymous after winning the lottery?

You can only stay anonymous after winning the lottery in certain states. Right now you can hide your winnings in the following states:

– Arizona
– Delaware
– Georgia
– Kansas
– Maryland
– New Jersey
– North Dakota
– Ohio
– South Carolina
– Virginia
– Texas

How much do you get taxed if you win the lottery?

The state where you win the lottery is required to withhold taxes from any monies they pay out whether lump sum or annuities. Right now, the federal tax withholdings are 24% and state tax withholdings vary from 4 – 13% depending on where you bought the ticket.

Why do lottery winners go broke?

Anyone can go broke. It’s not about how much money you have, but about how you manage it. If you blow all the money right away, you have nothing left for emergencies, retirement, or your day-to-day living costs. Hiring a financial advisor is the best way to keep your head above water and avoid going broke.

Final Thoughts – How to Handle your Lottery Winnings

Winning the lottery is exciting and fun, but also scary. Before you do anything, give yourself time. Take a deep breath, create a plan, and get plenty of support.

Don’t run out and tell everyone (or anyone) that you won.

Make a plan, figure out the best strategy to handle the funds and then move forward.

Kim Pinnelli is a personal finance freelance writer and koopy.com contributor. She lives in the Chicago suburbs, writing from home for the last 13 years. Kim enjoys helping people understand personal finances and writes on topics about saving money, investing, planning for retirement, and ways to increase income. In her free time, Kim enjoys hanging out with her 3 children, reading, crocheting, and spending time outdoors.

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