Financial Advice for Lotto Winners
FINANCIAL ADVICE FOR LOTTO WINNERS
What would you do if you won the lotto?
The Powerball Jackpot of $63m was won by a Coffs Harbour resident on 24th February 2022.
How would this change your life?
How would you spend your money?
Most lotto winners actually go broke within a couple of years.
This is due to four main reasons:
Management
If you cannot manage $5,000, you are not going to be able to manage $63 million
Your money story
Your money story or history of money shapes how you manage money and the relationship you have with money. You apply your filters, experiences, and even language you hear towards money and money management.
Your money mindset
Your money story helps establish your money mindset. Your money mindset is your unique set of beliefs and your attitude about money. It drives the decisions you make about managing money.
Your money thermostat
The money thermostat relates to a person’s comfort level when it comes to their level of wealth. In the area of personal finance, our brain is happiest when we are out of “danger”
We see this often with people have $10,000 cash reserves, and as they build their emergency fund or reserves they spend money to reduce their cash balance back down to $10,000 where they are comfortable or safe.
Others have a long seeded history of a scarcity mindset, where they believe they are not worthy of the money they have, and they continue to spend every dollar they have until they are back to where there thermostat is set at $0.
This has not been limited to lotto winners, we have seen the same effects with sport stars, only fan creators, and those that receive an inheritance.
The same principles and factors come in to play.
Money is not a problem
Take a moment to consider what your life is like and what you would be doing if money was not a problem.
How would you spend your time, how would you be contributing, how do you find self value and self worth.
Many people go through this when they retire, especially those with executive positions.
They go from being important and valued, to losing themselves and having to find what their purpose is.
What does this lotto win mean to you?
This is a personal question, however there are some common answers, including;
home unencumbered
investments earnings meeting your lifestyle needs
wake up with no alarm
plan your day out
are not in a rush
you don’t need to sit in traffic jams
you work on your own terms
you can take a break whenever you want
you can go on holidays anywhere anytime
you can spend time with those you love
What to do now you have won the lotto?
Vision
What do I really want?
Why do I really want this?
Many people live day to day, week to week, without thinking of the future.
As humans we are wired to choose today over tomorrow, but we also hate to feel like we are missing out on something.
A recent research study was conducted with monkeys.
5 monkeys were given a banana each – and high levels of excitement were measured.
5 other monkeys were given 2 bananas each – and high levels of excitement were measured.
However, when a change was made, and the monkeys with 2 bananas had one taken away, they still had 1 banana, but they became angry and irate.
Does this happen to us?
Do we forget what we already have?
If we feel like we are losing something, then we avoid it, we don't do it.
This is why so many people do not save & invest.
Saving sounds like you are giving something up or losing something today. But you’re not. It is giving yourself a gift today of peace of mind, certainty, of a secure financial future.
Therefore, those that choose today over tomorrow, often find themselves at the cusp of retirement realising that they will not be able to continue their current standard of living. This is not a fun place to be and can cause a lot of stress and uncertainty. By having a goal and a plan can help alleviate stress both now and in the future.
Choosing your goals or knowing where you want to end up is a crucial part of setting your vision.
They help lay the steppingstones to success.
When it comes to our financial lives, common financial freedom goals are often “repay your mortgage” & “replace your employment income”.
These are all fantastic goals.
In our experience, we have found when people attach their values or why this particular goal is important to them, it provides more meaning and increases the probability of achievement. Most of the time past experiences and individual filters will be placed on each goal. For example, if your parents are living off the age pension in retirement, I do not want this to be me and want to ensure I am financially free prior to retirement.
What is important to look at is what type of lifestyle aspirations you want to achieve.
Everyone has different goals and that is ok.
Money doesn’t buy happiness, but the unfortunate reality is that it does buy choices and choices are something that you want at all stages of life.
Values
What is important about it?
You need to know where you are going.
Different goals require different strategies.
It helps shape your career choices
It helps you stay focused.
Methods
how will I get it?
Now you have your goals outlined & why they are important to you, it is time to start building the plan around this to map out how you will get there.
Much like a GPS – you know where you are now, you understand your final destination & now you have to work out the best route to get there.
Many people will opt to do this alone, however if you have had these goals for a number of years & are yet to achieve them, it may be time to bring someone else in to support you & keep you accountable.
Generally most people seek advice & support from family members or spouses, however your finances and goals can be very personal, where you may not want to share your goals or financial situation with your family.
The alternative is to outsource this to a financial advisor who can provide expert advice, support & guidance. This is their job that they do day in and day out. They have the experience of hundreds of clients before you, they understand what works and what doesn't work. You can also lean on them to avoid mistakes as you only have one opportunity at life and you want to ensure you get it right.
However you look to build you plan, ensure it has the steps to get you to achieve your goals.
Obstacles
What is preventing me from having it?
Most people will understand what or who will prevent you from reaching your goals. So putting a plan in place to mitigate these obstacles will be critical to reaching your goals.
However, we need to be mindful that throughout life, markets, inflation, incomes, goals & your health changes. In short, life happens.
Your blueprint or financial plan needs to be fluid. A plan that sits on a shelf couldn’t possibly account for all that life throws at you, so we partner with you & adjust our strategies to accommodate as your life changes.
Measurements
how will I know I am successful?
It is fantastic to have a goal, but what gives them more power is to quantify them.
By making your goals quantifiable they are measurable.
Instead of “I want to be financially free” quantify it – “I want my home unencumbered”.
Instead of “I want to replace my employment income” quantify it – “I want to have $1,450,000 invested to produce $100,000 per annum to live off in retirement”.
Measurable goals also enable you to be able to break them down into smaller bite size pieces or steps.
Without this clarity, we are at the mercy of our whims.
Achieving financial freedom & retaining financial freedom is just as much about generating wealth, as it is figuring out what is most important to you.
“Run don’t walk to see a financial adviser”
- Advice from $109m lotto winner
If you were the $63m Coffs Harbour lotto win, reach out to understand your options and receive financial advice for your lotto win.