Lottery Jackpots – How to Spend Wisely
It’s pretty easy to waste money when you’ve got a lot of it. Ask most lottery winners about the amount of cash they part with following a huge windfall and you’ll probably be met with a wide-eyed response.
Unfortunately, despite the natural urge to spend like an inebriated sailor, many winners take things too far and squander their prize money in no time at all, only to find themselves back on 9-5 street within a few years. But it doesn’t just have to be about luxury cars,mock-Tudor mansions and fast living. While there’s no harm in enjoying the high-life for a while, it’s a good idea to find useful places to invest those millions so that you can protect your future while ensuring financial stability.
Find the Right Bank
To begin with, it’s crucial to find the right bank so getting the most pertinent advice is essential. Operators like the Camelot Group run after-care programs which provide access to a panel of lawyers and financial advisers who have extensive experience working with high-net individuals. For wins of more than £500,000, private banks are usually recommended. All high street banks have private departments while some even include teams trained to deal exclusively with national lottery winners.
Pay off Debts
This is one of the best places to start if you ever find yourself with a few million in the bank. In fairness to even the most profligate of lottery winners, paying off debts is often the first thing that they take care of. Student loans, mortgages and credit card debts are a fact of life for most of us and can be a major drain on financial resources, with interest payments also meaning that we actually lose money. So it makes sense to get rid of these burdens, not just to establish a sounder financial footing, but to provide peace of mind.
Buy Assets with Equity
Buying assets such as luxury cars, jewellery and clothing can be great fun if you’ve got cash on the hip. But investing in fancy automobiles and the like isn’t the most prudent form of spending because they depreciate in value like there’s no tomorrow: cars get updated constantly with new models while jewellery and clothes go in and out of fashion. What this means of course is that you’re going to get little or no value back in the short to medium-term. It’s therefore worth investing in items that are going to retain value and become a source of disposable income in the future. These include collectibles like artwork and antiques as well as high-end properties, which can have a significant resale value.
Investing in the Stock Market
Although the mere phrase is enough to fill some people with terror, the stock market offers plenty of opportunities for sound investment, provided the risks are managed properly. For one thing, spending money on stocks allows you to stay ahead of inflation – historically, stocks average an annual return of 10% which is significantly better than the 3.2% inflation rate. In addition, many well-established companies pay dividends to their investors, which should improve your chance of a solid return in the long-run.
Securing the future of your loved ones is a no-brainer if you’ve got the cash. Probably the most effective approach is to set up a discretionary trust, which you can oversee as a trustee. Whatever you decide to put into the account will be subject to tax at the rate of 6% every 10 years. However this becomes free from inheritance tax after you die which means that your children and grandchildren will be included as beneficiaries.
If you’ve been lucky enough to secure a lottery wind fall try to exercise some restraint and common sense and you’ll be set up for life. It’s simply staggering that so many lottery winners fail to do this and find themselves with very little further down the line.