A Sabahan who recently won quite an impressive amount of almost RM 30 million from Grand Dragon Lotto Malaysia was not exactly silent about his overnight success. Lottery winnings are rare but the stories of the winners going from wealthy to poor is rather common. The Sabahan ended up drying his winning wallet in no more than 2 years.
In the world of financial planning, the rules of saving money are simple and straightforward. One of them is simply by not purchasing extravagant or expensive items. However, albeit an easy rule to follow, many lottery winners still cannot resist the temptation of splurging.
As a matter of fact, purchasing expensive items is not the root of the problem, but the continuation of such actions with zero income flow. Big lottery winners (4D Malaysia or Jackpot), statistically, have left their day-to-day job and are entering the retiring phase of life.
Yet with so many cases of unfortunate lottery winners, the number of such incidents are not going down.
The bigger question here is: How do we avoid such financial mistakes?
Refrain From Over-publicizing
Sure, you are not able to remain anonymous completely after winning a very coveted prize. But that does not mean that you should flaunt it all over social media; announcing that your wallet is overloaded with money.
Though this is one of the most common moves by lottery winners, it can easily backfire. Relatives and friends that you have kept in contact with for years might just walk up to your door the next morning. Winning the lottery should be a satisfying and enjoyable experience, not a constant hindrance.
Hire a Team
This is usually overlooked by many boastful winners. They are reluctant because they would like to ‘save’ money on the fees and think that they can do just fine without them. The simple fact is that the lottery winners usually do not come from a wealthy background, hence, they do not have the experience of handling a large amount of money at once.
So, getting a financial advisor is highly recommended. Not only do they advise on your spendings, they can also contribute by managing your money effectively, leaving you without any worries in the financial area.
Staying/Quitting a Job
Winning RM 5 million or RM 15 million might or might not sustain your lifestyle. It does not necessarily guarantee a retirement life for you. If you are currently working with an average income, don’t be too hasty to quit just yet.
Quitting a job essentially puts you in a position where there is no incoming but only expenses from there onwards. If you dislike your job, consider changing one. With the lottery wins, you would feel more comfortable job hunting, knowing that you can still pay the bills for quite some time.
If you truly feel you can retire with the amount you have just won, consider consulting with a financial advisor.
Lump Sum or Annuity?
Not all lotteries provide annuity but almost all winners choose a lump sum. It is a tempting offer but not a wise decision. Getting a lump sum of the reward is also the first step of potentially losing it all.
There are several benefits of choosing annuity. The most obvious reason is that you won’t have the temptation of spending huge amounts on luxury items or buying a house. The adrenaline of getting a lump sum is so high that it can lead to irrational purchases. And, there is also another benefit where getting annuity increases the payout by a small percentage each year. This also means that you will be getting more than what a lump sum offers (subject to each lottery).
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