I listened to a podcast which stated that 55% of lotto winners are worse off than they started, within 3 years of winning the lotto. This got me thinking about how I would blow the winnings. Let’s ignore the fact that I have never played the lotto and assume that I found the winning lotto ticket in a ditch somewhere. I would like to know the odds of that?
How do lotto winners go broke?
Most people go broke by spending it on crazy shit that means something to them. They plan to change the world by donating to political parties, advocate marijuana legalisation or starting an all-female wrestling series. But the number one reason why people go broke, is they miss the thrill of the win. Winning made them feel alive and they want that feeling back. So, they gamble it all away and even continue buying lotto tickets. So, rule number one, no gambling.
The next batch of people simply gives it all away. We all have people in our lives that we know are struggling financially and the simple solution is to throw money at the problem. The problem is, you dig yourself out of a difficult situation with financial education, not more money. Treat the cause, not the symptoms. Rule number two, only give someone money if it is the only way to dig them out of a hole. Also, avoid listening to the song “Million bucks”.
Then you will also hear from a long-lost friend that you haven’t seen in 5 years. You deleted him from Facebook because of all the candy crush invites. You don’t want people to know that you won the lottery. Apart from the fact that people have been held for ransom, you want to enjoy the money in peace. Rule number three, stay anonymous.
How to blow millions?
The lottery amount at this stage is R14.2 million. If you follow my blog and have read my Financial Independence posts, you will know that this is more than enough for us to retire comfortably. I’ll even have some spare cash to blow (and give away). Here is my five-step plan:
Step 1: Pay off debt
I always wanted to be debt free, or let me restate that, own my home. This will be my chance to make that happen. If I had any other debt, this would be taken care of as well.
Step 2: Change a loved one’s life
I require R12.3 million (net -worth) to retire right now. At R1.5 million, I’m short R10.8 million. This leaves me with R3.6 million to spend on things I’ve always wanted and to help a few people in my life. I would not do it all at once but rather spend the money systematically after careful consideration.
Step 3: Don’t quit your day job
At least not at first. Stay for a few more months and see what it feels like to do your job if you don’t care about the money. Then organise a sabbatical for a few months and try it on. You might even find that you miss working or achieving something. Ask what you would do if all jobs paid the same salary. Only then can you determine what to do with the rest of your life.
Step 4: Invest
The rest of the money needs to be invested to give me a monthly income. It would be the simplest investment portfolio you have ever seen. It would have one global Exchange Traded Fund (ETF), One local ETF and one property ETF at a ratio of about 50/40/10. All while avoiding fees like the plague.
Step 5: Travel (a lot)
This is a personal thing. I like experiencing other countries and cultures. I would travel to Peru, Equador, USA, Canada, Ireland, Spain, Morocco, Malta, Croatia, Greece, Czech Republic, Sweden, Turkey, India, China, Vietnam, Cambodia, Japan, Australia, New Zealand and Madagascar. My wife would insist on the Maldives as well. Needless to say, you would not see me for a while.
This strategy applies whenever you receive a lot of money at once. Be it from an inheritance, a bonus or the sale of a company you own. Have a solid plan for how you spend lump sums, otherwise, it will almost certainly go to cars and tigers on a golden leash (and tigers eat a lot).
Be safe out there,
Quote of the week"There is a very easy way to return from a casino with a small fortune: go there with a large one." – Jack Yelton Click To Tweet
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