Having too much money can present a problem. Granted, it's a problem that most of us would be lucky to have, but a problem nonetheless.
As the current Powerball jackpot climbed to a staggering $500 million, hopeful winners rushed to buy their tickets before Wednesday's drawing. The odds of winning are incredibly small. One in 175 million small.
But what if you beat the odds? You'll be wealthy, of course, but many Powerball winners (or lottery winners of any sort) often aren't prepared to handle their sudden influx of cash. Worse yet, they sometimes find themselves being resented by friends, family and even strangers.
"You’re not going to be liked for a while, and you’ll have to accept that,” says Laurie Puhn, J.D., a lawyer, couples mediator and the author of "Fight Less, Love More: 5-Minute Conversations to Change Your Relationship Without Blowing Up or Giving In."
“The danger is that your choices — in terms of how to lend, who to lend to and when to lend — begin to appear unfair to your friends and family,” Puhn states, explaining that Powerball winners need to have a personal policy regarding their monetary gifts. If you plan on doling out money to loved ones, she advises you give once, give equally, and never give again. "If anyone does ask you again, you need to say no," she adds. "Otherwise, you will ruin your relationships.”
Mental health expert Dr. Jeff Gardere also notes that money can easily create resentment between loved ones. "Regrettably, once a person has become a millionaire, family and friends have a mistaken notion that they are 'owed,'" he says, adding that "they are notorious for not paying back on loans" due to their feelings that the millionaire family member has no right or need to get the money back. "Familiarity breeds contempt," says Gardere.
And much like Puhn, Gardere advises that lottery winners who share their jackpots should follow strict guidelines. "Of course [the winner] should share, but it should be conducted like any other business transaction," he says, explaining that lenders should weigh the "potential for return on a loan or investment."
But when it comes to investments, wealth management expert Ed Butowsky advises that Powerball riches be handled in a specific manner. "Stick with investments in the public market," states Butowsky, who recently founded ChapwoodFinance.com, a one-stop database for all things finance. "90 percent of private investments will lose 100 percent of your money," he says, explaining that the likelihood of a new restaurant or nightclub succeeding is, conversely, only about 10 percent. "What are the chances that your cousin’s best friend has one of those investment opportunities?"
And if it's a huge windfall, Butowsky sometimes advises not investing at all, but rather taking a lump sum and living off the interest. "Go have fun," says Butowsky. "Just make sure your living expenses are paid several times over."
But whatever a Powerball winner decides to do with his/her money, financial analysts agree that it needs to be done wisely. "If we have good financial habits, then lottery winnings are likely to enhance our lives and the lives of those people around us," believes financial advisor Peter Dunn, AKA Pete the Planner. "If we have poor financial habits, then lottery winnings will only serve to give us more resources," which, according to Dunn, isn't a good thing. "People that lack resourcefulness aren't well served with more resources," he says.
"You have to watch out for fraud, first and foremost," continues Dunn, who says that unlikely sources such as attorneys, advisors and accountants might try to con new millionaires out of their money. "A trusted accountant is probably the first professional that you should seek out," he advises. "In addition, a winner shouldn't come forward publicly if they don't have to," states Dunn. "There are zero advantages to having people know that you won millions of dollars. But there are millions of disadvantages."
But don't let those disadvantages get you down. As Puhn asserts, there's no reason to feel guilt or anguish over winning some cash. "Be honored, and use that money for a good purpose,” she recommends. “Between that and sticking to a consistent policy [of monetary gifts], you’ll be fine.”Comment