Americans spend more than $25.1 billion a year on lottery tickets, so somebody's got to win big. What if it's you? Would you be ready for the instant life-event change that comes with the winning experience? If you want to enjoy your jackpot to the fullest, you need to be prepared. Based on winners' case histories, we'll tell you what to say, what not to say, where to go, where to tell your job to go, and how much money to blow.
Many people are surprised to learn that lottery jackpots are paid over 20 to 25 years and the IRS withholds 28 percent federal income tax from each check. If, for example, you win $1 million, most states pay you $50,000 a year for 20 years less 28 percent federal withholding tax, leaving you with $36,000 a year. You may also have to pay additional income taxes when you file your retum, depending on your overall financial situation. The problem is that the $36,000 you receive today will only buy an $11,225 lifestyle 20 years from now, when the checks stop. There are no cost-of-living increase provisions for lottery payouts.
A better option for many is to take one lump-sum payment -- if you can get it. Only Arizona, Colorado, Ohio, and Oregon currently offer lump-sum options to new winners, and none to former winners. How much do they pay out? Forty to 50 percent of the jackpot amount. Still, over half of the eligible winners opt for the lump sum -- as well they should.
If you average a 10% return on investment, you can double your money every 7.2 years. In consecutive sets of seven years, $1 becomes $2, $2 becomes $4, and $4 becomes $8. At about the same time that the serial lottery payments would stop forever, you have increased your lump sum by a factor of 8 ($1 becomes $8). By taking a net lump sum today of $300,000 ($500,000 less 40% in taxes) and investing wisely instead of taking the $1 million jackpot in 20 payments (at $50,000 a year), you can have $2.4 million in the bank after 20 years and live off the interest forever. The wisdom of accelerating jackpot payouts is so compelling that our investment group has already helped over 44 lottery winners trade-in all or a portion of their lottery payments for cash-in-hand.
Though you should never believe anyone selling a system guaranteed to beat the lottery, there is one strategy called "Wheeling" that can improve your odds within a group of numbers. All wheeling techniques require playing several or all the combinations of a set of numbers and therefore spending more money. If you could buy all 18 million number combinations in the 6/51 lotto, you'd have a guaranteed win -- but it would cost you $18 million to play. So, many people form clubs and buy so-called "abbreviated wheels". For example, if you were to "wheel" all the combinations in the numbers 1 through 18, you would improve your odds of winning to 1 in 970 -- if the winning numbers fall within your group of 1 through 18.
There are two problems with wheeling. First, to guarantee a win, you'd have to spend $18,564 to buy all the combinations of six numbers in the 1 - 18 group. Second, if all the winning numbers are 19 and above, you lose everything. Still, lottery clubs form to wheel their way to hopeful fortunes.
Other play strategies include playing "hot" numbers (those winning most often) or "due" numbers (those not winning in a long time). To avoid splitting jackpots, some players buy the superstitious number 13, since most people skip it, and numbers greater than 31, since many players pick the 1 - 31 calendar numbers based on birthdays, anniversaries and other special dates.
Unprepared winners make the mistake of crediting their jackpot for their future fortune before they win and then blaming their jackpot for their eventual misfortune after they win. They fail to realize soon enough that money is merely a tool of wealth, not wealth itself. The lesson is that you have to take care of the money; the money will not take care of you. If you have problems before you win, these will be magnified and intensified after you win the lottery -- not solved by it.
To stay on the path to prosperity, invest at least $2 plus your time into personal growth for every $1 you chance on the lottery. With each dollar spent on the lottery, you receive the one-time, either-or, luck-of-the-draw chance to win or lose -- and then it's over. With every moment spent developing personal growth, you become that much closer to realizing your goals and assuring prosperity. An investment in personal growth is cumulative and always pays off. Bet heavily on you.
First, draft a simple group or family partnership agreement using one of the widely available do-it-yourself, fill-in-the-blanks legal kits. Then take your draft to a contract attorney for review. Doing so saves a great deal of money, as you are not asking or paying the attorney for the time to create a document, only to check an existing one. Next, obtain your free Federal Employer Identification Number (FEIN) by completing and returning to the IRS Form SS-4, "Application for Employer Identification Number". Call the IRS at 800-829-3676 for the form.
Then, when your group wins a prize, file your lottery claim using your FEIN and each group member then pays their fair share of the taxes due. One uninformed group of 51 players in Florida won $29.1 million in 1993 and has yet to collect a cent, due to internal disputes. Already two club members have died waiting for prosperity to come.
But don't wait too long to claim your ticket. Over $61 million has gone unclaimed, as most states require that claims be filed within 6 months of the win date. Besides, every day that you delay claiming your cash costs you lost investment or interest income.
Also, don't be overly-elated about winning, You may not know how many other winners could be splitting the jackpot. Unfortunately, there have even been cases of defective tickets that appear to win, but are worth only $1 for replacement of the faulty ticket.
In the meantime, do not postpone living your life until you win the lottery. Begin today living the life you ultimately want. Pursue what you do best and enjoy most, even if only on a small, part-time scale. Then, if you win the lottery, the money will accelerate your progress along the path on which you're already traveling. Too many players have waited to win their jackpot before planning what to do with their lives. As a result, many new winners spend about two years and several hundred thousand dollars in the school of hard knocks learning that self-direction is the key to prosperity.
A very practical reason for getting your life in order before you win is to avoid using your jackpot to pay for past "indiscretions". Most states crosscheck each winner's name against federal, state, and local agency files before they payout a penny. One Massachusetts Lottery winner of a modest (in lottery terms) $25,000 jackpot received a net check of only $6,000 after the state deducted $19,000 for previous welfare payments made to the player. Further, the state considered him to have earned income of $25,000 and removed him from the welfare rolls, leaving him worse off after he won than before! Other areas commonly checked include: U.S. citizenship status; outstanding arrest warrants or court judgments; federal, state, and local taxes owed; alimony or child support delinquency; student loan delinquency; even outstanding moving violations or unpaid parking tickets. Be aware: your jackpot can pass through many hands before placed in your pocket.
If not self-employed, immediately take a leave of absence. Expect not to return. You won't have to quit your job. Your pre-jackpot job will, most likely, quit you.
Fellow employees may try to make you feel guilty for keeping your job from some other person perceived as more needy. Co-workers can become jealous and resentful. Supervisors assume that you will quit eventually, so your promotion is unlikely and your responsibilities may become increasingly limited.
Quitting your job does not mean quitting your work. Work has a special intrinsic value and helps to embellish a sense of self-worth. Finding the answer to the type of work to do is a process of self-discovery -- a journey that your jackpot can help accelerate.
Meanwhile, park the cash in a 90-day CD and take an inexpensive working trip to plan the rest of your life. You need both the time to become accustomed to the new sums of money and the space to avoid jackpot chasers.
Getting an unlisted phone number, post office box, and home security system is a good first defense. Begin building a team of advisors that can include a Certified Financial Planner (CFP) to oversee the activities of a portfolio manager, a tax accountant, an investment advisor/newsletter editor; an estate planning attorney; and an estate planning life insurance agent.
For CFP referrals, call the Institute of Certified Financial Planners at 800-282-7526; the National Association of Personal Financial Advisors at 800-366-2732; the International Association for Financial Planning at 800-945-IAFP (4237). For attorneys, refer to the Martindale-Hubbell directory (also on CD ROM) and search for an estate planning specialist.
Even before you have all the positions filled, act as if you do. When you are inundated with the inevitable offers that barrage new winners, direct the pitch people to: "Send your information to our P. O. Box and if your program has merit, our people will contact you". This screening device takes the pressure off you and helps eliminate the inappropriate or illegitimate and to discover the truly worthwhile. Maybe one out of 100 deals will make sense for you.
Your personal demographic and psychographic information is a new world commodity -- and it's for sale or rent. Be aware that you will have -- probably already have -- a digital double of yourself in the binary bowels of several commercial databases. As your notoriety increases, your computerized clone becomes a more valuable trading commodity across many marketing databases. One "jeopardy of the jackpot" is that winning means losing a lot of privacy just when privacy becomes increasingly important to you.
The U. S. Office of Technology Assessment estimates that the marketplace maintains a total database of over five billion records and churns its data from computer-to-computer at an average rate of five times a day! Trust that your binary android is among the bits and bytes boundlessly bouncing between bureaus for bucks. Among the other information for sale or rent about you is: bank account balances; unlisted phone numbers; Social Security status, earnings, etc.; criminal records; litigation history; telephone usage statistics; work-related injuries; medical records; credit card balances, limits, etc.; driving records; employment and educational history; club memberships; bill payment history; personal data (such as, family composition, buying patterns, and lifestyle); and names of lottery winners .
Once you have the crass, indiscriminate consumption out of your system, plan your future spending and investing of the subsequent jackpot checks. Mindless, conspicuous consumption leaves you as empty as sex without love -- it may be fun for a night or two, but never satisfies your soul and sustains your feelings in the long run.
So, blow your 10%. Experience your momentary financial irresponsibility and decadence. Then, get back on the path to true prosperity.
So, play the ultimate what-if game: "What if I won the lottery? What would I do?" Take the answer to this question and dare to begin living that life today. Pursue what you do best and enjoy most. This activity gives you both a built-in competitive and psychological edge to success -- with or without the lottery -- and puts you on the true path to prosperity.
Rob Sanford, author of Infinite Financial Freedom can be reached at Titlewaves Publishing, PO Box 288, Lihue Kauai, HI 96766-0288. Copies of his book are available for $18.95 from the same address or at fine bookstores.
This article has been reprinted/republished through the courtesy of Halsey Publishing Co., publishers of Delta Air Lines' SKY magazine.
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