Do you want to be a millionaire? Many people do. They dream about mansions, expensive vacations; and of course, their own private jet.
The sad truth is that winning the lottery isn’t always what it’s cracked up to be. One day someone is an average Joe, and the next morning they are a millionaire. The pressure and potential are just too much for some people. Stories of lottery winners going to jail, going bankrupt, and regretting that they ever won are rampant.
What Goes Wrong?
Even after taxes take roughly 50% of the money, lottery winners are still left with a sizable amount. And what do they do with it? They buy everything they’ve always wanted and that’s where the problems start.
The most common purchases of lottery winners are multi-million dollar estates, private jets, and exotic cars. Brad Duke, who won a $220 million jackpot in 2005, took a $63,000 trip to Tahiti with 17 friends. He also spent $65,000 on several new motorcycles.
When compared to the overall winnings, these one-time expenses don’t seem significant. But what most lottery winners forget is that purchases like mansions and private jets are ongoing expenses.
Another big mistake lottery winners make is to quite their day job. This leaves them with more time to spend their new-found wealth. It also reveals the mentality that may be the biggest reason why winning the lottery usually turns into a nightmare; rather than a dream come true. People just can’t seem to remember that money doesn’t last forever.
When you combine extravagant purchases, ongoing expenses, and the wrong mentality it doesn’t take a rocket scientist to see why most lottery winners go broke within a few years. But not all of them do. In fact, Duke is an example of a successful lottery winner. So what did he do right?
How to Do It Right
Out of the $220 million he won, Duke walked away with $85 million. Forty-five million of this he invested in safe, low-risk investments. He invested another $35 million in more aggressive investments like oil, gas, and real estate.
Although Duke did spend a significant amount of money on new motorcycles, cars, a vacation, and family gifts; his expenses were nothing compared to what most other lottery winners spend.
The difference between people like Brad Duke and people like David Edwards is simple.
Whereas Duke invested his money and didn’t go overboard on purchases, Edwards bought a multi-million dollar home, a private jet, dozens of exotic cars, and bundles of crack cocaine. He ended up going broke and living in a storage shed until he got kicked out.
Do You Still Want to Be a Millionaire?
Managing millions can be a challenge for anyone who’s never done it before. But successful lottery winners like Brad Duke show how it can be done.
You many never win the lottery, but in case you do, there is a lot to learn from those who have. First, remember money doesn’t last unless you keep adding to it. So, don’t quite your day job and do invest most of the money. Second, don’t go overboard on fancy purchases. Sure you can still go buy a nice house or give some money away; but keep it reasonable and don’t forget that some expenses are ongoing.
Who knows? You could end up winning the lottery one of these days. If that happens, are you going to be a David Edwards or a Brad Duke?