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Posted: Wednesday, Jan 08,2020 | Time: 05:15 am | Edited by: The Lottery Lab Staff
People make plenty of money mistakes in their lives. People are prone to get even more careless with money when they receive an unexpected windfall, like a lottery jackpot. What’s more, there are some mistakes even financial experts won’t warn you about. Learn about those common money mistakes, so you can avoid making them-
The biggest mistake anyone can make is blowing a financial windfall. People see a large amount and think that it allows them to buy whatever they want to. But what they don’t realize is that any amount of money is limited. Since it is a one-time income, they can’t replace the money they spend and eventually, they will run out of money (unless they make careful investments). A financial advisor will tell you when and how much to spend but they won’t tell you where NOT to spend!
People making an average of $30,000 a year manage everything including housing, food, health, etc. Then they win a lottery, they buy an expensive house, expensive clothes, new cars, dine out at luxury restaurants, have exotic parties, start working out inexpensive workout studios, etc. Very few of these things are necessary or provide real value. So eventually, people go bankrupt. They were able to manage it all with an average salary but couldn’t with the extra windfall. Why? Because they started living above their means. A financial advisor will never tell you that!
A vacation is often one of the first things a lottery winner plans. Because this is one of the first new expenses, winners often assume they have a lot to spend. As a result, they lose track of their spending and tend to spend more than intended. Vacations are important and they should be relaxing, but it is best if the vacation is well-planned and pre-booked. Planning ahead can help winners avoid spending too much on vacations.
One mistake winners can make is not using a personal budget. Sure, they are going to have a plan from the financial advisor they hired, but then they need a personal budget to keep track of where their money is going on a monthly basis. Once they start using one, they can figure out ways to reduce monthly expenses and then use their surplus to treat themselves once in a while.
Always pay your debt before setting up a savings trust. Pay your debts because you are paying interest on these debts. In most cases, the interest you are paying is higher than what you can earn by saving money. You can avoid paying hefty interest if you pay your debt immediately after your big win. Here’s why it makes sense: If you have debt on a card with a 22% interest rate, then every dollar you put towards that debt is a guaranteed return of 22%. That’s a significant return rate, and it’s risk-free.
The thrill of winning the lottery can make it hard to make well-thought-out decisions. Maybe that’s why most people hire financial experts. But what about the things even they don’t tell you? For that, you will have to do your homework. Don’t completely rely on them and do some of the research on your own. An extra effort and little knowledge never hurt!
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