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Got the winning lottery ticket? from freemexy's blog

A resident of South Carolina finally stepped forward to claim the Mega Millions jackpot from last October. Although the prize was worth around $1.5 billion, the winner – who wished to remain anonymous – chose the cash option, a one-time payment of $878 million.Get more news about 彩票API,you can vist

This begs a question: What should you do if such a windfall falls into your lap, whether a jackpot, a large inheritance or huge profit from selling a business?

I have pondered this for years as an economist researching personal finance issues. I also ask my undergraduates every semester what they would do if they suddenly got $1 billion. The standard student response is to pay off their sizeable college debts and travel the world.

While college is expensive and traveling to exotic places is fun, neither will use up much of a billion dollars. But yet somehow many people manage to win big and squander it quickly.

Here are a few tips based on research for how to handle an unexpected windfall.As I noted in a recent article, people who come into large sums of money end up bankrupt. My own research found that the average person in their 20s, 30s and 40s who was given an inheritance or large financial gift spent or lost half the money relatively quickly. A 2011 paper found that people who won mid-sized prizes in the Florida lottery were more likely to file for bankruptcy than small lottery winners.

The data suggest it takes time and experience to radically adjust to a different lifestyle. Given these problems of self-control, my advice is simple. If you win the lottery, do not take the lump sum payment. In the case of the Mega Millions jackpot, that allowed a winner to receive $878 million immediately – before taxes.

Instead, take the option to receive annual payments over 30 years, which is still an incredible amount of money each year. And if you happen to have issues with self-control and spend the entirety of your first and perhaps second payment on fancy homes and cars, you still have 28 or 29 years of additional payments – which get larger over time – to get your financial house in order.

If your windfall came by another means, such as inheritance, it’s still easy to handle a self-control problem. Many insurance companies and brokerage houses sell annuities, which operate just like that 30-year lottery payment option.

An immediate annuity is a simple contract. You give a certain amount of money to an insurance company and in return it gives you a periodic payment, which factors in inflation, for either a fixed term or for your entire life.

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