A lucky resident of Texas has just become $800 million richer, holding the seventh-largest Mega Millions jackpot in history. While this massive windfall might seem like the ultimate dream come true, it also opens a Pandora's box of potential pitfalls.
What should you do if you find yourself with an extraordinary fortune overnight?
Mark Cuban, billionaire entrepreneur and "Shark Tank" star, has some unorthodox but insightful advice for lottery winners. Cuban, known for his business acumen, shared his thoughts in a recent interview with Benzinga.
His guidance can be boiled down to a few key principles that could help you navigate the complexities of newfound wealth.
Play the long game
When faced with the choice between a lump sum or an annuity, Cuban strongly advises against taking the lump sum. For instance, with the Mega Millions jackpot at $1.1 billion, winners typically have the option to choose between receiving a $1.1 billion annuity over 30 years or a one-time lump sum of around $528.8 million.
“Don’t take the lump sum,” Cuban said. “You don’t want to blow it all in one spot.”
His rationale is straightforward: having a steady income stream helps prevent the risk of squandering the entire jackpot.
By choosing the annuity, you ensure a consistent payout of approximately $23 million annually, providing financial stability and reducing the risk of reckless spending.
Avoid risky investments
Cuban also warned against using lottery winnings for high-risk investments.
“You don’t become a smart investor when you win the lottery,” he said. “Don’t make investments. You can put it in the bank and live comfortably—forever.”
The odds of successfully doubling your fortune through investments are slim. Cuban argued that placing the money in a bank, though it might yield lower returns compared to riskier investments, ensures safety and peace of mind.
The key is to avoid the anxiety of potentially losing your winnings through ill-advised financial ventures.
Hire a tax attorney ASAP
Cuban’s next piece of advice is to hire a tax attorney before claiming any prize. Navigating the labyrinth of state and federal tax laws can be overwhelming, and a tax attorney will help manage your obligations and protect you from potential pitfalls.
This step is crucial in ensuring that your newfound wealth is handled efficiently and in compliance with tax regulations.
Be cautious with family and friends
Lastly, Cuban emphasized the importance of managing personal relationships carefully. “Tell all your friends and relatives no,” he advised. “Everyone seems to come out of the woodwork when they hear about someone winning the jackpot.”
While it’s natural to want to help loved ones, Cuban warned that many people may come forward with unrealistic demands.
“If you are close to them, you already know who needs help and what they need. Feel free to help some, but talk to your accountant before you do anything,” he suggested.
Cuban stressed that no one truly needs millions of dollars to meet their needs. Those who ask for large sums might not be genuine friends.
Rewards and challenges
Whether you’re one of the fortunate few who has struck it rich or are simply looking to improve your financial future, consulting with financial and tax professionals can help you make the most of your money. After all, effective financial management is the key to long-term success and happiness.
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