How to Manage Your Lottery Winnings

Americans spend more than $80 billion a year on lottery tickets. That’s more than $600 per household! Experts say this money should go to other places, like saving for retirement or building an emergency fund. Instead, many winners end up bankrupt in a few years.

Lotteries have been around for centuries. The Old Testament instructed Moses to take a census and divide the land among the people, while Roman emperors used lotteries to give away property and slaves. The lottery was introduced to the United States by British colonists, but early reaction was largely negative. Christians were especially concerned that lotteries promoted immoral behavior and enslavement.

The lottery is an arrangement in which prizes are allocated by a process that depends wholly on chance. In some arrangements, the prize is a cash prize. In others, the prize is a service or a good. For example, a company might hold a lottery to determine the best employee to promote or to allocate prizes for their services.

A third element is a mechanism for collecting and pooling all the stakes paid for a ticket. Normally, a percentage of the stakes goes to the costs of running and promoting the lottery. A further percentage is earmarked as revenues and profits for the lottery organizer or sponsor. The remainder of the stakes is available to the winner or winners.

It’s easy to imagine what you might do if you won the lottery — expensive vacations, fancy cars and luxury goods, of course. But, before you start spending that big jackpot money, consider hiring a financial team, including a tax attorney and certified public accountant, to help you make the right choices about how to manage your winnings.