I couldn’t ignore the article titled “High
cost of a Powerball jackpot,” authored by Dayana Yochim, a consumer finance
expert for the Motley Fool multimedia financial-services company. Considering the hundreds of millions of
dollars with which the winners could be deluged, complications certainly seem
inevitable.
Ms. Yochim concentrates her attention on how
the newly created millionaires must now conduct their lives. At once, each must quickly hire a staff of
advisors to shepherd the unwitting recipient through the fiscal minefield of
sudden wealth. Onto the payroll must go,
at the very least, a certified financial planner, a tax attorney, a certified
public accountant, an estate lawyer, and finally a therapist who will guide the
benefactor through a life which “. . . is never going to be the same.”
It’s true that for a billion-dollar winner, the
effect can be traumatic, but it’s unlikely anyone will ever see such an
amount. Most likely an advertised award
of $50 million will be the largest, and if paid in a lump sum, the funds
distributed after taxes will come to no more than $30 million. This is not peanuts, of course, but for
anyone with a sense of perspective and discipline, it’s a manageable figure. And by manageable, I mean without the
collection of hired handlers. How? Let me tell you.
To begin with, you do not . . . I repeat, NOT
. . . place your affairs with a financial planner, certified or otherwise. Though along the way you’ll need legal and
accounting assistance, it’s not so at the onset. And above all, you must keep personal control
of your windfall or you’ll see it dissipated.
As a very first step, you should safeguard all your winnings by one-year
FDIC-insured time deposits at as many banks as necessary so that each is fully
insured to $250,000 singly or $500,000 jointly. Although small amounts may be needed during
that year to meet previously pressing problems, nothing else should be spent,
and in particular no commitments entered into. This then gives you a full year to breathe comfortably
while you conduct the investigations you must and acquire the knowledge you’ll
need to competently oversee your newly acquired fortune.
If you’re reasonably sound of mind, my method
will work nicely. If, however, you’re
incapable of conducting your life in any sensible manner, then you’ll lose it
all, this in keeping with the timeless adage: A fool and his money are soon parted.
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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity
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