Quora Answer: Should You Consult a Financial Consultant if You became a Lottery Millionaire?

The following is my answer to a Quora question: “Should you consult a certified financial consultant on the best methods of investment if you have suddenly became a lottery millionaire?”

As long as you have excess funds, you should engage a financial consultant.  This also includes tax consultants, and investment managers, if there is a need.  This is good practice.  When it comes to a massive unrealised gain, such as a lottery win, this becomes much more pertinent.  Most lottery winners make major mistakes in their finances because they do not understand that financial intelligence is just as important as emotional and other forms of intelligence.

For example, in many cases, they make large purchases without consideration of maintenance costs and tax exposure.  What happens is that they quickly arrive at a position where the cost of maintaining wealth far exceeds any income.  This is a slippery slope.  Their purchases are either of diminishing value or illiquid.  They are unable to service the growing debt, and they end up bankrupt, worse off that before the lottery win.

If you do manage to win the lottery, and get millions, your first instinct should not be to go out and splurge.  It should be to consider that you are now starting on a higher plane of wealth, which has privileges as well as cost.  Map out an investment horizon, and expected return.  And once all that is done, ensure you always spend less than you earn.  Consider moving the funds into an investment vehicle such as a trust, so that you mitigate your tax exposure.  These are the first, most fundamental things you do.