Financial advisor James Wrigley has warned Australians about what to do and what not to do if they win the lottery. (Source: Getty/The Lottery/Instagram)
Australian lottery winners have revealed all the lavish and responsible things they did after winning the jackpot. There were 500 division 1 winners last year, with more than $1.5 billion going to lucky winners. If all prizes were the same amount, the average would be about $3 million per person.
Ahead of Thursday’s $100 million Powerball drawing, The Lott shared some examples of what winners are scrambling to buy with their sudden cash grab, but financial advisor James Wrigley told Yahoo Finance that anyone who wins the jackpot this week should exercise caution.
“You have to do it in moderation,” he explained. “It’s very possible to spend all your money on everything – holidays, luxury cars, houses, villas, boats – and then 10 years later you’ll have almost nothing left and end up having to go back to work.”
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How did Australian lottery winners spend their money?
Some of the smart purchases made by Australian lottery winners last year included a “fancy new house and kitchen” and a “fence and shed”.
But some of the more lavish spends included a trip to the Monaco Grand Prix – a lifelong dream for the winner – and skydiving over the Gold Coast.
Just over 50% of winners said they had invested some of the money for the future, and a further 53% said they had paid off their mortgage or bought a new home.
Two-fifths of winners added that they used some of their lottery winnings to provide financial support to friends and family.
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Wrigley told Yahoo Finance that lottery winners shouldn’t hold back on shopping sprees or gifting loved ones, but he urged them to think carefully about each purchase.
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“I think an easy trap to fall into is spending too much on lifestyle things like big houses and vacation homes,” he said.
“At the end of the day, those things might be nice to have, but they would cost a lot of money to maintain.”
While the costs may not be a big issue at first while you have plenty in your bank account, city taxes, cleaning fees, insurance and other bills could add up significantly, he said.
“You could end up putting a lot of money into assets that don’t actually contribute anything to your retirement,” Wrigley said.
What should you do if you won the lottery?
While it ultimately depends on what you want out of life and how much money you’d like to earn, Wrigley revealed the top four things he’d do if he suddenly had over $100 million.
Real Estate: Your financial advisor tells you that you are looking to buy a home for your family.
Pensions: He explained that he will make non-deductible contributions of $110,000 each (current annual limit) into his and his wife’s pensions by June 30. Then in July, he plans to deposit $360,000 into both retirement accounts (more on that here).
Private Auxiliary Fund: A Private Auxiliary Fund (PAF) is a type of charitable trust that helps manage charities. You can give 5% of the money you put into the fund to charity each year and get an immediate tax deduction on that money.
Family Trust: Wrigley said most of his lottery winnings go here and are invested in various stocks and real estate. If you play the game right, he said, the money will “last for generations.”
Lott recommends that winners meet with a financial advisor before claiming their prize and to spend the money wisely.
When is the $100 million Powerball drawing?
Entries for this week’s $100 million Powerball lottery draw close at 7:30pm AEST on Thursday 22 August.
The winning numbers will be drawn immediately after the application deadline.
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