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How to invest your lottery winnings

When people buy a lottery ticket, of course they dream about winning that big lotto jackpot. But if they really do win, the first reaction normally is to buy something they always wanted to have. That is perfectly ok, as long as you don't spend all your winnings for just one thing.

What you should do is sit down and make a plan for your future and how to use your new riches wisely. That plan should always include some kind of investment. Investing a part of your lottery prize is a wise move if you want to make sure that your financial future is secured. In order to do that, we would suggest that you do not put all your eggs in a basket. The secret of conservative money management is to split the available funds into 5 parts, as suggested below:

Buy real estate for your own use

win lotteryOwning your apartment or house is the most solid way to invest your money. No more monthly rent, and if you have enough money at your disposal, you may want to buy property for your closest family members as well. One word of advice: do not buy too big - property comes with monthly and annual expenses such as real estate tax, community fees etc. Make sure that you are able to cover those expenses from your monthly income. It is ok to spend up to 30% of your funds for this part.

Fulfil one or two of your dreams

That is the part which is the most fun. Buy a nice car, go on a World cruise or whatever your heart desires. Again, watch out for long-term costs that come with your purchase. Do not use more than 20% of your funds for this.

Low-risk investment

A good part of your funds should go into solid and secure forms of investments. A savings account (if the interest rate is not too low), government-issued bonds, precious metals, rented real estate and similar forms of investing fall into that category. Note that a lower yield from those is acceptable, but make sure that the yield is higher than the inflation rate. Use 20% of your funds here and make sure that you can convert this part back into cash quickly if needed.

Medium-risk investment

Buy stocks, but unless you have experience in this area, stick with blue-chip stocks. There is no need for day trading here, just buy for a decent price and let the stocks sit there. The long-term yield from those stocks should be pretty decent. Again, 20% of your funds should go into this part.

Higher risk investment

It is ok to use a small part of your winnings by investing in more risky assets. You may want to open your own business without having to get a loan from your bank, or you want to quit your job and go into day-trading, or you could invest money into a promising startup for some new technology. Maybe you can find that business that will be the Apple or Google or Amazon 10 years from now?

Whatever you do, make sure that the newly found riches are invested in a way that they are assets, and not a burden. Enjoy life and the freedom that a well-padded purse can give you, but do it wisely!

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