Winning the lottery is something that most people only dream of happening. Once it becomes reality many may think that all their money problems have disappeared, however that may not be the case. There are still important financial decisions to make once you realize that you have won the lottery.
Winners have the option of choosing how they would like to receive lottery winnings. There are usually two options, a cash lump sum or yearly annuity payments paid out over the course of many years. Three are pros and cons to both options making careful consideration of both options equally important.
Lump Sum Payment
Getting a lump sum payment can be a wise choice for those why are savvy investors or who are financially capable of handling such a large amount of money. Extravagant purchases can be made and large amounts of debt can be paid off by accepting a lump sum payment. On the other hand those who are not financially sound enough could find that they use all the money very quickly with very little to show for it. With the lump sum payment you get all the money at once, therefore when it is gone, it is gone.
Those who choose to receive their lottery payments as an annuity over the course of years usually pay fewer taxes on their winnings. Annual payments cause these individuals to fall into a lower tax bracket that lowers their total taxes paid on their winnings. The term of the payment nets a larger payout amount in the end. These payments however are received annually. This means that there is not a large sum of cash for any financial emergencies or to help cover expenses. There will be another payment once the first payment runs out, however it will not be until a certain date. More than 40% of families in the US admit to spending more money than they earn making it easy to spend annuity payments quickly after getting them. This makes annuities a good choice, especially for those who are well disciplined in their spending habits.
Selling Your Lottery Annuity
The good news is that majority of people who opt for annuity payments to receive lottery winnings have the option to sell some or all of those payments for unexpected finances that might arise. Selling some of your payments allows you to get immediate cash yet still have annual payments later down the road. This provides the best of both worlds. Immediate cash for extravagant purchases, and a steady stream of cash to help meet certain financial responsibilities.
Surveys confirm that playing the lottery is currently the most practiced form of gambling in the United States. Winning the lottery could be the end of all your financial worries. The average adult in the United States owes approximately $3,761 in revolving debt. Spending your money wisely and choosing the best way to receive lottery winnings can be beneficial to reducing or eliminating your current debt and helping you lead a debt free life.