Your Finances Should Be In Your Control Opt for a Lump Sum Payment

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So you’ve finally struck it big and won the lottery. You’re already dreaming of all the ways you’re going to spend your millions — until you realize that you may not get your money all at once. Nor are you getting quite all of it. Federal tax takes 25% of your money, then between 6-9% goes to your state tax, depending on which state you live in. You’ll be asked whether you want to start annuity payments or whether you want to opt for a lump sum. There are a host of good reasons to opt for a lump sum, especially if you were in debt — like most Americans — before winning the lottery. Opting for the lump sum is a good policy no matter what situation you’re in — if you find yourself with a large amount of money all at once, it can be in your best interest to simply take it all at one time, invest it, save it, and spend some of it. A financial advisor can also often help you make wise financial decisions.
So What Is All This About Lottery Annuity?
The lottery annuity payout is essentially a payment schedule over a long period of time. You’ll eventually get all your money, but you’ll only get a certain amount per the schedule, over the course of the payment schedule. For example, the Mega Millions annuity gives you one immediate payment and then 29 yearly payments. Each yearly payment goes up 5% from the last year. Similarly, the Powerball annuity has 30 annual payments that also get higher as time goes on.
So Why Should I Opt For a Lump Sum Payment?
For one thing, a lump sum payment may give you more financial freedom. Consider this — household income has increased a little over 25% in the last 12 years, but the cost of living has increased 29%. The typical American household has over $15,000 in credit card debt and over $125,000 in total debt! They pay a little over $6,500 in interest annually and almost 1 in 5 young Americans (between the ages of 18-24) say they are in “debt hardship.” The amount of debt this country is in can feel downright crippling and winning the lottery can feel like the answer to all your prayers. But if you’re only getting parceled out a certain amount of money per year, your debt may still not be paid down all the way and you can’t invest in other things. By choosing a lump sum payment, you have the entire amount of money you won at your disposal to spend or save as you see fit. That choice shouldn’t be in anyone else’s hands but yours. If you’re worried about the money going too quickly, there are always financial advisors on hand to counsel and guide you down a smart financial path.
What Sorts of Things Would It Be Wise to Spend My Lump Sum On?
First and foremost, paying down any outstanding debt should be a priority. This lets you have a clean financial slate — no more interest payments! No more monthly payments for student loans or credit card bills. After that, you have a little more breathing room. Certainly making some wise investments and saving should be in your top interests — after all, you want to be building the groundwork for a secure financial future with your newfound money, not squandering it. If you’re smart, you can have a lot of fun with your money, but also rest easy, knowing there’s still some in the bank or out in the financial market, making you more money. And of course — you should be having fun too! Buy that dream house or apartment you’ve been longing after. Finally get a new car or go on a lavish vacation. Treat yourself to a shopping spree! When you opt for a lump sum payment, the world can be your oyster.
Give yourself financial freedom by choosing the lump sum payment option. You want to be able to spend your money how you please!

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