What to do after you win the lottery

So you’ve won a multi-million dollar jackpot, and you want to know how to avoid end up miserable from having all that money.

First: Don’t tell anyone.  If you don’t have enough willpower for that, tell people that a distant relative died and left you a few thousand dollars.  If people ask you how much exactly, say you’re not sure because of taxes.

Second: Work with a law firm and an accountant to set up a blind trust.   You want the law firm to be reputable, because they’ll be watchdogging the accountant.   The blind trust should be set up to make it deliberately difficult for you to get at your money, except from the rules below.   If you do decide to get money out of the trust ahead of schedule, it should come with extremely high penalties, in the form of matching donations to charities that you absolutely despise (for example: NAMBLA, or an evangelist church.. or in my case, both!)

The Rules:

  • Divide your current monthly income by 6.   We’ll call that X.
  • The first month, the blind trust pays you X
  • The second month, the blind trust pays you 2X, the third month 3X, the fourth month 4X, etc.   By the 6th month, you’ll certainly be able to quit working (if you so desire) because you’ll be making the same as your current salary.  By the end of the first year, you’ll be receiving twice your normal monthly salary.
  • In the second year, this continues – by the end of the second year, you’ll be receiving four times your former salary.
  • Have your accountant do some analysis with you at this point – how long will this strategy work before you run out of money?  If it will last until you are certainly dead, keep at it.   Otherwise, you’ll want to decide on what age you’ll switch to a more modest “retirement style” payout schedule

Why this works:

People who have things to look forward to are happier than people who don’t.   When you receive all your money at once, you are happy for a few months, but then your mental state adjusts, and you no longer have the future income to look forward to.  Typically, you start buying expensive things because you can, and they make you happy for a few days, but then that wears off, and you get into a cycle of spending, just to feel happy until *poof*, all the money is gone.

Instead, we’re going to slowly increase your income over time.   Every month, you’ll get a little more, and you can plan on using that extra money to pay for things that you want.   By slowly growing, you have something to look forward to, but not enough to use up your winnings quickly.   You’ll be able to enjoy luxuries, but you’ll have to plan for them, months in advance, and looking forward to something in the future makes people happy too.

And if someone (a relative) finds out about your winnings, and starts pressuring you, you have a nice safety valve – if you withdraw early from the trust, you’ll be funding charities you despise.  It gives you a strong moral argument to stick with the program.

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