Winning the lottery

This guest post from Tina is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. If you enjoyed this story, please consider joining our facebook community at our Get Rich Slowly Facebook Page.

Although I know the schadenfreude of reading a lottery winner's tale of woe, I want to share a more positive perspective. I also think that windfalls are more common than we realize, whether they come from inheritances, settlements, or tax refunds. So here's my windfall story.

The year 2009 was a rough one financially for my husband and me. We dealt with a job loss, the birth of our first child, a very expensive medical emergency, and an unexpected move across country for a new (much lower-paying) job all at once. Fortunately, we had a 12-month emergency fund ready, no debt, and knew how to adjust to more frugal living. (We're long-time Get Rich Slowly readers.) We surprised ourselves by how calmly we accepted the drastic changes to our circumstances.

But you never know what life has in store.

My husband settled into his new job and joined a $5/week state lotto pool with a few co-workers. Yes, I know that the lottery is a fool's tax with astronomical odds (1:~5,000,000 in this case), but he viewed it as a bit of fun at an otherwise stressful job. My view was that it was $5 down the drain, so imagine my shock when he called to tell me the office pool had won the jackpot!

After going through a roller coaster of emotions, we met a fee-only financial planner and devised a plan.

  • First, we avoided publicizing our name by claiming the win with a trust. (Tina isn't my real name, in case you were wondering.)
  • Then we planned for taxes. The initial prize was over $10 million, but after taking the lump sum, dividing it between winners, and setting aside 40% for federal and state income tax, we were left with a million and some change. Not enough to retire on when you're 30 (we're keeping our jobs), but we can't complain!

Now that we had more assets, we had to worry about protecting them.

I work in a medical field with some chance for litigation, so I greatly increased liability and umbrella insurance. We set aside one-third of the cash to custom-build our dream home (not a McMansion; a 2500 square-foot ranch home on a half acre). Then we maxed out a 529 college fund for the kids (bonus: the contribution is tax-deductible in our state). A portion was allotted to charity and we were left with quite a bit of cash to invest.

We decided on an 80% stock/20% bond allocation (we went more aggressive because we are relatively young and have no mortgage). We had always maxed out retirement accounts, but now needed to start taxable investing. We're using a passive, indexed approach; our retirement accounts are composed of a total bond market fund, and the taxable account is split between a total U.S. stock market fund, an international fund, and a tax-exempt bond fund. It has been an adjustment to watch our balance fluctuate by $50,000 when we have a volatile week in the market, but the plan is to stay the course, rebalance when needed, and do lots of tax-loss harvesting (we need it this year!).

I've read the studies that have found no significant increase in happiness for lottery winners. Overall, I agree. We really are just as happy as we were before all this, and our lifestyle really hasn't changed. However, it's very nice not to worry about finances if we have an unexpected car repair or want to take a family vacation.

The lesson I've learned is prepare for anything! Just when you think you have life on auto-pilot, life throws some turbulence your way.

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Daria
Daria

I really liked your story. It’s nice to hear about a lottery winner who did some planning after winning. You didn’t say anything about family. I’m hoping that if they know you won, they are glad for you. I have any aunt whose sister won a California lottery and shared it with her. The sister was not married and didn’t have children. It was wonderful of her sister to share because this aunt had heart problems and the money enabled her to have medical procedures she needed.

Charlene
Charlene

Congratulations! It’s great to see someone win and act responsibly. Claiming the winnings as a trust was something I recently heard about and can see the advantage there. And quickly going to a fee-based financial advisor was an excellent response to an otherwise overwhelming situation. The best part of your story, for me, is that the money didn’t change your state of happiness or your lifestyle. That says a lot and I’m that much happier for you!

Drizzt
Drizzt

omg! 10 mil becomes only 1 mil??

Joe+M
Joe+M

Sure, after you split it with the other people in the office pool and pay taxes.

Tracey+H
Tracey+H

Wasn’t it shared amount a group of workers?

Petra
Petra

Congratulations, Tina. I think you did well. Must feel good to know that you have a buffer. I’ll get there too, in the future, it just takes a bit longer 🙂 .

@Drizzt: they had to divide the money amongst several people, they were together in a pool.

Selene M.
Selene M.

Congratulations, Tina. Lots of good strategy there for big winners. Thanks for sharing your story.

Megan
Megan

What a great story, and I think you’re exactly right that big life changes, whatever they are, don’t change who you are. One tip: you mentioned that you increased your personal liability and umbrella insurance because of the chance of litigation from the medical profession. You’ll want to talk to an insurance agent about that decision and what you’re covered for because a professional exclusion is common on liability policies and you’d probably want a separate personal liability policy if you’re concerned that your employer isn’t carrying adequate coverage. (As an employee, if you’re named in a suit for an… Read more »

Nicole
Nicole

Congrats!

20's Finances
20's Finances

Great story. Similar to the other comments, it is nice to hear of a responsible lottery winner. Before reading this, I wasn’t sure they existed. I still suspect that they are a rare find. Congrats!

Lauren
Lauren

I really enjoyed reading your story. Whenever we play the lottery (rarely) we say we’re paying for that short period of time to dream about what we’d do if we won. It’s nice to read a story that sounds a lot like our dream. Not everyone just runs out and blows the money and for some of us, that can be dreamy!

RosaMN
RosaMN

It is nice to hear of someone whose dream is basically the same life, with less worries. That’s mine, too.

Geek that he is, my boyfriend did the math & figured out just how much I’d have to win to quit my job (the after-tax amount has to equal the present value of my expected future earnings, basically) – it’s significantly more than $1 million.

Nancy L.
Nancy L.

What a great story! It’s nice to hear a different view than the typical “You’ll regret it forever and you’ll wish you’d never won!” story that we usually see. When we’ve been dreaming about windfalls at work, I’ve often said that $1 million is a very deceptive amount. It’s large enough that people think that you should be willing to open your wallet for everything, but small enough that it can disappear very quickly if you aren’t careful. I think I would find it quite frustrating on a personal level as well, because I have a couple of relatives who… Read more »

Jen
Jen

At my husband’s work they’ve got someone new who will get together a group buy whenever there’s a bigger jackpot (maybe once a month).

He contributes for exactly one reason — so if they ever win he would be part of the lucky group not the envious group!

Donna Freedman
Donna Freedman

I occasionally buy a lottery ticket even though I’m told it’s a tax on people who are bad at math. My feeling is that it’s a dollar every so often. Some people spend several dollars a day just on coffee. When I daydream what I’d do if I won, my dreams are a lot like yours. I’d buy a (smallish) house for myself and look for dull-but-safe investments to provide additional income when I can no longer work. I’d pay off my daughter’s house and give her and her husband $10,000 each to use as they saw fit. If there… Read more »

Maggie
Maggie

I always look at Lottery participation as entertainment expense. That’s cool that you won. One time when Hubby and I were daydreaming about a high lottery pot he revealed that he was interested in going back to school full time. Then we planned and made it happen. I don’t think he would have said something if we were not dreaming.

Chris
Chris

Totally agree, viewing lottery tickets as an entertainment expense (rather than an “investment”!). Puts expectations in a healthy perspective. I think that’s the right way to look at buying individual stocks, or trying win big by timing the market, too – go crazy, have fun, BUT do that spending out of monthly entertainment budget, NOT in lieu of normal diversified, dollar-cost-averaging long term investments.

*pol
*pol

Maggie- I think “the dream” is a healthy exercise to dredge out the deep heartfelt dreams. Its so terrific that you are making it a reality with the education goals!
I have my one ticket a week called entertainment too. Bad math or not, it’s cheap fun as long as I keep it small.

Mike
Mike

Yeah It was almost 20 years ago that I was talking with friends about dreams like this and did go to graduate school and I’m now a professor. It’s worth talking about those dreams even when you never win

Katy+@+The+Non-Consumer+Advocate
[email protected]+The+Non-Consumer+Advocate

I would love to hear how the other winners fared. Did they splash out and quickly run through their money? Did they also claim the money through a trust? Is your husband still in the same job? What did his co-workers think of how you handled the money?

As a completely unrelated aside, my friend’s father won the lottery and used the money to open a nudist ranch. So I guess everyone’s dream are different.

Congratulations!

Katy

Tina's husband
Tina's husband

One of the co-workers is 72 and already retired. He only worked a few hours week, but is not working anymore. He bought a home and a couple of cars for him and his wife and that’s pretty much it. The other is in his mid 20’s, but a very bright young man. He also bought a new home, and has invested the rest. Him and I are both continuing to work. Yes the job can be stressful, but at the same time, we both enjoy working there. I do have another year left on my contract that I need… Read more »

Katy+@+The+Non-Consumer+Advocate
[email protected]+The+Non-Consumer+Advocate

Thank for filling in the details. It’s great to hear of a lottery winner success story for a change.

Katy

Tina's husband
Tina's husband

Thanks, and no problem. I don’t think we’ll be opening a nudist ranch anytime soon, but a catering business might be in the works 🙂

Laura
Laura

Thanks for the extra info, and to Tina for this post generally. Should we ever win a lottery, claiming it as a trust had never occurred to me and it’s definitely what I’d pursue.

Very smart not to tell your co-workers!

Sounds like life sent you a windfall to compensate for the rough time you had had. Congratulations to you both, and kudos for acting responsibly.

triple-e
triple-e

Wow. How do you manage to not let it slip to your coworkers? is the company big, but the pool small or both? A great story, hopefully you can pass on your common sense to your child(ren) too!

Tyler Karaszewski
Tyler Karaszewski

“not a McMansion; a 2500 square-foot ranch home on a half acre” Hmm… So what’s a McMansion exactly? Is it the square footage, ranch style, or lot size that disqualifies your place? I’m sure it’s a very nice house, but it’s strange to get preemptively defensive that it might be taken for a “McMansion”. “it’s very nice not to worry about finances if we have an unexpected car repair or want to take a family vacation.” With a 12-month emergency fund and no debt, it sounds like you didn’t need to worry about those things before either. It’s no surprise… Read more »

El Nerdo
El Nerdo

If you’re ever in the DC area, visit Potomac, Maryland. The prevailing architecture should clarify beyond all words.

El Nerdo
Michael in Missouri
Michael in Missouri

That’s almost too vivid an illustration of everything wrong with American ideals, goals, aesthetics, etc etc…

Thanks for a good laugh.

Matt
Matt

What’s the distinguishing line between “Mansion” and “McMansion” anyways???

SystemError
SystemError

If you’re building a “mansion” now, it’s a McMansion. 🙂 If you have real money, you’d buy something historic, something more sensible or tasteful.

Ru
Ru

A mansion doesn’t look like you can buy a miniature version in the Barbie aisle at Toys R Us. It would be made of long lasting, well chosen materials, unlike McMansions which seem to be constructed from cardboard and spit. If it fell into disrepair, you would try to fix it, rather than demolish it, because it would actually be worth fixing. A real mansion is inhabited by land-rich/money-poor vaguely aristocratic sorts who swan around in moth eaten cashmere and drive a 1960s Land Rover. The house stinks of damp, very old books, and the 10 or so hunting dogs… Read more »

Leigh
Leigh

It sounds like they *had* a 12-month emergency fund and no debt, but the year that her husband and his coworkers won the lottery, they may have used some of that up and things were a bit tighter than before.

imelda
imelda

Go to Greenwich, CT. I used to babysit for a family moving there from NYC. Their new house was somewhere between 10 and 15,000 square feet, for the 4 of them. It was very clear that the *only* reason for a house like that was the desire to impress others. I have to agree that their lottery winnings weren’t a big deal because they were already comfortable. Like someone said – it allowed them to keep living the life they were already living, with fewer worries. If I won the lottery it wouldn’t be a big deal for me, but… Read more »

Owen
Owen

I’ve heard the average lottery winnings last three years, so it’s wonderful to hear of someone doing everything perfectly.

If there’s one take-away from your story for me, it’s to find a recommended, fee-based financial advisor before you claim a single dollar of winnings, inheritance, etc.

I hope future posts about windfalls will link to this post.

Besides the house, I hope you set aside a few bucks for a trip you’ve always wanted to take or something like that.

barb
barb

I am shocked that either of you really thought you should keep working at your present jobs. Why? Are you still in recovery mode from winning or not really thinking you could buy a home and retire? I would really love to know why you did not stop working? I understand if your medical job is a love for you but your husband still at a low paying job? Did any of the group retire or did everyone keep grinding on. I know you think 30 is too young to retire so don t retire……find something else. At least one… Read more »

PawPrint
PawPrint

I believe she said that a million and some change (what they received) doesn’t go far enough when one is 30, not that they felt they were too young to retire. IMHO, saying “at least one of you should stay home with the kids” is a judgment on people who choose to work instead of staying home with children. I, too, would love to know what the other winners did.

barb
barb

You are worth 1 mill + change and you leave your kids alone with ??? strangers/ hired help
b/c you still think you need more money.
I fail to see any logic in both parents working, here.
Kids are your heart, why risk it?
barb

Nancy L.
Nancy L.

Barb, without trying to set off a working mom-stay at home mom debate (which pretty much NEVER resolve), you are assuming that first, working parents only work for money, and second, that having a child cared for at times by someone other than a primary parent offers no benefits. Both of those assumptions involve quite a bit of judgment towards working parents, and are rather insulting towards people who actually put quite a bit of thought into whether or not they are going to return to the workplace after the birth of a child. Just because a choice doesn’t feel… Read more »

Ann
Ann

Hmm…judgmental much? I have plenty of friends and colleagues with nannies. That doesn’t mean they love their kids less than SAHM or SAHD. They simply want to provide their children with a secure financial future. I grew up poor, and let me tell you that wasn’t fun.

Unless you live in the middle of nowhere and plan on eating mac and cheese every meal for the next sixty years, one million dollars is not going to last.

Annelise
Annelise

barb – You’re so right. It’s really sad that so many parents stick their children in day orphanages and miss out on quantity time with their kids (much more important than so-called quality time) in order to go out and earn more money than they really need. With a million you could at least afford to have one parent at home caring for the children full time. And Ann – I respect other points of view, but don’t like this word “judgmental.” It’s used far too often nowadays, and usually means, “I don’t like your opinion, please stop speaking.” That… Read more »

Ann
Ann

@Annelise – Your word choice (e.g. “day orphanages”) implies that you judge working parents to be inadequate because they don’t love their children.

I have no issues with SAHM and SAHD because I had a SAHM growing up and I appreciated it. However, when she started working, I didn’t think she loved me less because I know she wanted me to have clothes that weren’t hand-me-downs and it made her happier to have an adult conversation every once in a while.

phoenix
phoenix

@ Barb: I am completely confused at this notion that a school for young children is “leaving your children with strangers.” First, apparently my children are still being raised by strangers as they attend school–public school at that . When they were younger, I felt so much better when my children were watched by a school for young children than when my mom watched my children. The school hired college-trained educators who were taught early childhood ed. and who had been first-aid certified. Once a year, I would spend an entire day at the school, learning first-hand how amazing an… Read more »

Nicole
Nicole

Wait… I thought Annalise was joking. Taking an idea to the extreme and showing how foolish it is. Am I wrong? Day orphanages, quantity time being *so* much more important than quality? I thought it was hilarious. There’s no way that could be serious.

Tina
Tina

Yes, deciding to keep working is a very personal decision. I am actually working part-time and only because we found a baby-sitter we adore. I believe that “it takes a village to raise a child”, and I think my child and I are both happier getting a change in environment a few days each week. It might be different if we had family or more friends in the area, but I felt too isolated when I wasn’t working. And I love my job.

Laura
Laura

Great story. I also think it is wise not to make too many “sudden moves” after a big surprise like that. Keeping your jobs and considering your long-term options seems like a great way to approach the situation. It seems to me that if you suddenly change everything about your life all of a sudden simply because you have a big influx of cash, that you may not be in the best place to make really good long term choices that will increase your overall (long term) happiness. I’ve always imagined that such a situation would create a nightmare in… Read more »

Amanda
Amanda

Especially with no mortgage/rent payment anymore… Obviously some lifestyle inflation has occurred.

Amanda
Amanda

I mean I’m surprised that one of them didn’t stop working or (other than the contract in place) both could go to part time. I don’t have a million dollars and if we had a child I’d have DH continue his part time schedule so that he’s involved in the child’s life more fully than most dads.

shallowwater
shallowwater

@amanda

Most part time positions that I know of do not come with health insurance, which I assume is a concern given the new baby, and also the mention of a medical emergency. A million dollars is a lot of money, but not THAT much, and it will go even faster if they add on the increase in health care costs that come with being uninsured.

Tom
Tom

While $1M sounds like a lot, I don’t think it is enough to retire on comfortably and securely – depending on your intended quality of living, or course. What it does is give you the freedom to pick and choose what you do for a living. They set up a trust to accept the prize so that their identities would not be revealed. No doubt part of the reason for that was to prevent moochers from bothering them and/or to retain the quality of life they already enjoyed. If your family and friends noticed neither of the you work anymore,… Read more »

Chris
Chris

Recent Forbes article says $1M may not be enough anymore for those AT RETIREMENT AGE… let alone 30s. Wise of Tina and husband to continue earning…
http://www.msnbc.msn.com/id/44138332/ns/health-forbes_com/#.TmJRBo6d6KZ

lk
lk

Well, if you’re not working, you don’t have employer-provided health insurance. You can either pay through the nose for it, or not carry it (and ultimately wipe everything out because of medical emergencies).
In the same situation I would keep working. I might retire early (but not at 30). I might try to find a less-stressful (even if lower wage) job that would nevertheless have health insurance. At that point I’d be comfortable enough that I could actually use my vacation time and go somewhere fun.

Kaylen
Kaylen

My child does NOT attend a “day orphanage”. He attends a preschool which he LOVES and provides him a far better education that I would have been able to provide him at home, by university-trained teachers who have advanced education degrees. I pay for that privilege and because I work am able to pay for a LOT of other privileges for him that he would not otherwise be able to have – such as the two movies I bought him last week which he has been wanting to see and asking about for months. Simple pleasures like that would not… Read more »

Melissa
Melissa

This is such a lovely story! I feel like all I ever read about is lottery winners who ruined their lives, so it’s nice and refreshing to hear of someone who came into some money, and just dealt with it in a reasonable, normal manner. Glad you guys were able to keep a good, solid head on your shoulders.

njcatherine
njcatherine

I had a friend who also won the state lottery in an office pool. She had been the one to collect money and buy the tickets on a weekly basis. One morning she called me up before work (I worked somewhere else) shouting WE WON!!! The total lottery winnings were 3M, split between her ticket and another winning ticket, so that was $1.5M. Because there were several people in the pool, it turned out that their annual annuity for 10 years was about $10k–certainly not life-changing but not chump change either. Proving that winning a lottery can bring out both… Read more »

Amy+F
Amy+F

Your friend’s coworkers certainly knew the right person to trust with the ticket!

Tee
Tee

Congratulations! Nice to see the win go to folks who value the opportunity for what it is.

Just to give a differing perspective – I think there are some, at 4% return, $40K could be enough to live without ever working again. (i.e. Extreme Early Retirement philosophy, which is essentially bare bones consumerism to avoid being a wage slave)

For fun, I play with a group lotto at work. It’s $5 every 10 weeks for a 1/8th chance. A small price to pay for a pleasant dream of quitting my stressful job…..

Tina
Tina

I think that 4% safe withdrawal rule is only supposed to last 30 years. With increasing life expectancy ages and kids to raise, I just don’t feel comfortable completely retiring. However, we don’t plan on killing ourselves with long hours or overly stressful jobs, either:)

Tom
Tom

I completely agree with you. Besides, while $40k is probably enough to get by on, especially with no mortgage (and with the caveat that you have enough saved that you can grow your investment base enough so that you could increase your withdrawals to match inflation), that is still tight enough that you’d have to watch your spending the rest of your life and could not indulge much in travel or hobbies. Better to work just enough to keep increasing your principal, so that your retirement could be even more secure.

krantcents
krantcents

Congratulations. Your conservative logical approach to the winnings will help you hold on to the money.

Jacq
Jacq

If I was buying lottery tickets as a treat because my job was that stressful, if I won (and still wanted to work) I’d be looking for another job ASAP.

And yes, it takes a few years to get used to those big swings in your stock balances – both positive and negative. It certainly does help ease the pain when you can actually use the tax losses. 🙂

Good story though – and congratulations!

Roberta
Roberta

Thanks for sharing your story, it sounds like you were happy and fiscally responsible before winning the lottery, and you remained so after winning. So nice to read about! Congratulations on your good fortune.

Chris
Chris

Alot of average earning folks can essentially ‘win the lottery’ too. You hear about them occasionally in the news. The librarian that leaves several million dollars to a local library, animal shelter, school, etc when she dies. The guy who had low paying jobs all his life and died a multimillionaire. My wife and I have ‘won the lottery’ in a similar manner financially to the writer of the article by simply living within our means and saving regularly since or twenties (we are now just hitting 50).

Hannah
Hannah

I have noticed recently that whenever I have a little extra money, I use it to justify spending extra money. I find myself thinking it’s OK to spend more, because I made more. If I had a BIG windfall like this, I think my biggest struggle would be to not justify spending on things I really don’t need just because the money is in the bank.

I would be interested to know if the OP and her husband struggled with this too. How did they keep lifestyle inflation from creeping up?

Jack
Jack

Hannah, I am not the OP, but something similar happened to me. We inherited a large amount about 9 years ago. We also found a very good fee-only financial planner that helped us. But, for us, we kept the lifestyle creep from happening because we decided to keep our jobs, stay in our house, and keep our same group of friends (because we like them). If we went out and bought new cars or moved into a large house, or went out to eat all the time, we wouldn’t really fit in with our group of friends anymore. We’re more… Read more »

Tina
Tina

I really agree with how you tried to change as little in your life as possible. It was very important to us to live in a “normal” middle-class neighborhood where we don’t feel the pressure to show off and our children never feel entitled. I can see where moving up to an exclusive neighborhood would lead to needing nicer furniture, newer car, etc.

Also, we view this as a once in a lifetime opportunity and almost feel obligated to treat this money very carefully and maximize its utility.

Carey
Carey

It’s interesting that the primary determining factor for stock allocation is so often willingness to take risk. My preference is to base the decision on three factors: need, ability, and willingness. For example, if $1 million dropped into my lap, I might decide that while my ability to take risk has increased, my willingness and need have decreased. Thus I may decide to use a more conservative ratio like 50% stocks.

Leigh
Leigh

Congrats, Tina! I’m glad to hear a sane story about winning the lottery. What you guys did sounds a lot like what I would do with a large windfall, whether it’s the lottery or an inheritance. Is an 80/20 stock/bond allocation really necessary when you have over $1 million in investments? My personal allocation is both age and assets dependent – I reduce my target asset allocation for stocks by 1 percentage point each year on my birthday and when my investments pass a $100,000 mark. With that formula, at 33 with $1 million in investments, the target asset allocation… Read more »

P Shorten
P Shorten

I really enjoyed reading your article. I started an office pool to buy power ball tickets several years ago. I hope someday we win big! I would love to read how your husbands pool was coordinated and how they as a group decided to claim the money…etc. Really interested in the dynamics of the win.

Thanks for writing!

Tina's husband
Tina's husband

There was no real coordination in our pool. It was me and two other co-workers. Other co-workers never wanted to join in. I was asked to join the first week on the job and these other two employees both work for me. We only played the state lotto, because of better odds. I didn’t hesitate when asked, not because I really thought we were going to win, but because growing up I always remembered a quote from a lottery commercial “you can’t win if you don’t play”:) With that said one of the co-workers only worked a few a hours… Read more »

Amanda
Amanda

Why do you feel it was appropriate to give him a “nice chunk of change” when you were all contributing equal amounts. Did it really take that much gas for him to stop in somewhere on his way home to get a ticket? Just asking. I probably sound judgmental.

Tina's husband
Tina's husband

Honestly if it weren’t for him we probably wouldn’t be where we are today. I doubt my other co-worker and I would have ever had the motivation to get lottery tickets every week. Most of the change we gave him was for a good cause in which he donated to charity.

barb
barb

@Nancy L…………..
I am not making any judgements…..just asking why.
I now have a question for you……..if you are not working for money, what are you working for?

Nancy L.
Nancy L.

I personally love my work to the point that I could not give it up without feeling frustrated and unhappy. That is the reason why I work. It doesn’t mean that I love my work MORE than I love my child, but rather that I feel that I am most effective as a parent when I am feeling good about myself overall.

PawPrint
PawPrint

Excellent answer and one that I can relate to, although money was a necessity for us. I never wanted to stay home with children full-time and neither did my spouse. Sadly, women seem to be awfully polarized around this issue now instead of being supportive of others choices and needs.

Lauren+@+Pineapple+Pizza
[email protected]+Pineapple+Pizza

I’m really glad that so many of you are so pragmatic about this issue, especially when others throw judgmental statements about others’ parenting choices. I know from working with children (as a chosen profession that I absolutely adore and as a side income as a babysitter) in different areas that I would not be an effective stay at home mother should I choose to have kids. On the other hand, most of my friends really want nothing more than to be SAHMs until their children reach school age. Both of those choices suit those who are making them and no… Read more »

Nicole
Nicole

All I know is that I work f/t, my husband works f/t, and my son is perfect. There’s no way he could be any more perfect even if we’d stayed at home with him 24/7. So what exactly is staying at home supposed to optimize that we’re not getting as we are? He’s happy, we’re happy.

He gets a lot and has gotten a lot from having more than just us 2 care providers. It takes a village to raise any child, and some people’s villages include paid child-care providers. And that is fine.

Jaime
Jaime

How do you claim the win with a trust? I normally see lottery winners photographed afterwards, how did you avoid that or did you avoid that?

Tina's husband
Tina's husband

You may not be able to do this with a multi-state lottery, but this particular state lotto gave us the option of receiving publicity or not.

SB @ One Cent At A Time
SB @ One Cent At A Time

Congrats Tina! Reading through the comments, I have a feeling that majority of us only think about safeguarding our life first. Tina and other readers suggest spending the money very systematically in to something that will secure our future. But people tell me honestly this $1M, couldn’t it be used better for creating a business? Tina and her partner might love their jobs and didn’t think of quitting, but not even a single commentor of this post? I am one of the way would be buying a fast food franchise one of them could have left the dream job and… Read more »

Megan
Megan

I’ll jump in.

I can see where someone would have no desire to start their own business. If you work for someone else, you don’t need to worry about the picky details that go into running a business. It might be “safe,” but perhaps the OP and her husband value having more time with friends and family than running their own business. And perhaps the OP and/or her husband might have an opportunity for promotion within the next few years – you get to advance yourself, but without really risking anything.

SB @ One Cent At A Time
SB @ One Cent At A Time

safety first, waiting for small definite success rather than a big tentative success will keep our self mediocre only.

PawPrint
PawPrint

There are lots of “mediocre” fulfilled people out there who love their jobs and value their free time. I applaud the people who want to work 18 hour days and don’t get anxious sinking their life savings into their business. I’m not one of them and am totally satisfied being mediocre while sipping wine on the patio of my smallish house, looking at my blooming flowers and thinking about my next trip to Hawaii. Appropos to nothing, really, but I’ve always wondered why people love to complain about Starbuck’s and Microsoft–they started out as small businesses. People don’t seem to… Read more »

phoenix
phoenix

My MIL runs her own business–I don’t know a harder-working woman. But she’s as much of a slave to that business as the term implies, esp. with the investment she put in. And she is unhappy and trying to sell–a position she has been in for the past 15 years. “Middle class mentality” seems to be the smarter choice in every way. One is focused on what is smart and safer and will fulfill you. Too often, starting a business can mean you’re stuck doing the things you hate–administrative stuff, hiring, payroll, and managing employees. It is definitely a gamble.… Read more »

Laura
Laura

I have to disagree with this statement: “Middle class mentality” seems to be the smarter choice in every way. –in which you were suggesting that owning your own business is nothing but a losing proposition, and that having a “regular” job is better. Yes, it sounds like your MIL is stuck in a bad situation with her business. But lots of entrepreneurs thrive on running their own businesses, and if the business is successful it can be a great lifestyle and money-making alternative. The trick is to design the business in ways that really fit your life, and not bury… Read more »

phoenix
phoenix

You are right–I should not have used the word “better” because everybody is so different. For my MIL, she had tons of experience in that business (a florirst) and loved it, was great in it, etc. It’s just now, she’s managing a business rather than doing what she loves.

Jaime
Jaime

btw, I forgot to write Congrats “Tina” I think it’s great that you are savvy with your money including your lottery winnings.

Yes there are some sad lottery winning stories, but there are happy ones too. A couple of years ago I remember watching Discovery Channel or TLC and they had some shows on lottery winners.

Some of the stories were really sad, but there were happy stories too. I don’t buy lottery tickets because I’m not willing to invest money on a very small chance of winning.

mike
mike

If we took all the money and redistributed, but still had our capitalist system, the Warren Buffett’s of the world would still become warren buffett, and the homeless would manage a way to become homeless. Someone I know has come in to a net worth of between 50 and 150 million dollars. She does not share at all with any family. And sadly she now walks around with a purse that is duct taped together. I know there are other issues going on besides miserlyness, but if you don’t help out your own immediate family, what good is money? It… Read more »

mike
mike

PS. Not only is the number reduced if you take a upfront payment, but I didn’t realize you have to pay taxes on top of that? Wow. The numbers look even worse than I thought they were.

Heather
Heather

I had to do a project my senior year of HS to figure out how to decide lump sum vs. yearly payments. In either event, with winnings in one year over $1M, we figured the tax to be about 50% (it was like, 48.6 or something close–granted with that amount of money, that 1.4% could be thousands of dollars). Taking the lump sum is about half the posted winnings. Therefore, by taking the lump sum, you get about 25% of the original amount. There was a bunch of math involved, but it ended up being that until age 50, regardless… Read more »

Amanda
Amanda

This totally makes sense.

I’m guessing the OP had to take lump sum because of the one co-worker in the group that was at retirement age… Very kind of them.

I’d choke at giving so much to the IRS! I’d rather pay them a smaller amount each year. =)

smedleyb
smedleyb

Great story, Tina. Bravo on your good fortune! My only gripe: the fact that your FA made you invest all your liquid cash (there’s no commission in cash!). I would be more inclined to have you keep most of that cash “in” cash, rather than subject you to wild market fluctuations (which seem to keep you on edge). My ideal allocation for you: 20-30% blue chip high yielders (think Verizon, P&G, Pfizer), and the rest in cash. I would tell you to wait for the day everyone is screaming ARMAGEDDON, then tell you to put 10% of your money to… Read more »

Tina
Tina

First of all, we paid no commission to our fee-only advisor, and he really did not help us make any investment decisions. We are leaving some cash aside, but don’t feel the need to keep much cash because we have no debt, good earning potential, and we can use bonds to rebalance during that “great sell-off”. Of course, none of us know the future, but I respectfully disagree with your investment suggestions. First of all, the plan to hold mostly cash seems to be coming from recency bias. Did you feel the same way a year ago? I’m more afraid… Read more »

smedleyb
smedleyb

Tina, my long term account has been all cash since late 2005. I did manage to deploy roughly 10% of that in March 2009, but cashed out that little bit by the fall of 2009. I’m no genius but I read financial news voraciously and was fortunate to encounter a shred crew of writers over the years like Barry Ritholz, Bill Fleckenstein, and Todd Harrison who were years ahead of the debt implosion and the commodity bull. Better lucky than smart, I say. That said, I apologize if you took offense to my suggestions. I was more fantasizing about what… Read more »

Tina
Tina

No offense taken. We all have our different investment strategies that are right for us. However, not having a mortgage allows us to be more comfortable holding stocks right now.

Carey
Carey

Sounds like smedleyb is focused on trading, rather than long term investing. A lot of people seem to enjoy trading, but I’m glad to see Tina is more interested in investing. Diversification and long term thinking, hooray!

Ken
Ken

I agree. Cash is the best right now. So that you can buy into the bear market. Otherwise, when the market drops, you can’t do anything about it. And if it jumps up, you don’t really need to be fully invested, since income to savings ratio is low. And there is plenty of time to jump in if the market is on another 50 year rally (fat chance). I’d say 80% stock is high, but then none of us knows the relevant income. If the couple is making 100 net annually, 80% does sound right. I’d also say that precise… Read more »

Chris
Chris

Tina, I think you not did “better than most,” I think you absolutely hit a grand slam with your response to your windfall. Well done!

You should be an adviser to other lottery winners! In some ways, the giant but temporary incomes of entertainers, supermodels, pro athletes, etc. are like windfalls, too. Unfortunately, most of them aren’t as wise as you… this from SI describes how the majority of pro athletes are either bankrupt or in some kind of financial distress 5 years after retiring, and most of them had a chance to bank even more than you did. http://www.msnbc.msn.com/id/44138332/ns/health-forbes_com/#.TmJRBo6d6KZ

Amanda
Amanda

Athletes are in the spotlight and often have to spend a lot of their money to keep up with their co-workers and the lifestyle they’re “supposed” to lead.

OP was able to keep it quiet due to the trust…

lawyerette
lawyerette

Precisely. Athletes and entertainers don’t have lives like ours, so it’s more difficult for them to live like we do. A friend of mine plays in the NFL. His teammates make fun of him for driving a car that “only” costs $60,000.

Tonya
Tonya

Fascinating perspective. Glad to see you were so *wise* with your winnings.

Max From Liquid
Max From Liquid

You absolutely did the right thing; I wrote about it a few months ago.
http://liquid.is/6lcOG

Megan E.
Megan E.

Congrats on the win and being smart about managing it!

The taxes seem quite high at 40%! In CO they are 29% for Fed AND state…11% less than yours…

Best wishes for future financial management.

Courtney
Courtney

For 2011, the highest marginal tax bracket was 35% on income over $379,150. If you plug $1.1M of taxable income into a tax calculator it comes up at an actual rate of 31.99% federal taxes, regardless of what state you live in.

Jake
Jake

Nice story.

My parents won the lottery when I was a kid in a similar manner (and a similar amount, but they didn’t do lump-sum then).

We had a good experience overall, but it didn’t revolutionize our lives. We moved from an ok neighborhood to one of the best in the area, and my parents paid for college.

I think them winning had a big impact on me, because I got a better education and started my adult life debt-free, which is a big jump on a lot of my peers.

Heidi@pocketchangebook.com

You’re right about the research that shows that lottery winners return to their happiness “set point” and don’t necessarily realize a huge increase in level of happiness. But at the same time, there is research that shows that if you can take the issue of money “off the table,” people feel a lot more secure and less prone to financial stress. Thanks for an interesting post!

Nancy
Nancy

We would be significantly happier if we won the lottery–my husband has been unemployed for almost 2 years on the heels of another year-long stint of unemployment. Our savings are gone and soon our retirement will be, too. The stress is killing us. So yeah, I think our happiness “set point” would not be what it is now if we had a windfall of a million bucks.

Steve
Steve

In the case of my spouse and I, I think we have enough saved already that another million would be enough for at least one of us to “retire.” I don’t know though. Right now we could “afford” to have one of us take a few years off, until our child(ren) is(are) in school. We’d have to scale back our savings, of course, but they would still be growing. And yet we choose not to do so; both of us like working. So it’s hard to imagine that anything less than full retirement money would be enough to induce one… Read more »

Felice
Felice

It is so nice to hear a positive story. Congrats on winning! I am also impressed to hear a story about a winner being “smart” with the money. Most do not account for the taxes let alone think about how they can invest it to make more. Great post!

honeybee
honeybee

Odds of retaining head after winning lotto: 0.0001%. Nice job!!

moom
moom

One interesting thing about reading these comments is that the majority of people think about what would they do if they won the lottery – i.e. with their job, savings, cost of living, family etc. and then give advice or criticize on that basis…

kara
kara

All of the people who are criticizing the OP for not quitting working because they won $1 million are the very people who have no true understanding of the value of money and would probably piss the whole thing away in 3 years and be left with nothing.

Anyone who thinks a pair of 30 year olds with kids can quit working on $1 million is seriously clueless.

Tom
Tom

While I think that comment may be a bit on the severe side, it caused me to ponder that term, “millionaire”. I believe the issue is that the term is so ingrained in Americans’ minds as meaning “infinite money” (whose growth outpaces expenditures) that they don’t stop to think about its real current value – something just shy of infinite (depending on ones cost of living, of course). Today’s billionaire is yesteryear’s millionaire.

Frankz
Frankz

As someone else said, entirely too many people don’t take everything into account when trying to say that somebody who won only $1 million should quit their job and retire. Yes, “only” $1 million. They’re only 30 years old, so they need all living expenses for both of them for about another 50 years. That includes house, cars, clothing, food, household items, furniture, appliances, all the regular monthly utilities, medical care, health+life+car+home insurance, property tax, entertainment, and whatever other expenses you can think of. And then all that again for at least 1 kid for at least 18 years, and… Read more »

Kaylen
Kaylen

It’s awesome to see a couple use their lottery winnings responsibly and not blow it all on a new yacht or something.

Great job you guys!

Dan
Dan

Why doesn’t anyone ever suggest a 30 yr old putting 1M into a money market bank account, withdrawing the 1% interest each year (10k), or so, and live below the poverty line for the next 60 years? I think its a viable option!

Mr monopoly
Mr monopoly

I think its kind of hard for poor people who won the lottery to manage that kind of money because all you have surround you are poor people who dire in need for money it completely different when a rich men win the lotto because he dont have to deal with such headache because i have a $700 a week job all my family member and friends they find out when i get my paycheck they all keep call me and ask to borrow money and my friends they want me to fill up their car so it gonna be… Read more »

Won For Life
Won For Life

Alas Mr monopoly, people in your position either become the main source of income for your friends/family/town and then everyone else ends up wealthy and you end up penniless. Or You call a halt to it and are then forced to lose most if not all of your friends and sometimes family and move away. I think its sometimes better if you move away to create a space for your friends and family to be able to mentally handle it, its bad to leave a large house and then go back to your life but it is a gap. In… Read more »

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