Matt Watson

What would you do if you won the lottery?

Matt Watson

This is a question that comes up often between my friends and me. In fact, it has come up twice with two different friends just this past week.

We were all at the dinner table at one point, and I believe the winning ticket in the hypothetical scenario was along the lines of 400 million dollars. One of those friends all the way at the other end of the table said that if he won the lottery, he would put the money in some sort of trust or annuity that would pay him in installments over many years so that he wouldn’t squander it all.

I nearly choked on my tiramisu before blurting out in a perhaps rude and definitely bewildered voice, “Did you just say you would put it in a trust where you can only get a little bit one year at a time?! I would never do that! I want my money now.”

You hear this all the time, right? If you win the lottery, you got to be careful not to spend it all. Even this Forbes article says don’t quit your job or buy a new house right away.

Now remember, we’re talking 400 to 500 million dollars. If I bought a modest mansion in Georgia and one or two new cars, I’d still be spending less than a million, hardly putting a dent in my new stash. I’m a frugal person and would be wary of completely changing my lifestyle over night, but come on. A 500 million-dollar winning should at least give you new lodgings and new transportation automatically.

“Oh, but if you start spending, you’ll never want to stop, and in just six months, your whole 500 million is gone.” It’s not uncommon to hear this sort of thing.


I have trouble imagining what kind of cretin could possibly spend (not gamble) 500 million dollars in six months or even six years. If you have that much of a spending problem, you deserve to lose all your money.

Now that my initial shock has decreased a bit, I’ll concede that my friend had some good points. A cursory Google search on what to do if you win the lottery brings up that interesting and well-informed Forbes article mentioned earlier. In that article, Janet Novack does say that going the trust/annuity route may save you in taxes depending on the laws in your state, but most likely not. The main reason to do an annuity would be to protect yourself from yourself, but I think this reason would be stupid. I trust myself, and I would think most people would feel the same way.

That being said, I’m not an expert on finances, so I would definitely put together as trusty of a professional team as I could, as a matter of course.

But it’s hard for me to believe you’d save more by an annuity. You should set strict limits, no doubt, and establish your own allowance, but still. It seems to me that one of the axioms of our capitalist society is the fact that it takes money to make money.

That’s the problem most of us have. We never have money, so we can’t make any. Sure, we can work for a modest income, but this is little more than slavery. We live and work in a servile state wherein our labor contributes to other people’s assets and not our own. The owner of the company you work at might not know a darn thing about your trade. But he has money to open a business, and you don’t. And that’s the way things go.

With 500 million dollars, it should go without saying that you’re never going to work again a day in your life. You’re just a sucker if you stay at your job or take up any sort of traditional employment. Your only work at this point should be spent on managing your newfound wealth.

Let’s do some math. Let’s say you’re 30 years old and you just won the 500 million-dollar lottery. I have no idea how much is taken out in taxes, but let’s just say 60 percent to be really conservative. That leaves you 200 million dollars. Just to wrap slave minds like ours around how much money this is, 200 million dollars means 5 million dollars until you’re 70. If you live till 90, you could spend 3.3 million a year before you ran out.

The math alone proves that even if you never invested your money or went on any exciting new capitalist ventures or did anything worthwhile in your life, you would make multi-millions a year, coming nowhere near the meager 50,000 you were making at whatever crummy job you had before you won the lottery. But if you think you still need your job in order to be a responsible adult and pay toward your children’s future, if you think 5 million dollars a year is simply 50,000 dollars too short, then by all means, throw your life away wasting eight hours a day at work.

Wait, hold the presses! My brother is complaining in my ear right now that I am not accounting for inflation. So let’s redo this with inflation. It might make all the difference.

If we assume a 3.4 percent increase in inflation each year for 40 years, then at the end of those 40 years, 200 million would be equivalent to about 52.5 million, according to this online calculator. 52.5 million divided by 40 would be 1.3 million a year. So that gives you some idea as to the effect of inflation.

Now what about salary raises for inflation if you did not quit your job? If in 2015, you’re making 50,000 dollars, in 40 years, assuming you get a 3.4 percent raise each year to account for inflation, that would tack on an extra 4.3 million dollars total, a small fraction of the 200 million dollars in your hand. And that’s if you work until 70. And we haven’t even taken out income tax yet.

So in my opinion, it doesn’t make a difference when you account for inflation. Not when we’re talking in the hundreds of millions. Which would you prefer: 200 million and never working again, or 204 million and working eight hours a day until you’re 70? Obviously, the former.

But that’s all conservatively and gloomily assuming that nothing happens in those 40 years, that you’re just sitting on the couch watching movies all day.

Obviously, you don’t want to do that. You want to do something with your life. You will probably want to make even more money. And that’s exactly what you should do. However, anyone who tells you that you need to remain employed is out of their minds.

Working a steady job is the proven worst way of trying to get rich. The reason rich people are rich is because either they started from nothing and risked everything they had in investments or in making their own business, or they started out with money (inheritance, etc.) and therefore had enough to invest and/or start or sponsor a business. It doesn’t matter how you get there, whether you worked for it or won the lottery. Once you’re in, you’re in. Now you are the boss, and you control your own destiny.

To be honest, you should probably quit your job and start a business even if you don’t win the lottery. But that’s another post for another day.

June 27, 2015, Byram, Miss.