Top financial advisers reveal what to do if you win the lottery as $120m Powerball goes off

With an eye-watering $120 million divvied out in last night’s Powerball, top financial advisers how you should actually spend the winnings.

A whopping $126 million Powerball lottery has gone off, making two Aussies unthinkably rich overnight.

A mystery player from New South Wales along with a West Australian scored more than $60 million each in Thursday night’s Powerball jackpot.

In addition to the two division one winners, there were 36 division two winners who shared more than $2.7 million.

With the major prize winners still yet to come forward, the one thought on everyone’s mind is, “What would I do if it was me?”

A $120 million Powerball lottery prize was drawn on Thursday evening. Picture: iStock

But before you mentally buy that Lamborghini you always wanted, keep in mind most lotto winners actually go broke within a couple of years.

Many are descended on by vultures wanting a share of the winnings, while others are their own worst enemy and spend it as soon as it hits their bank accounts.

We asked some of Australia’s top financial advisers how to preserve your new-found wealth while still being able to enjoy the benefits.

Sue Dahn, Partner at Pitcher Partners. Picture: Aaron Francis

Firstly, relax and take a deep breath, suggested Pitcher Partners financial advisor Ms Dahn, and don’t make any rash decisions for “at least for a month”.

You’ll be tempted to rush into quick decisions, but it’s best to come up with a plan of how you will spend your money.

Get to know your relationship with money and don’t make immediate drastic changes like quitting your job or buying a luxury car.

“A lot of people create their identity around what they do for a living,” Financial Spectrum’s Brenton Tong, who has advised past lottery winners, said.

“Winning the lottery changes your identity … if you don’t mind your job, keep doing it. If you hate it, quit and apply for the one you want.”

Be extremely careful who you tell

Being a multi-millionaire can change the way others view you. A lot of people who were never interested in you before suddenly start circling like sharks. Everyone from long-lost friends to relatives you’ve never met, charities and financial experts will come out of the woodwork.

“Keep it under wraps,” suggested Mr Tong.

“Imagine you’ve killed someone and need help burying the body. Who do you tell? That’s who you tell you won the lotto.”

Pay off your debts

Ms Dahn advises paying off your outstanding debts, especially your non-deductible debt where the interest cannot be claimed on tax is a good financial first move.

Talk to trusted advisers

Oftentimes it’s hard to know if advisers are trying to help you or use you. Your best bet is to hand-pick your own team of advisers, whether that be lawyers, investment advisers or accountants. Do your homework to work out if the people you have picked are trustworthy.

Once you’ve decided on a financial plan, they can provide checks and balances.

Consider the best investment and wealth options

When looking at investments, there can be so much to choose from that it becomes a daunting process.

“Consider the two best wealth options available to Australians: principle residence and superannuation,” suggests Ms Dahn.

Principal residence is the main home a person lives in. By upgrading your home to a more valuable asset, you invest your money for the future without having to pay a large capital gains tax should you later sell.

Although it depends on the age of winner, personal contributions to your superannuation is another common option Ms Dahn recommends, as the money is taxed at a lower rate.

If you’d rather take a back foot in managing your investments, superannuation is a good option as it is primarily managed by your super fund and is often more diversified among investment types.

The most important thing to remember when investing is “never to invest in anything you don’t understand,” said Mr Tong.

You need to have a plan. Photo: iStock

Make a short term, medium term and long term plan

Both Ms Dahn and Mr Tong agree you need to have a plan - especially if you’re not used to having a lot of money.

Work out a short term plan for the things you want to do, like travelling or how much money you want to live off every year.

Also have medium and long term plans, looking at how much you want to grow your money, where you want to invest and what assets you’d like to buy. Maybe you would want to set up a trust for a charity if your goals are philanthropic, or for your children if that is your primary concern.

“At the end of the day you need to have a plan,” Mr Tong said.

“Winning the lottery transforms your life. If you don’t have a plan it will change your life without you.”