I had this posted in another forum when the discussion turned to David Edwards. These are my general rules for after I win.
That David Edwards is quite a story. We should be able to look at his life, and the lives of other jackpot losers, and come up with a set of general rules to live by should we win.
1. Invest for income and live within a budget. Let's say Edwards had 27 million after taxes and everything. If he had invested it, drawn off 3% for income, he'd have an income of over $800,000 a year, plus his investments would have grown to match inflation and increase in value. Are you telling me that 800k a year is not enough to live on?
2. You are not financially responsible for friends and family. There's a difference between one time gifts and regular gifts. If you give someone money and they squander it on beer, hookers, and donuts, then come back with their hand out, you're doing them no favor by giving them more. I know people with huge massive credit card debts. There's no way I'd bail them out. They need credit counseling, not cash. If you must gift, give once and learn to say no.
3. If you hire a financial advisor, listen to their advice. It seems Edwards had only one person in his life who was looking out for his best interests, and he mocked that person and ignored their advice. Get your financial advice from a large, renown company. He used Morgan Stanly. But Vanguard, Blackrock, these types of companies deal in trillions of dollars. If you're worried about them embezzling your money, you're just paranoid. Your few millions will be piddling compared to their total assets. It's the little guys you have to watch out for. This Chandler guy that Edwards hired, who did he work for? Himself? He was better at lining his pocket than managing money. Abraham Shakespeare trusted some woman who just showed up and offered to help him. No. The real professionals don't come to you, and they certainly don't need your money.
4. Appreciate the value of money. A $78,000 watch? A $34,000 watch? A $159,000 ring? If a watch costs 78k, the thing better shoot laser beams and be able to stop time. He bought cars, but had no place to store them. If his neighbors were complaining that his home looked like a car lot, it was because the cars were setting in the driveway, not the garage. Buying a one hundred thousand dollar car is a splurge, having a million dollars worth of auto in the driveway is a waste. Let's don't even mention the jet. That's just craziness.
5. Drugs are bad, mmmkay. If I had millions of dollars and a drug addiction, I'll be in nicest rehab facility in the world. If I had an income of 800k a year, I'd hire a big Samoan* to travel with me everywhere, slap the drugs out of my hand, and sit on my head every time I even think about doing drugs. I'll learn. *I'm partial to Samoans, really nice, honest people, but I guess any large muscular person would do.
6. If you weren't a business expert before you won the lottery, you will not magically be one after. Edwards bought a limo company, a fiber optics company, and three racehorses. What made him think he had the business sense to know if any of these things were good investments? His financial advisor would have put the kibosh on all three.
7. Get a hobby that doesn't require spending tons of money. You need something to fill your time. Off and on over the years, I've dabbled in drawing, painting, playing music, and writing. If I didn't have the nine-to-five, I know exactly how I'd be spending my time. You need some hobbies, especially if you're a recovering addict (boredom and druggie friends would probably be the greatest threat to your sobriety).
The people who talk about not trusting the stock market or investment companies, you might be paying too much attention to the scare mongers. It's true that people recently lost gazillions of dollars in the stock market, but the economy went into the crapper. What did you think was going to happen? Few people prosper during hard times. But it will recover, the market will rise again. That's what it does. The global economy shifts and grows, shrinks, flexes, always moving. If the maxim is true, "Buy low, sell high," then isn't now is a good time to buy?
If we're talking about multiple tens of millions of dollars to invest, then, yeah, I'm putting a small portion of that in index funds. I'll ride the market waves, because I don't think the current recession will last forever. But the bulk is going into government and corporate bonds, t-bills, and other relatively safe investments, because I'm not a high risk investor.
As for the people who talk about buying gold, I say, "Turn off Glen Beck." Buying and holding gold is traditionally not a good investment. Motley Fool has some articles on the subject.