How to win at being a lottery winner

Have you ever thought what you might do if you won the lottery? We show you how you could carefully handle your new wealth to help avoid the pitfalls that have plagued some winners.

Winning the lottery should be a dream come true. But since the National Lottery launched in the UK in 1994, creating more than 6,800 millionaires and paying out £53 billion in prizes, there have been many winners whose dreams have become nightmares. Some have regretfully spent their winnings, and others have had relationships break up over the money. But it doesn't have to be that way.

Your first choice will be whether to go public or not. Those who go public have reported being snowed under with requests for money, so it may be the wise choice not to do so. Even those who don’t go public but tell their family and friends sometimes find that it can ruin relationships.

One American lottery winner went the other way with her US$480,000 win – she didn’t even tell her husband, as he had "a tendency to spend on things we don't need and that aren't going to benefit us in the long run, so I didn't want our money to be blown quickly on stupid stuff like cars and clothes," she said.

He only found out eight years later, when he saw a text on her mobile’s lock screen from her financial adviser telling her that her investment account had hit the US$1 million mark. Luckily, he wasn’t angry, but was grateful that she had invested it wisely and had successfully grown the original amount.

One winner who made thoughtful choices is Brian Caswell from Bolton, who won almost £25 million on Euromillions in 2009 and was careful to look after the money, buying a new allotment and houses for his daughters, and setting up a charity. He also paid for an emergency quadruple bypass for himself, and he and his wife bought a five-bedroom detached house.

What would the professionals advise?

We asked Shanaka Cristofoli, Senior Wealth Manager and Financial Planner at Nutmeg (Opens in new window), the digital wealth manager that's part of the Chase family, what advice he would give to a new lottery winner.

“First, we'd gauge the level of understanding the customer has about finance. Then we'd take them through a formal professional advice process.

“We'd start by helping them to form a budget. Have they invested before? Some people might win the lottery and already have investments. At the other end of the spectrum they may have never thought about what stocks and shares are.

“Find a financial adviser who's highly qualified – a chartered or certified financial planner. The first part of what we do is lifestyle planning. We'd then look at the resources available to help form that plan.

“We recommend keeping cash of six times monthly outgoings in a separate emergency fund, and to keep that money in an instant access savings account for any unexpected expenditure. Avoid tying up money you'll need to access quickly in the future in investments, which are more suited to long-term financial goals.

“The last part of our role is implementation, where we share a path to get them as close as possible to their financial objectives.

“Typically, investments can include stocks and shares ISAs, pension portfolios and general investment accounts, and taking advantage of the available tax wrappers will minimise tax along the journey. We aim to keep charges as low as possible, because the more that is left in the pot, the more it can grow. At Nutmeg, we're specialists in providing investment and retirement planning advice. Clients pay a flat fee of £575 for our advice service. There are also management costs and fund costs associated with the portfolio management service.

“We do a questionnaire with our clients to assess their capacity for loss and risk tolerance. We also look at their knowledge and experience of investing, and take all these ingredients into account to recommend the right portfolio and wrappers for them.”

What sort of traps could people fall into?

"The horror stories tend to have similar themes, in that the winners have a low understanding of good money management and maybe haven’t known where to go for help,” says Shanaka. “Managing finances can be complex at the best of times, and an addiction to gambling, overspending, or living beyond your means, and even feelings of guilt, can all be amplified after winning the lottery.”

Shanaka recommends that winners stay anonymous. “This will ultimately be a personal decision, but I would suggest that it’s something they may want to consider. If it's in the newspapers that they won the lottery, then they're potentially going to expose themselves to scammers and fraudsters, unfortunately. They could also spend the next few years being inundated with requests for money from family, friends and acquaintances."

The flip side to that, is if you choose to go public you won't have the stress of having to keep it a secret or consider how to explain away any expensive purchases.

Winning the lottery can turn out to be a dream come true if you carefully consider what you want, get a financial adviser to help you pursue that vision, and don’t forget to have some fun!

Recommended reading

• Why some behaviours can make you less wealthy
• Are you a High Earner, Not Rich Yet (HENRY)?
• Raffles, lotteries and competitions

Disclaimer: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek financial advice.

Nutmeg is authorised and regulated by the FCA in relation to certain investment services and restricted advice only. Chase is a trading name of J.P. Morgan Europe Limited. Nutmeg and J.P. Morgan Europe Limited are J.P. Morgan companies. Products provided by Nutmeg are not guaranteed by Chase. Before applying, you should consider if a Nutmeg account and its features are suitable for you and your investment needs.

This information is provided to you solely for information purposes and does not constitute advice or recommendation to invest and may not be construed as such. All the information provided is not tailored to the needs of any individuals, and it should not be used as the basis to make investment decisions.