Congratulations! You just won a multi-million dollar prize in the NZ Lotto. Now what?
Step one: Do Nothing.
Sign the ticket. Put it somewhere safe. Take a picture of it for your records. Contact the Lotto NZ Customer Service to claim your prize.
Don’t tell anyone. Maybe your immediate family, but as soon as you tell 1 person, the secrets out.
Now don’t do anything for 8 weeks. Let the money sit in your bank account or a 30 day term deposit. Don’t buy anything, don’t travel, don’t book a holiday, don’t buy a house, don’t buy a car. Maybe go out to a nice, normal dinner with friends and family to celebrate and pick up the tab.
But that’s it. Don’t do anything else. This is not going to feel naturally, but it’s important that you buy yourself time. Time to think. Time to adjust. Time to talk to professionals like a fee-only financial advisor. Time to talk to lawyers about things like trusts.
Here’s a couple things to NOT do straight away:
- Don’t quit your job next week
- Don’t buy extravagantly priced cars, property, or other excessive consumption spending
- Don’t invest in your mates business idea, or buy a business, or start investing in high-risk investments like hedge funds, property syndicates, or horses
- Don’t listen to any advisor that contacts you. Find financial advisors that operate in a fee-only, independent manner that aren’t trying to sell you a product
- Don’t be extra generous to family, friends, or charities. That time will come, but it’s not now.
Step two: keep your life mostly the same, for a while
Big life changes on top of a sudden windfall are how people become unmoored from reality and unrecognizable to themselves a year later. Slow down. Breathe.
Don’t quit your job, don’t move cities, don’t announce a divorce.
Sudden wealth won’t fix a bad marriage, an unfulfilling career, or a lack of purpose. But it does give you the means to start working on those issues. Give yourself 6-12 months of your normal life before beginning to make any changes.
Step three: The practical bit
The actual financial work isn’t complicated.
Tax – Lotto winnings in New Zealand are tax-free. Investing those winnings in tax-efficient investments, like NZ Listed Portfolio Investment Entities (PIEs) can keep your tax rates at 28%.
Build a small team of trusted advisors – you’ll need a lawyer (to draft a will, power of attorney, possibly a trust if that makes sense), an accountant possibly, and an independent, fee-only adviser. Other than that, you don’t need many other helpers for your money. Any more than that you add will only drain your funds away from doing what you want to do with the money.
Set up a cash runway – anything you want to spend in the next two to three years, hold in cash or a term deposit.
Invest the rest simply – A low-cost, automated, globally diversified, and simple portfolio of shares and bonds will outperform almost anything over any reasonable timeframe. With just two NZ-domiciled PIE funds, you can cover the whole job: global shares + global bonds. Set a reasonable allocation between them based on how long you need the money to last and how much volatility you can stomach.
Anchor on a safe withdrawal rate, not a vibe – The 4% safe withdrawal rate is a useful starting point. On a $10 million Powerball share, you could spend $400,000 per year comfortably for the rest of your life. And give yourself an inflation adjusted raise every year. That’s about 3x the annual median NZ household income in 2025 of $140,000.
Avoid the financial traps – You probably don’t need life insurance. You can self-insure. But an insurance “financial advisor” (aka, salesman) will love to sell you a life insurance product. Make sure it’s suitable for you. You’ll now have access to wholesale investing opportunities. Most of them are crap. You can safely ignore them. If a product needs a pitch and a slide deck, you have my permission to pass.
The simple answer usually wins
There’s a pull to add complexity to your life when the dollar amounts get bigger. Surely it’s time for hedge funds, trusts, wholesale investing, and large property deals now that I’m a multi-millionaire? No, not necessarily.
You don’t need to do something clever with a Lotto win of this size or any size. Resist the pull to complexity. Keep your life simple, low-stress, and uncomplicated. You’ll probably have a better financial result with a low-cost, automated, diversified, and simple investing strategy that you can implement yourself versus a high-cost, manual, concentrated, and complicated strategy that you need to pay advisors to implement for you.
A diversified portfolio of shares and bonds, a reasonable spending rate (or “burn rate”) of your Lotto winnings, a small team of fee-only professionals, and few months of restrained spending is going to be the winning combination.
That’s the playbook. It’s a bit boring, a bit dull, a bit simple, but that’s the point. It works.
The money you’ve won can carry you, your family and friends, and possibly the next generation, forward into your next chapter of life. Yes, there may be new houses, new boats, new cars, maybe even a private plane or 2 in your future. But that will all come shortly. Practice a little patience now and set yourself up for a life of abundance, comfort, success, and worry-free living.
Other considerations
- Take your time. Avoid impulse decisions. Sleep on decisions.
- Tell as few people as possible. Claim your prize anonymously.
- Set aside 6-12 months of expenses in a checking account.
- Resolve any emotional, family, and social issues that may be in the background. Therapists and counselors aren’t cheap, but you’ll need to have good relationships to navigate the next part of wealth.
- Look for a fee-only, independent financial advisor to help build an investment, spending, and money management plan
- Read some books on investing or money management. Here is my recommended reading list.
- Create a long term plan – work, location, lifestyle, etc. The Bogleheads Guide to managing a windfall is a great resource
Things to spend Lotto winnings on
- Retiring, short or long term
- Cutting back hours at work or changing careers
- Starting a business
- Going back to school for a new career or just for fun
- Setting aside funds for a loved one’s benefit, like wedding, house down payment
- Move to another city
- Pay off debts
- Upgrade your home or car
- Buy a home
- Travel
- Take up a new hobby
- Throw a party for family and friends
- Grow your family
- Donate to charity
- Volunteer your time