If you win the lottery, you’re probably going to spend a lot of money. But there are ways to manage your winnings so that they last, personal finance expert Farnoosh Torabi tells CNBC Make It. For example, you can take an annuity payment, which reduces your taxes while giving you access to a substantial sum of money over time. But be careful with your investments; if you’re not a financial whiz, it can be tempting to immediately invest all of your winnings. That could backfire, especially if you lose track of your investments.
But the real issue here is not gambling, per se. It’s the way that state lotteries market themselves, he says. By dangling jackpots of record sizes, they attract people who want to get rich quick and lure them into buying tickets. Super-sized jackpots also earn lotteries free publicity in the news, which bolsters ticket sales and awareness.
The big problem with that is it’s misleading. “The real message of a lotteries is not ‘you have a chance to become rich,’” Cohen says. The real message is that you’re doing a civic duty by purchasing a lottery ticket, which helps improve your state by funding things like education and addiction recovery.
The $70 billion Americans spend on tickets each year is a huge amount of money that’s not being saved for retirement or paid toward debt, and it contributes more than 10% to state budgets, according to a Pew study. That’s why entrepreneurs funded by billionaires Jerry Jones and Mark Cuban are fighting for a slice of a $100 billion lottery industry. One startup, Jackpocket, has already taken 2% to 3% of the market in just a few years.