If you were lucky enough to win a lottery jackpot of, say, £5 million, what would you spend the money on? It's a question we often ask ourselves and is one we posed in our recent survey, which we conducted to learn more about people's aspirations and expectations following a windfall.
We asked 500 people what they would do with the money and how long they think it would last. However, we discovered that something didn't quite add up. It seems that despite many of us expecting to quit our jobs, to spend big and to give lots away, we also believe the money will last for a very long time. It doesn't take a mathematician to work out that you can't spend extravagantly, have no source of income and expect your money to last forever. Unless, of course, you manage and invest it wisely.
We found that 50% of respondents would expect a win of £5 million to last for 30 years or more, while almost everyone (99%) would anticipate it lasting longer than one year. This is despite the fact that 80% of those questioned would leave their job if they won the lottery, and most would spend big as soon as they cashed in their winnings.
When asked what their first major investment would be, our respondents said:
➢ Buy a new house (37%)
➢ Go on holiday (22%)
➢ Pay off debts (22%)
➢ Invest winnings (8%)
➢ Buy a new car (6%)
➢ Other (4%)
➢ Donate to charity (1%)
The findings suggest that while the vast majority of people will begin splashing the cash pretty quickly, just 8% are looking to immediately protect and grow their money through investment. And while few of us would deny ourselves a dream holiday, house or car, it is telling that our initial thoughts turn to spending, and not safeguarding.
Sharing the wealth
We're clearly keen to spend big on ourselves (and who could blame us?), but it seems we're also eager to use any newfound wealth to help those close to us. A huge 90% said they would share their winnings with immediate family, and only 3% said they would not share their money with anyone. Our respondents also said they would share with:
➢ Their partner (58%)
➢ Their close friends (46%)
➢ Charity (39%)
➢ Colleagues (5%)
While sharing winnings is commendable, the impact this will have on your finances should not be underestimated, especially if you - as many respondents have said they would - intend to share with various people, including partners, family and friends.
Will the money last?
It seems we want to both spend and share freely, while at the same time quitting our jobs and foregoing our other forms of income, with little thought given to investment. How, then, can we expect our winnings to last for 30 years or more?
Without the necessary management, finances - including even the biggest of windfalls - can dwindle over time. While many people think of a lottery jackpot win as something to set them up for life, meaning they no longer need to give any thought to financial management, the truth can be very different. There have been many instances of lottery winners squandering their winnings, losing all they had and having little to show for it, simply because they failed to look after their money or invested it unwisely.
Could we buy anything we want?
To help illustrate the need for sound financial management, we thought it would be fun to look at what people might choose to spend a lottery win on and compare that to the cost of buying cheaper versions.
Our infographic compares the cost of buying some of the world's most expensive items (mansions, supercars, dream holidays) and pits them against the price of more common purchases. The infographic helps to demonstrate that it is not feasible to spend money with scant regard for the consequences. Even with a huge lottery win, the money would soon dwindle if we are not clever with our spending and do not look to protect what we have.
A lottery win would indeed be life-changing, but only through sound financial management can we ensure it helps us live the dream lifestyle many of us long for.