4 mistakes lottery winners make, according to a financial advisor

• Eszylfie Taylor advises several lottery winners on managing their fortunes.
• He suggested winners consult an advisor and carefully consider how they want to receive the money.

Eszylfie Taylor, a financial advisor, counts several lottery winners among his clientele.

They include Gloria Easly, who said she recruited Taylor two months after netting $3 million in her state lottery.

Easly, 44, said she was "in a solid financial position" after following his monetary advice when she won the prize seven years ago.

"I know I could have blown through the money and gotten into difficulties," she said. She said Taylor convinced her the fortune "could vanish in a blink of an eye" if she didn't handle it wisely.

Taylor outlined four mistakes he sees lottery winners commonly make.

They don't weigh their options

He recommended winners examine the pros and cons of receiving the winnings through an annuity — which guarantees a larger total payout over time — or a lower lump sum up front.

He noted that annuity accounts, also known as life accounts, typically make payouts only during the winner's lifetime.

He said that, in his experience, winners tend to take a lump sum — usually about half of the total prize. In most cases, he said, it was partly because it allows people to name a beneficiary and partly because of the appeal of getting an instant sum.

If you opt for an annuity, the advisor went on, you can't change your mind later and ask for more liquidity in the future.

"Once you annuitize it, you can't un-annuitize it," he said. "You have to decide what you want to do right away in terms of taking a lump sum or not."

They spend, spend, spend

Taylor said winners frequently forget they don't have a limitless supply of cash.

"It's the worst mistake you can make," he said. "The money is finite — once it's gone, it's gone."

He added that the biggest challenge is establishing a sustainable withdrawal rate that doesn't exceed their earning rate.

Taylor said people like celebrities, athletes, or lottery winners who make a lot of money quickly but then spend it unsustainably often end up in worse financial situations than they started in.

He said the lottery winners who choose a lump sum are particularly vulnerable because they're getting that money only once.

He said he tells winners that they can "risk their eggs, but not their golden goose."

"If you want to take a risk on something, do it with the interest you've accrued on the millions you won," he said.

Taylor said he advised clients to put their money in "different buckets" to build a diverse investment portfolio.

They ignore financial experts' advice

The financial advisor said winners who think they can handle their financial affairs on their own are often mistaken.

"I would definitely say stay in your lane," Taylor went on.

He most commonly gave advice about real estate. "It might feel great to drop $10 million on a house and not have a mortgage," he said. "But you still have utilities, property taxes, and upkeep to plan for."

Another pitfall for lottery winners, Taylor said, was ignoring tax implications. "It depends on where you live and the money that your money is making, but you have to account for taxation," he said.

They make their wins public

Taylor said people should think carefully before broadcasting their win beyond their closest family and friends.

"Keep your mouth shut," he said. "Or you just put a target on your back."

He said winners should consider how it would serve them to share the details of their lucky break — people may start pestering them for loans and donations, for example. "You have to remember that you're not a charity," he said.

He said he was happy to "be the bad guy" if winners opted to decline requests from needy relatives and friends. "I tell them to say things like, 'I would love to help you, but Eszylfie says my funds are locked up,'" he said.

He said he often guides his lottery-winner clients when they are ready to make an investment. "We discuss the risks and the pros and cons," he said. "I'm here to give them insights. Ultimately, however, if they want to do it, it's their money."