Imagine being a teenager and winning the lottery. Not only that, but you get money every single week for the rest of your life. Rest of your life! That happened to Robert Salo, an 18-year-old Brooklyn high school student, who just became the youngest person ever to win the aptly-named "Win $1,000 a Week for Life" lottery game. Oh, boy, oh boy. What to do with all the cash?! A house? Maybe a mansion! A car? Robert says he'd love a Lamborghini or Ferrari, but would probably settle for a BMW. Oh, the possibilities!
Not so fast, Robert. We don't want this to turn into one of those stories about the lottery winner who quickly goes broke. So let's go over some things.
You seem like a smart lad. In fact, you and your mother said you want to spend your winnings on paying for engineering college. Good move! But that talk of a Lamborghini scares me. Maybe you were joking. I hope so.
"It feels like I'm living a dream," said Robert. Well, let's make sure this dream doesn't become a nightmare of rags to riches and quickly back to rags.
So $1,000 a week sounds like a windfall, but let's get one thing straight. It's NOT. I don't know if there's a cap on the "lifetime" payout, but if there's not, and you live another 60 years, this comes to about $2 million total. You'll get taxed on that too. A top-of-the-line Lamborghini can run around $750,000 -- or about HALF of your entire winnings. Don't go there, Robert. If you want a car like that, get a girlfriend like Kim Kardashian.
What you've got here is a little safety net. If you play your winnings right, you'll always have something in the bank to save you from Skid Row if all goes wrong. And sometimes things do go all wrong. But you will never have to worry about that, and that's a wonderful thing. What you DON'T have is so much money that you can buy expensive purchases, support other people, loan other people money, invest in anything other than well-established mutual funds.
Here's my advice: Do NOT get any big, high-interest loans with your lifetime winnings as collateral. Park your money in a balanced portfolio and a bank. Take out student loans as long as rates are low.* Pay off the loans as soon as you can after graduation. Buy a small, reasonably-priced apartment since rates are low. And get an unlisted number. Pronto.
What advice would you give Robert?
* School loan rates can go as low as one percent and Robert can certainly make more than that in the stock market over the long haul.
Image via Mark Tee/Flickr