You won the lottery, now what?

You've done it. You've actually won the Powerball lottery. You've scored significant winnings in the lotto and the possibilities are endless. With those endless possibilities, however, can come confusion. It's likely you've already heard about lottery winners who have made poor choices with their winnings, and you definitely don't want to become one of that group. This is the money you wish to use to achieve your dreams, pay off your debts, and help your friends and family.

So the big question, is not what can you do -- but what should yo do next.

Fortunately, there is expert advice out there to help you.

Get Ready to Cash in your Ticket

Before you can spend or invest your Mega Millions jackpot, you have to first obtain your winnings. As a large lump-sum payout cannot be cashed at your local convenience mart, you'll need to take a few steps to make things happen. Insurance experts recommend you first take a deep breath, and then also take a backup copy or image of your winning ticket. The time to get a financial planner is now, and it may also be worth getting a lawyer to help you manage things before that final ticket is cashed.

You'll need to read the fine print to understand how your winnings work, and also how your lotto of choice handles privacy concerns. Once your ready to turn in that ticket, the next step will be understanding payouts.

Lump Sum vs Annuity

In the simplest of terms, a lump sum payment is a method of "getting all your money at once" and an annuity is a payment over time. A lump sum can be preferred by many since this simplifies tax obligations and allows for large investments such as a home or stocks. A lump sum can, however, greatly reduce your total payout due to tax schedules. Annuities will have a lesser yearly tax burden but can be more complicated to process. Annuities can also provide financial protection to winners who may struggle with budgeting or binge spending their winnings.

Disadvantages to Lump Sums

Leading economists have studied people who win large amounts of cash. The evidence shows that people who suddenly come into large sums of money can still end up bankrupt. For example, research has shown that the average person in their 20s, 30s, and 40s who was given an inheritance or large financial gift spent or lost up to half that cash in a short time. A study on Florida lottery winners also found that those most likely to file for bankruptcy were winners who received at least mid-sized or larger sums.

While no one seems to know for certain, it's theorized that large winnings can lead some to make drastic lifestyle changes. And while these changes may seem great, not everyone is prepared to handle the shock of those changes. For some people, maintaining self-control in the face of such excess can be very difficult. Another factor that can affect how these sums are managed is the changing perception of the winner by friends, families, and community who will have expectations of how those winnings should be shared.

Advantages to Annuities

Annuities may feel like delayed gratification, but it's important to remember that you're still winning -- but now you're winning over 20-30 years. You'll actually get more money total by taking payments, and you'll have ongoing income for years to come, a great safeguard against poor investments or budgeting. And it's not just a few dollars more, taking payments over time could result in millions more in winnings.

An annuity income will still allow you to get so many of those adventures and items you've dreamed of while taking the time to enjoy each component of your winnings as you go. A sound financial planner can help you further those winnings with smart investments and savings plans that can greatly expand your windfall over time. Your investment professional can also help you understand the financial contracts involved, payment rate and frequency, and long term potential of your cash.

What should you do with the money?

Clearly, you should use your winnings to make sure you have food, shelter, and have met all your necessary financial obligations. Pay off student loans, catch up on medical bills, and secure some awesome housing. Beyond that, you probably deserve something nice too. Consider a trip or cruise that you've always wanted to take. Buy some new clothes, and some toys too. But you may be surprised by what the research shows will make you happiest.

Buy happiness by spending money -- on others.

It turns out that while a little self-pampering is good, a lot doesn't make us any happier. Researchers suggest that extended happiness can instead be paid by donating to charity, sponsoring a person in need, or as simple as starting a pay it forward chain at your local coffee place.

So enjoy your winnings, and invest your money smartly. There's no need to be overwhelmed, and no need to go buying crazy right away either. Consider annuity payments with fun and financial sound purchases over time.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes