Winning the lottery is often viewed as an instant path to financial freedom, but history shows that many winners end up losing their fortune within a few years due to poor financial decisions.

Experts caution that without proper financial planning, a sudden windfall can lead to reckless spending, unwise investments, and increasing pressure from family and friends seeking financial help.

Norman Munsamy, a Durban-based senior wealth advisor, stresses that the first step for any lottery winner should be to seek professional financial advice.

"Managing the funds from the winning is the most important aspect," he says. Consulting a financial planner can help winners structure their finances effectively, ensuring long-term stability instead of short-lived wealth.

One of the most common mistakes lottery winners make is excessive spending. Many rush to purchase luxury cars, extravagant homes, and designer goods without a structured financial plan.

Others fall into the trap of lending money to family and friends who are struggling financially, which can quickly deplete their winnings.

"It sounds like a good gesture, but caution must be implemented in deciding to whom and for what monies are given or loaned out," Munsamy advises.

To maintain long-term financial security, experts recommend prioritising debt clearance and investing in assets that appreciate over time. "The aim should be to free debt," Munsamy notes, adding that property investment offers both short- and long-term benefits.

Securing investments with medium to long-term interest-earning potential is also advised, including financial products with access restrictions, such as five-year investment plans.

Unlike salaries or business earnings, lottery winnings are not subject to taxation in South Africa.

However, Munsamy suggests that winners consult a tax practitioner if needed to ensure compliance with any legal financial obligations.

Another significant challenge is handling requests for financial assistance from relatives, friends, and even strangers. While helping others is commendable, Munsamy warns winners to be "careful yet wise" in deciding who to assist and how much to give, ensuring that their financial security remains intact.

Maintaining financial anonymity is another key step in protecting wealth. "It’s the safest means to ensure the individual and family members are protected from unnecessary attention," says Munsamy.

Many lottery winners attract scams, fraud attempts, and even threats once their winnings become public knowledge. Keeping a low profile and working with trusted financial professionals can help prevent such risks.

For those who dream of a lottery win, financial planning should begin the moment the prize is claimed. Without a structured approach, the excitement of a windfall can quickly turn into financial ruin.

IOL