If You Win Lotto On Saturday, Here’s What To Do First

One Lotto winner got through a significant win in under three years. And advisers say it usually starts the same way: a flash car, a $10 million house. So if you won the $15 million Powerball, how would you avoid becoming that story? In this episode, Ed and Andrew walk through the mistakes Lotto winners make, and what they’d do instead. You’ll learn: Why you need a cooling-off period before you spend a centWho you should (and shouldn’t) tellWhether you should pay off your mortgage firstThe lesson? The biggest risk with a Lotto win isn’t losing the ticket. It’s what you do in the first few weeks. Let us know your thoughts by leaving us a voice message on the Property Academy Hotline⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.speakpipe.com/PropertyAcademy For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Stay ahead of the NZ property market⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/private-property-sign-up?utm_source=podcast&utm_medium=promo&utm_campaign=pp_signup ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome along to the Property Academy Podcast by Obers Partners. I'm your host, Tim McKnight.

• 0:12Speaker 01

  And I'm Andrew Nakul.

• 0:13Speaker 00

  And this is the show that helps Kiwis go from zero to five investment properties. So you could be financially free and stick around for the next 15 minutes because you're going to learn what I'd actually do if I won Lotto, the mistakes Lotto winners always make and what most Kiwi winners actually do, because it's not what you'd guess. Now, Powerball is coming up to $15 million on Saturday and they recently changed their rules to make winning harder. So because of that, we're going to tell you how likely it is you'll now win Lotto, what those rule changes are. And if you do happen to win the big 15 mil, what would you actually do? Because after all, their slogan at Lotto is, imagine, used to be, what would you do?

• 0:57Speaker 00

  So we're going to talk about what we might do. Now, before we get into the maths and the nerdy investment part, Andrew, if you won the 15 mil, what's the first thing you'd do?

• 1:08Speaker 01

  Don't people just say they quit their job? What would I do? The first thing I'd do, I'd probably contact your wife, actually. I'd probably contact your wife and put it into some funds.

• 1:16Speaker 00

  Interestingly, you say that you would quit work because 85% of Lotto winners keep working and at least initially stay in the same job as before. So while a lot of people might think, I hate my boss, I'm going to quit. That's it. I'm going to show them.

• 1:32Speaker 01

  That's just you every Monday.

• 1:35Speaker 00

  Well, if you were to follow the official advice, step one, right? If you win the big 15 mil, would be to do nothing. Now, I'll tell you a little story. Back when I was 18 years old and I was a university student, there was like a 17 or 18 million dollar jackpot. It was basically the biggest it could have ever been back at that time. And I thought, okay, I'm going to visualize this.

• 2:00Speaker 01

  Amazing.

• 2:01Speaker 00

  I'm going to bring this into my life through the power of the universe and the law of attraction.

• 2:07Speaker 01

  Oh my God, you're so cooked.

• 2:10Speaker 00

  And so what I did.

• 2:11Speaker 01

  How'd it go?

• 2:12Speaker 00

  Was it, that didn't work, but I downloaded the winner's guide. So Lotto actually has some information for if you win, like they have a guide that they take you through around, hey, this is going to be quite a shock to your life. Here's what we suggest you do. And the first thing on that list is quite a good read, by the way, even if it doesn't bring it into your life.

• 2:33Speaker 01

  Even if it was a waste of time.

• 2:35Speaker 00

  Well, no, it wasn't because 15 years later, I'm talking about it on a podcast.

• 2:40Speaker 00

  And the first advice is do nothing with the money. Like you should take some time back. They say, put it into a term deposit or an interest bearing savings account, not necessarily locking it up for five years in that kind of term deposit, but put it aside in an account and don't really do anything initially. And in fact, there are a lot of financial advisors who advise Lotto winners, because the first thing a Lotto winner does is like, wow, I've never had this much money in my life. I better go ahead and talk to someone. And often the financial advisors will say that if you go and do some big abrupt purchases, a $10 million house, a flash car, that's a sign that someone's really not thought this through, right?

• 3:22Speaker 00

  So you might need a bit of a cooling off period before you go ahead and do anything big, because some other financial advisors say that people who sometimes win big amounts of money manage to get rid of it within three years.

• 3:35Speaker 01

  I think it's like most of them, right?

• 3:37Speaker 00

  So let me ask you this, would you tell anyone if you won? So you won the 15 mil, like who would you tell and how quickly?

• 3:45Speaker 01

  I'd probably tell you and Ollie, the three of us are business partners and we just have no secrets. Every now and then Ed will try and keep a secret and then he'll blurb it out. Yeah, I have to tell you something. I'm not meant to tell anyone. Angela told me not to, but it's been three hours and I can't help myself.

• 4:04Speaker 00

  Well, Lotto often says as well, you've got to be careful who you tell because you can't untell someone, can you?

• 4:10Speaker 01

  I think that often I know some people that won Lotto twice, actually, and it was a meaningful amount. It wasn't like this 15 million, but it was a meaningful amount of money. And I remember them saying to me that everyone then thinks, well, we can borrow some money off them.

• 4:25Speaker 00

  Well, it's interesting you mention that because I kind of see both sides, right? So when I lived in Harbour, in South Taranaki and was at high school, one of the local high school teachers won Lotto and everybody knew about it. And I remember thinking at the time, well, why is it that she's telling everybody? And it turns out the reason was she ended up buying a smart board, like that had all of the fancy technology that was around back in 2006 or 2005. And so she kind of had to tell everyone, otherwise all of the other teachers would be like, well, why has she got this cool technology and I don't? Well, it's because she basically bought it and donated it herself. But you do need to be careful, right? Because I was talking to another financial advisor and there was a situation where a

• 5:10Speaker 00

  Lotto winner won a significant amount of money. I'm talking about over $10 million. And then all of a sudden they happened to get into a relationship. Somebody's come out of the woodwork and in the end, he ended up giving quite a lot of money to the new partner and their children. And ultimately, after that new partner got the money, she left him and he lost about half of it within a few years. So you've got to be very careful who you tell and who you start trusting, right?

• 5:43Speaker 01

  Yeah, I actually think I remember reading about a court case, maybe in America. You know what it was? It was actually on Judge Judy, which is one of my guilty pleasures, especially if I'm like doing something.

• 5:53Speaker 00

  Don't be guilty by friends.

• 5:55Speaker 01

  You're like, if I'm working late at night or if I'm cooking and I just want something, some noise on in the background, I'll have Judge Judy playing. And there was a case where this couple won and then he basically said, oh yeah, no, we'd be mindless together, but I bought this one and so bugger off.

• 6:11Speaker 00

  He didn't want to share it with his wife?

• 6:13Speaker 01

  No, no. Now, now just bear in mind, obviously that's like a disputes tribunal kind of case. So I think the maximum cap is like 10K. So we're not talking about millions, millions of dollars here, but it's like, pretty dog. You've got to wonder like, I think, I think you and I actually spoke about this once. Like if you're in a like syndicate or something and you bought a ticket with your friend and you did that every now and then, what amount of money would you say that you'd be like, nah, bugger off, I bought this ticket. I mean, Ed would do it for, you know, a hundred bucks.

• 6:44Speaker 00

  It's easier to do it for a little money rather than a lot of money. You see, because if it's a hundred bucks, you could just say, oh, that wasn't a winner.

• 6:51Speaker 01

  No, you're too clever for that. What you'd do is we wouldn't win and then three weeks later, low and behold, we won a hundred grand and I got my 50 and I should be very happy. And then I see a Lamborghini with gosh as the number plate or something.

• 7:07Speaker 00

  Well, step three, after you've got your money, you haven't told anybody, you've put it aside for a little bit to have a cooling off period. I think is where we get to the nerdy stuff. Step three is to start setting up your investments. How would you start thinking about this, Andrew?

• 7:22Speaker 01

  So I think the first thing you want to do is think about how much you want to spend every year, because if it's an amount of money that you want to live on, you need to kind of think about, I don't want to all of a sudden just spend it frivolously and then regret it later on, which I think is what most people do. If you work out, okay, how much money do I want per year, every year for the rest of my life? Like, okay, if I replace my income, that's awesome, but also I've got a whole lot more free time now and I want to be doing some things. So let's say it's 200 grand a year. So that means I can spend $4,000 every single week. So you've got two options then. You can either use the rule of 4%, which we've spoken about on the show previously, but I'll go through that again in a second, or the golden goose. And just bear in mind, there might be some tax implications as well.

• 8:04Speaker 01

  So you need to think about the income coming in from your investments and how that's going to be taxed, because the winnings from Lotto, they're not taxed in New Zealand. I know in America they have quite heavy taxes for that sort of thing. We don't, but then the money that you earn from that cash, that is going to have tax implications.

• 8:21Speaker 00

  And if we think about the rule of 4%, this is just a very general rule of thumb. And I'm going to talk about some of the risks in a moment, but the rule of 4% is this idea that if you've got a hundred thousand dollars and you invest that in some shares or some funds, you can take out $4,000, so 4% of it every year. And as the cost of living goes up, you adjust it for the cost of living, you take out that money every single year and your pot of money should last most of the time. The golden goose is a different one, which I know one of our case study Sunday guests is going to talk about shortly, where you buy some rental properties and you live off the rental income. But of course, if it's rental income, then you are going to be paying tax on that. Now, if we were to do the golden goose, right?

• 9:06Speaker 00

  What do the numbers look like on that?

• 9:08Speaker 01

  So we always work on a 4% net yield, so not gross yield, net yield. So after your costs have been taken out, what's left over? Now, because you're going to be using cash to buy these properties, your biggest cost, your mortgage, that doesn't exist in this case. So if you're working on a 4% net yield, you had 300,000 divided by 4%, which is the yield, works out to be about seven and a half million dollars worth of investment properties, give or take.

• 9:33Speaker 00

  It's quite a lot of investment, eh?

• 9:34Speaker 01

  It is quite a lot of investment. Like if you think about, okay, well, winning Lotto, that seems, oh, wow, you know, that was easy. I mean, it's not easy, but you know, the money's just hit your account. If you're wanting to live on $300,000 a year, which, which, you know, that is a significant amount of money, but a goal that quite a lot of people that I work with, who have built up some assets would want, I think they'd be surprised at that number.

• 9:54Speaker 00

  Well, I suppose the other thing as well is, because we started out by saying, you want to spend $4,000 a week. Which is a lot of money, but you've won Lotto, so you're keen for it. But in order to do that, you really need to generate $6,000 of rental income per week, because about two thirds of it is going to go off to the taxman. And then you say, well, in order to get $6,000 a week before tax, you really need to get about $10,000 a week in rental income in order to be able to pay the costs and then pay the tax and then get the money that you actually end up spending. And in order to earn $10,000 a week of rental income, we really need to be earning about half a million dollars of rental income a year.

• 10:34Speaker 00

  So yes, that's why you need many millions of dollars of property in order to earn the half a million dollars of rent, in order to pay your $200,000 worth of costs, in order to pay your $100,000 worth of tax, so that you can get what you get at the end. And it's quite interesting, when you run the numbers like that, you're like, oh, wow. Like, it takes money to make money sometimes. But the alternative is the famous four percent rule, because this would give you a different number. If you simply say, okay, I want to spend $200,000 a year. I divide that by four percent, which is the same as multiplying it by 25, and that means you'd need about $5 million invested in order to be able to get that 200K. But one thing that I just want to point out is there's a lot more risk in that rule of thumb than people think.

• 11:18Speaker 00

  Because the way that it's sometimes marketed or talked about is that if you're 20 years old and you've got a million dollars gifted to you by dear Aunt Mildred, who's just popped her clogs, you're going to put that into a fund and you're going to be able to withdraw $40,000 a year, never have to worry about anything. But you still need to think about the ups and downs of the market. So the Society of Actuaries in New Zealand, which is basically the nerdy number crunchers, they looked at the rule of four percent. And what they found is that this works really, really well if you are like 65 and about to retire. Because if you have a couple of bad years in the share market,

• 12:00Speaker 00

  that's okay, because you can still draw down on those funds, right? So you could still spend some of that money and live off it. And what they found is that if you were to invest, and I think they said in a balanced fund, and you were taking out four percent per year, there is a 50% chance that it runs out after 38 years.

• 12:22Speaker 01

  Yeah.

• 12:22Speaker 00

  So if you retire at 45, there is a 50% chance that all that money is gone by the time you turn 83. So I think this is a really good rule of thumb, but it's not a golden rule.

• 12:37Speaker 01

  Yeah, imagine, imagine if you got closer and closer to kind of those later stages of your life and you see your money dwindling down and start to panic and you're used to quite a comfortable lifestyle. That could be quite scary at that stage.

• 12:49Speaker 00

  Well, especially if you were like 30 years old and then you run out of money by 68. And it's just to say that, again, the rule of four percent is great, great, great rule of thumb. But you also have to factor in things like the years that your investments underperform and go down in value, because you're still going to be wanting to draw your money out. And if you're still drawing your money out, you're selling your investments while they've gone down in value, right? And so you've got to sell even more of them to pull your money out. And so you've got to factor in the market volatility, rather than just think, oh, that sounds like a really good rule. That's the reason why you review your investments every year and might have to say, okay, the markets are down, we're going to spend a little bit less this year because we don't want to sell more and more of our assets.

• 13:33Speaker 00

  Basically, I'm just trying to say, great rule of thumb, not a golden rule. But let's say that you put your $5 million aside as some investments. What would you do with the $10 million of money left over?

• 13:45Speaker 01

  So I kind of think, well, if it were me, I'd probably, like, I'm very happy with my house. I'm very happy with where I live. I'd probably buy a holiday home at that stage, because, you know, I quite like that and I'd go on more holidays, probably. Probably, probably not. But there are people that say, you know, take 2% and just use that as your crazy money. Like, just do whatever the hell you want with that. And I think it's good to have like a fair limit on that, rather than just go crazy. Because I think people, you know, they do go out and they buy those cars and they buy all this extra stuff. And then, and then those are, those are not good assets for later on, if you want to keep that money.

• 14:19Speaker 00

  Well, as a financial advisor, you've worked with Lotto winners before, right? What are the things you encourage them to keep in mind?

• 14:25Speaker 01

  Do you know that the people that I've worked with, they're all really down-to-earth people. No one actually did go into it. Jeff, one of the guys, he went out and bought a car that was like his dream car. It was like a, like a SS Commodore or something like that. So it wasn't overly expensive, but it was, you know, it's, they'd never bought a brand new car before. And that was just like, that meant everything to him.

• 14:47Speaker 00

  Well, it's interesting looking at the stats as well. So of the people who have won Powerball, right, in 2019, 81% of them went and bought a new house. So only 19% stuck where they were. As I said before, the majority of them, about 85 odd percent, kept on working, just kept doing the same job as before, at least initially. But interestingly, while 81% bought a new house, even more, 95% said they would buy their ideal car if they won Lotto. But of course, it has got harder to win. They've made a change, they've added some extra Powerballs. So of course, when you play Lotto, you've got to get your six numbers that come out from the initial draw.

• 15:29Speaker 00

  And then we've got the additional Powerball, which had 10 numbers that have to line up as well. Now Lotto, they've just added an extra four Powerballs, which might not seem like it makes much of a difference, but it makes playing, or at least winning Powerball, 40% harder, which means that rather than the chance of a single line winning, the chance was one in 38 million, it's now gone closer to one in 54 million per line. So much, much less likely, even though we've only added in an additional four balls. And over the last 15 minutes, you've learned what I'd actually do if I won Lotto,

• 16:09Speaker 00

  the mistakes Lotto winners always make, and what most Kiwi winners actually do, because it might not be what you think. Right, let's wrap it up there, but please don't forget to rate, review and subscribe to the podcast. It really does help us get the message out to more people.

• 16:27Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Stephen Knight.

• 16:30Speaker 01

  And I'm Adrian Coles.

• 16:31Speaker 00

  We're going to be back here tomorrow with even more daily strategies, tactics and insights to help you get the most out of the new selling property market. Until next time.