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Imaginary Lottery Winnings Can Pay Off in Setting Real-Life Financial Priorities

July 05, 1998|Charles A. Jaffe | Charles A. Jaffe is personal finance columnist at the Boston Globe

Q: I frequently find myself fantasizing about winning the lottery, figuring out what I'd do with the money. I'm worried that I really should be spending that time studying mutual funds or focusing on investments. How can I discipline myself about this?

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A: Playing "If I Win the Lotto" is a healthy exercise in learning about yourself and your financial priorities.

While you may never have the multimillion-dollar jackpot to prepare for, you may wind up with an inheritance, a lump-sum distribution, an annual bonus, a lucrative stretch of overtime or some other windfall that gives you a tremendous opportunity to improve your finances.

And to make sure you don't do anything foolish in the excitement of the moment, it pays to be prepared.

The Forum for Investor Advice recently surveyed people who received large cash payouts from retirement plans, inheritances, insurance settlements or elsewhere from 1994 to 1996. The average windfall in the study was $87,000.

A quarter of all respondents said they felt anxiety, guilt or numbness upon receiving the money.

Those are not good qualities to have when there is a lot of money on the line.

Now, I am no fan of lotteries. I know I am almost as likely to win without a ticket as with one. That said, however, indulging in a little fantasy about what you would do with lottery winnings is a good thing. It encourages a self-examination that can have a positive effect on everyday decision-making, even if you never hit a jackpot.

Let's try it.

Pick as many answers as apply to you--in order of their importance--as you finish the following statement:

If I won the lottery tomorrow, I would . . .

* Quit my job.

* Pay off the credit cards.

* Set aside enough to pay for college tuition.

* Invest/secure my retirement.

* Help out my family.

* Make large donations to my favorite charities.

* Pay off the mortgage.

* Buy a new house/car/vacation home.

* Start my own business.

. . . You get the idea.

Keep going until you have thought of everything you would do with a windfall.

When you finish, you should have a financial wish list that includes all your priorities and dreams. That list could come in handy if you ever have a financial windfall, but it is helpful right now.

"There is a playful quality when you are fantasizing that eliminates your anxieties and makes this easy to do," says Richard Geist, a Harvard University-affiliated psychologist and president of the Cambridge, Mass.-based Institute of Psychology and Investing. "When you find yourself playing this game, go back and look at your answers.

"You are listing your desires. If fantasizing helps you figure out what you really want and what is really important to you, you can then try to figure out how to get there and achieve those things on your own, without the lottery."

For example, debt is the source of a lot of people's anxieties about money. They worry about not being able to pay off their purchases or about being saddled with debt forever--something that a lottery win could take care of pretty quickly.

But if wiping out debt would be the first step taken with your winnings, you might want to make it the first move in your everyday financial planning, so that you can eliminate much of the stress from your financial life.

Without a lottery jackpot to help you, look for other solutions that could curb your debt.

"The idea is to come back to reality and impose your own realistic conditions on whatever came up in the fantasy," says Geist.

"People see this whole list of what they want to achieve and see how hard it is to do, and that can send them to a financial planner," Geist says. "They're still trying to achieve their dreams, they just realize they may need help with it."

The other part of the lottery fantasy worthy of exploration surrounds attitudes about money, work and inheritances.

Frank Capaci, who won more than $100 million in the recent Powerball jackpot, vowed to set up trust funds for his kids, provided they kept working. He showed up for his part-time job as a golf course groundskeeper on the morning he claimed his jackpot.

Use this information--what you consider an appropriate legacy for children and grandchildren--to shape estate plans and charitable contributions, and to consider how you feel about work as you look to reshape your financial and business life.

The nice thing about winning fantasy millions is that it can change your life in almost any way you want. You would be starting over with a clean, ideal slate.

So go ahead and dream about the lottery, as much as I encourage you to refrain from actually buying tickets. You could turn up a winner just from being in the game, uncovering your financial dreams and then reshaping your financial attitudes and life to make them come true.

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Charles A. Jaffe is personal finance columnist at the Boston Globe. If you have financial questions of general interest that could be addressed in this column, write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail business@latimes.com with "Money Talk" in the subject field.

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