The Christmas lottery is a favorite among Spaniards, although not the one with which you can win the most. But the Christmas atmosphere of sharing the tenth with family, friends or colleagues means that it is played with enthusiasm and that December 22nd is a day marked on the calendar. El Gordo gives the tenth 400,000 euroswhich, together with the amount that must be paid to the treasury, amounts to 328,000 euros (20% of the premium, but the first 40,000 are not taxed).

While it’s a prize you can’t retire with, it’s a nice pinch to plug holes and even make a profit if the desire to spend doesn’t prevail. For this reason, experts note the need to have a plan and not make decisions lightly. In fact, research from the European Financial Planning Association (EFPA) shows that 70% of winners have “much less money” five years after winning the lottery.

According to comparator HelpMycash, those lucky enough to win the jackpot are focused on helping friends and family pay off their debts. Others are considering paying off their mortgage early, and some are exploring investing in either the stock market or real estate.. The experts’ first recommendation is to distribute the prize money in different areas that correspond to the financial situation of the winner. “Paying off card debt or personal loans is a priority, followed by building an emergency fund, meaning savings equal to six months’ salary, to have a cushion in case unexpected events occur,” says Olivia Feldman, economist and co-founder of HelpMyCash. .

They also advise donate a percentage of the prize to help friends and family if you so chooseor set aside some money for personal indulgences, such as going to a better restaurant or going on a trip. But by allocating some money for it, HelpMyCash confirms that it is important to be responsible and allocate an amount for long-term financial management.

For their part, Abante experts recommend financial and personal planning. The first recommendation is to remain calm, that is, do nothing with the prize money for several months to get used to living with it. . “The purpose of letting time pass is to avoid making hasty decisions. because in these cases, very often people get carried away by emotions, want to pamper themselves and end up making a bad investment,” they note.

It includes financial and personal planning so you can think about what your life goals are and how the prize money can help you achieve them. This process will also allow you to think long-term, predict what goals, needs or problems you have or will have over time, and contextualize lottery money within those plans, whether personal, professional or family (there are rules in this sense) . gives a maximum period of three months for receiving the tenth amount).

Know how to invest

The next step, once the vital goals have been established and the taxability of the bonus is understood, is to crunch the numbers. A financial advisor will review the winner’s financial and asset status. to find out what your starting point is and see if the extra prize money is enough to reach your goals or if you have a shortfall that needs to be covered. And in this exercise you will take into account not only your current financial situation, your savings, your future income or your debts, but also when and how you plan to retire, your marital status, increasing life expectancy and your risk aversion . . Through this exercise, it will be possible to see whether the winner needs to enter the financial markets and at what rate of return he should invest to achieve his goals.

It is very important to know that if you choose not to invest your money, after a few years you will lose purchasing power as prices rise, not keeping up with inflation. That is, if you have €328,000 and don’t invest it, after 20 years and assuming average annual inflation of 2% (ECB target), that money will be equivalent to approximately €220,734 (current). To do this, the first step is set the financial goal that is needed – which is marked because of the difference between what you have and what you need- and this is what will determine what level of risk can be accepted and what portfolio or what financial asset is most suitable, depending on each specific case and the global picture that has developed at the property, financial and fiscal level.

To find the best solution for each person and to be able to optimally manage your money, it is necessary to professionalize investments in order to know what percentage can be invested and in what type of assets. This decision depends on your liquidity needs, the term available to you, your risk profile and your financial goals. “A financial advisor will be able to help you develop the investment strategy you need and build an adequate and balanced investment portfolio based on what you need to have in each asset type: alternative investments in unquoted assets such as private equity, real estate investments or listed assets,” – they say from Abante.

In the above part, Abante experts note that in order to maximize prize money, it is important to have diversified portfolios, both by geographic distribution and by sector and asset type. Moreover, if you have a long investment horizon, you can take on more risk, resulting in a much larger final capital. For example, if you want to beat inflation by 2 points (that is, achieve an average annual return of 4%), you would have to invest in a portfolio with 50% of the investment in stocks. AND An option that provides diversification, provides tax benefits and gives access to professional management are investment funds.

Pay off your mortgage

In addition to investing, many lottery winners typically use the prize money to pay off their mortgage. “The depreciation decision does not have to be the most appropriate one.”, they note from Abante. You always need to analyze a specific situation to see if the return on the money invested exceeds the cost of financing, because in this case it would not be interesting to amortize it and it would be better to invest this money. . In addition, you must take into account that if the permanent residence was acquired before 2013, there is a personal income tax benefit (the law allows you to deduct 15% of the maximum payment of €9,040 each year), which you may not be interested in at a loss.

Economic improvement in the winning province

The Bank of Spain published a study Sentimental propaganda of lottery winnings: evidence from the Spanish Christmas lottery (“The Sentimental Spread of Lottery Prizes: The Christmas Lottery in Spain”) by Isabel Mico-Millan, Morteza Gomi and Evi Pappa, which shows that its consequences are repeated in society.

The document states that “Consumers in the winning provinces are significantly more optimistic about Spain’s macroeconomic conditions than those living elsewhere” and that this optimism leads to increased spending intentions in areas that have received awards. In fact, according to the study, the winning provinces receive income equivalent to 0.2% of their GDP, which can rise to 3.4% in the provinces that receive the highest per capita prize. The unemployment rate is also falling, reaching its greatest decline in the next 12 months.

This affects not only the economy, but also the sentiment of households, which become more optimistic and improve their expectations. who do not live in these provinces,” the study says. Except, Lottery prizes also encourage the purchase of this type of product in the winning provinces. “The growth rate of car licenses increases by 10 percentage points in the winning provinces,” the text clarifies.