Mad Money

Cramer's lucky 7 rules for the winner of the $700 million Powerball jackpot

Key Points
  • "Mad Money" host Jim Cramer goes over what you should do if you have the winning ticket to the $700 million Powerball lottery.
  • Cramer lays out seven key steps for the winner to follow to make the most of the jackpot.
Cramer: 7 rules for Powerball jackpot winner
Cramer: 7 rules for Powerball jackpot winner

You've won the Powerball. You're on top of the world. You can taste the $700 million already. But wait! CNBC's Jim Cramer has a few rules that will ensure your winnings don't get squandered.

1. Take that money

"First and foremost, you take the money all at once," the "Mad Money" host said. "Don't let them string it out like that. You want the time value of all that cash working for you. That's vital."

2. Pay those taxes

Cramer's second vital step is to pay your taxes right away.

"Do it immediately. Get an accountant who understands taxes so you never, ever have to worry about the one thing that destroys more wealth than anything but health problems — the government," Cramer said.

The audits tend to start trickling in once you're rolling in dough, so as much as it may hurt, Cramer's cardinal advice is to play it as safe as possible with the taxman.

3. Don't get reckless

As Cramer always says, you only need to get rich once. Even if your move is to buy low-earning U.S. Treasury bonds with the $700 million, that move has Cramer's blessing.

"I just don't want you to invest in something reckless or someone who promises a big return. You don't need it. You already won the lottery," the "Mad Money" host said.

4. Don't get swindled

The Powerball winner will become instantly famous to family, friends and the country. Cramer's blanket rule about those who ask for loans, investments or payouts is, simply, don't do it.

"I don't care how good the business is. I don't care how good the borrower's credit is. Don't do it," he said. "If you don't listen to me on this, you will end up getting scammed left and right. That's what happens to people who suddenly got rich. I'm urging you not to fall for it."

5. Give a little

"I do think you should give some money to charity," Cramer said, adding that he would give around 10 percent. "I prefer local charities because I can watch over them and have more impact."

6. Diversify, diversify, diversify...

...but not like in a stock portfolio. Cramer's first move would be to put 10 percent of the prize money into gold or bullion right away as something of a rainy-day fund.

"Don't store it all in one bank. Don't even store it all in one bank in this country. Remember, the U.S. government confiscated our gold in 1933," the "Mad Money" host added.

Step two?

"Buy an older mansion with lots of land and then fill it with masterpiece art," Cramer said. "Why? Mansions and masterworks have been known to maintain their value even in the worst periods of hyperinflation in any country you name."

Then, Cramer would advise buying municipal government obligation bonds, a tax-free way to grow your wealth that is backed by the taxing and credit authorities.

The lucky winner won't need much more income than those bonds, Cramer said. But if the jackpot-holder wants to buy stocks, Cramer suggested using 20 percent maximum of their winnings to buy into domestic and international index funds diversified by nation and continent.

7. Have fun! ... but not too much

Finally, after all that, Cramer gave his blessing for you to go out and invest 5 percent of the winning portfolio into stocks of your choice.

"No more than that, ever, though. You don't even need to be diversified because you've already correctly diversified the way a super-rich person diversifies," Cramer said. "Have some fun then. Get speculative. But never put more than 5 percent of your wealth into individual stocks, ever, because stocks are inherently risky. And once you've won a $700 million lottery, there's just no reason for you to think or ever take that kind of risk again."

Watch the full segment: Cramer's Powerball procedure

Cramer's lucky 7 rules for the winner of the $700 million Powerball jackpot
Cramer's lucky 7 rules for the winner of the $700 million Powerball jackpot

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