Money

Kevin O'Leary: This is what you should do if you win the $1.6 billion Mega Millions 

The Mega Millions jackpot has climbed to $1.6 billion, making it the largest jackpot in U.S. lottery history. Players across the country are plotting how they would spend those millions, but when it comes down to it, becoming a multi-millionaire overnight is serious business.

So what is financial expert and "Shark Tank" investor Kevin O'Leary's best advice if you win the lottery?

"You've won financial freedom. Don't screw it up!" he tells CNBC Make It.

Though O'Leary says he bought "zero" tickets himself — "Everyone knows I like low risk investments. I don't do one in 302.5 million odds" — here he tells CNBC Make It what to do if you win.

Take the lump sum

Mega Millions winners must decide whether to collect their money in a single reduced lump sum or 30-year annuity payments.

"Take the lump but don't spend it," O'Leary tells CNBC Make It.

"Pay yourself an annuity," he says, "and put the excess cash flow to work for you. More money up front means more money to invest and grow."

O'Leary recommends putting the money to work by investing in "low volatility, dividend paying stocks."

According to USAMega.com, for the current $1.6 billion jackpot, the lump sum would be $904.9 million in cash, less about $217.2 million in federal tax withholding (24 percent). You can also expect to owe the difference between that amount and the top federal income tax rate of 37 percent. The annuity option "provides for an initial annual payment followed by 29 annual payments. Each payment is 5 percent larger than the previous one," according to Mega Millions. (In both cases there could also be state taxes, which range from zero to 8.82 percent, and other taxes may apply.)

O'Leary's advice is in line with what other experts have said: Take the lump sum, because if you manage it well and invest it wisely, you could end up with more money over time.

Watch your spending

The biggest mistake you can make if you come into that much money, O'Leary says, is drastically changing your spending habits.

"Just Google 'lottery winner goes bankrupt' and you'll find dozens of horror stories about lottery winners who strike gold, only to lose it all within a year or two," O'Leary says. (Indeed, many lottery winners go broke as their spending spirals out of control.)

"Blowing through hundreds of millions of dollars might seem like an impossible task, but it can happen quick with bad habits," says O'Leary.

"Is your lifestyle going to change? Indubitably. But ease into it, and don't stop paying attention to your budget."

Pay off debt

There is one caveat to O'Leary's advice not to spend your winnings: "Pay off your debts," he says.

"There's never an incentive to stay in debt," O'Leary previously told CNBC Make It. "Life is unpredictable."

Correction: This story has been revised to correct that the federal tax would be up to about 37 percent.

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Disclosure: CNBC owns the exclusive off-network cable rights to ABC's "Shark Tank."