What is a jackpot?
The word “jackpot” refers to a big win from gaming. Regarding money, “jackpots” are significant gains on investments that happen quickly.
How to Read a Jackpot
A five-card draw poker game from the 1800s required players to show a hand with at least two jacks to start bidding. This is where the word “jackpot” came from. Since each player put in an ante before the deal, the pot would grow during a run of hands in which no one could claim anything better than a pair of tens. The term was used more widely in gambling to discuss games like slot machines and lotteries, where winnings build up over time before being paid out.
In everyday speech, “jackpot” refers to a big win that comes as a surprise. This is where the financial use of the word comes from. For instance, investors who buy stock in a company during an initial public offering (IPO) hit the jackpot if the share price of the company they backed goes up dramatically and quickly, letting the investors cash out with a significant profit.
What Happens When You Win a Jackpot?
People often think about getting rich, like winning the lottery, betting on the right horse, or getting in on the ground floor of a hot IPO. These dreams usually involve what they could do with all their new money.
No matter where the money comes from, a financial fortune can cause more problems than buyers expect, especially if they don’t know what will happen when they get a lot of money. If someone suddenly gets a lot of money, they might struggle to fight the urge to go on a shopping spree. But their future financial health could depend on them not giving in.
Enormous sums are usually taxed first and foremost. There are. However, different tax rules apply to different types of windfalls, and not all wins payout similarly. For instance, some lotto payouts let winners choose between a lump sum or an annuitized payout, giving them payments over time. You usually have to pay capital gains taxes when you make a profitable purchase. Financial planners and tax experts can be beneficial in making sure that people spend their windfalls wisely and save enough to pay their taxes on Tax Day.
After planning for taxes, financial experts usually tell people who have won a lot of money to be careful with big-ticket spending. It doesn’t matter how much money you get; it will run out eventually. And it might not take as long as you think. When they win a lot, some lottery winners take too much and end up in debt or bankrupt.
Finally, people who win a lottery should think about how their newfound wealth will change their investing goals, tactics, and level of comfort with risk. You may need to re-evaluate your finances and assets to make a long-term business plan with a higher net worth.
Conclusion
- A jackpot is a large sum of money that comes in all at once from an investment or some other source.
- A “jackpot” used to mean a big one-time payout in gaming. It can also mean an IPO that does well or a trading plan that makes a lot of money.
- Everyone who invests wants to win a jackpot, but they can also be hard to get.
