Managing a windfall: one signed a multimillion-dollar contract; another bought a lucky lottery ticket; a third sold property rights. We'll look at what they did with their sudden gains and what you should do with yours.

It's the get-rich-quick dream shared by millions of people nationwide: to strike it big by winning the lottery. For Chicago resident Sterling Plumpp, that dream came true five years ago.

Plumpp won a cool $1 million from a $10 instant lottery pick in August 2001. After Uncle Sam grabbed his share--some $400,000 in taxes--he netted a hefty lump sum of $600,000. "You can't believe the phenomenal rush you get when you win the lottery," says Plumpp, who had been teaching at a university for nearly 30 years and already qualified for a pension.

Despite his winnings, Plumpp still works. He didn't go into a mad shopping frenzy. And he managed to keep his most prized family relationships intact. In the five years since hitting the jackpot, he has continued to live a modest life. That's not to say Plumpp hasn't enjoyed his money; he has--just with moderation.

"I bought a new wardrobe. I needed expensive dental work, so I took care of that. And I did buy a new car, a 2001 Mazda 626, because I previously owned a 1976 Cadillac Sedan Deville. It was coming apart," he says with a chuckle.

Plumpp's experience as a lottery winner is atypical--very, very few lottery players win big. But he's far from being alone in having to manage sudden wealth. Americans are increasingly dealing with financial windfalls of all types. More commonly, they are widows or beneficiaries who inherit money or receive life insurance proceeds, recipients of divorce or lawsuit settlements, retirees who get a lump sum payout from their jobs, or entrepreneurs who sell their businesses.

Although most people think they would love to come into an enormous pile of cash, experts say that amassing sudden wealth is fraught with financial and emotional pitfalls.

"One of the most common misconceptions about sudden wealth is that it categorically eliminates stress," says Harold Hadnott, an associate with Merrill Lynch's Private Banking and Investment Group in San Francisco. In reality, "a financial windfall--whether a substantial unexpected inheritance, insurance settlement, or a stock option cash out--can cause great anxiety for those who lack effective planning techniques," he says.

One reason for this anxiety is that recipients of instant fortunes must now deal with a host of new and complex issues, such as asset management, tax strategies, estate planning, and philanthropy.

Plumpp made his winnings easier to deal with by getting financial help. "I went to a lawyer first thing after I won, set up a trust and a living will and a way of investing the money," says Plumpp, who now meets with his lawyer four times a year.

Although Plumpp says he didn't know much about Wall Street, the lawyer he selected is a proficient stock picker and works as Plumpp's financial adviser as well. "In the five years since I've invested in the market, my portfolio is up more than $100,000," he says, adding, "I still have about 80% of the money I won, and I think I'll have it when I die."

Plumpp gradually invested about $260,000 of his lottery winnings, over nearly three years, and has since parlayed that investment into a $400,000 nest egg. A key part of his strategy has been diversification--he's purchased 22 different stocks, including off exploration stocks and shares in well-known companies such as McDonald's, Pfizer, Harrah's Casino, Boeing, and Walgreens. Plumpp says 17 of his stocks have increased in value.

So far, the most gratifying thing he's done with his money, Plumpp says, is to help his adult daughter, Harriet Nzinga Plumpp. "When she got married, I was able to pay $30,000 for the wedding," he says. "And later on, when she needed $20,000 toward the down payment on her house, I was able to help with that, too."

These days, Plumpp stays busy by teaching courses part time in African American literature and creative writing at Chicago State University. But Plumpp's ideas have changed about big financial wins of any kind. "When you win a lottery, your first reaction is that it's a blessing from God," he says. "But now my philosophy is that the real wealth in life comes from your health, your children, and your work."

NBA star Bobby Simmons also knows what it's like to manage a huge windfall. Last July, Simmons landed a $47 million, five-year contract with the Milwaukee Bucks--a deal closer to $50 million when various contract options are included.

Growing up in the rough-and-tumble South Side of Chicago, Simmons always wanted to be a basketball star. Seeing that dream come to fruition--and the financial, personal, and professional implications that come along with it--have been a real eye-opener for the 26-year-old athlete.

Before signing the fat contract, Simmons took the hard road to the NBA. The Seattle Supersonics, Washington Wizards, and Los Angeles Clippers all passed up the young forward. Simmons was even sent to the Development League, a sort of minor league for the NBA. Simmons described his experience there as "humbling."

Reggie Brown, a sports management agent with Priority Sports & Entertainment, mentored Simmons. "Athletes like Bobby work intensely to be the best because they understand that an average NBA career lasts just six or seven years. A great career lasts maybe 12 years," says Brown. "So these guys know they have to take advantage of that narrow window of opportunity."

Brown is a mentor to Simmons but draws the line at being a financial adviser. "My job is to make money for them, not tell them what to do with it," the talent scout says.

To keep his money growing, Simmons uses a team of professionals but relies mostly on his financial adviser, Stacee Bain Crittenden of Smith Barney's Bowie, Maryland, office. The two talk four to five times a week, and sometimes several times a day, to discuss the financial markets, potential investments, and various business ventures. "The first thing I told Bobby is that I'm not concerned about today," says Crittenden. "It is my goal to make sure that he has money for the rest of his life, after the NBA contract is over."

To that end, Crittenden recommended that Simmons purchase a variable annuity product in order to guarantee income later in life. Simmons will not start taking income from the annuity until after he leaves the NBA. "It's so powerful to sit down with your client and have them know exactly what income stream they're going to receive in the future," she says.

With regard to Simmons' investments, Crittenden has built a strategy around having two distinct portfolios: one that is tax-oriented and another that is growth-oriented. "I tend to buy short-term, tax-free municipal bonds or tax-favorable instruments to pay taxes," says Crittenden, "because the worst thing you want to do is tell a client in April that you made all this money and now you have a huge tax bill and you have to sell stocks to pay it."

Simmons is in the top federal tax bracket, 35%, according to Mark Goldstick, a CPA and the chief financial officer of Priority Sports & Entertainment. Illinois, where Simmons resides, also has a 3% state tax. So every month, Crittenden uses the income thrown off by those dividend-paying bonds to fund Simmons' considerable tax bill.

The other portfolio Crittenden created for Simmons utilizes a tried-and-true investment strategy: dollar-cost averaging, in which investors commit a set amount of money to the market on a monthly basis or at some other pre-determined interval. "It doesn't matter whether you can afford to invest $50 a month or $50,000, dollar-cost averaging is still the best way to invest," she says.

Crittenden says Simmons' overall portfolio is made up of 65% stocks and mutual funds and 35% bonds and other fixed-income investments. "I pay a lot of attention to asset allocation too," she says, adding that Simmons holds a broad range of domestic and international investments, including small-, mid-, and large-capitalization stocks in industries as diverse as pharmaceuticals, energy, and banking.

Since Simmons has a 7-year-old son, Crittenden advised him to open a 529 college savings plan that will provide fully for college expenses.

Part of Goldstick's job is to prepare the personal tax returns and ensure the proper tax compliance for Simmons and Priority's other athletes, which he says, "keeps their name on the sports page and off the front page." The head of Goldstick Tax Service L.L.C. in Chicago, Goldstick says that high-net-worth individuals, or those who come into windfalls, can sometimes minimize or delay taxes by deferring income, accelerating or deferring deductions, and buying financial products like tax-deferred annuities.

Besides giving investment advice, Crittenden tries to get clients to think critically about their spending. For instance, Crittenden and Simmons agree that luxury automobiles are one of Simmons' favorite toys. "I always tell Bobby that it's his money, and that I just give advice," she says. "But anytime he tells me he wants to buy a new car I say: 'OK, then which one are you going to sell?"

Besides purchasing high-end cars, Simmons--like other athletes with big contracts--has spent considerable money on close relatives. Susan Bradley, the author of Sudden Money: Managing a Financial Windfall, says that one challenge of newfound wealth is dealing with all the emotional issues surrounding money--including other people's unrealistic expectations.

"Almost everybody looks at the issue of sudden wealth and thinks, 'Yeah that's a problem I'd like to have,'" says Bradley. "There's a great American myth that says 'Money is good and more money is better.' But the truth is that money is complex. Whether it's good or bad is determined by the individual, not by the event, or even the amount."

Ilyas Akbar, a financial consultant and CPA at AXA Advisors in New York City, believes that Plumpp and Simmons have done themselves and their families a good service by enlisting the help of competent professionals.

"Sometimes I hear stories about people who've come into money and say, 'I'm going to take care of it myself or 'I'm going to just put it in the bank,' but I think that's a big mistake," says Akbar. "It almost goes without saying, but when you experience sudden wealth, you really do need to get professional financial help."

That's sound advice that DeAnna Whitsitt wishes she had taken a year ago. In October 2005, the Fort Washington, Maryland, resident came into a windfall of her own: nearly $76,000 from selling property interests. Today, Whitsitt looks back and wonders where most of the money went.

She can point to several major expenditures, like the 2004 Kia Sorrento she bought for roughly $15,800. She also recalls paying off nearly $30,000 in debt and spending about $6,000 to pay half the tuition to the school her two young daughters attend. But now Whitsitt, who still has about $10,000 in debt, says she is kicking herself for not paying off all her credit card bills. She also regrets not having paid her children's entire tuition, especially since the second half is due in January.

Instead of spending conservatively, Whitsitt says she did some impulse buying. For example, she once purchased 20 pairs of shoes on eBay, at prices ranging from $29.99 to $49.99, and took her daughters with her to get manicures and pedicures. "People were saying: 'Oh, you have money to blow,'" says Whitsitt. "I saw it as a special treat not only for myself but for my girls as well."

Whitsitt also acknowledges taking her daughters on vacation to Myrtle Beach, South Carolina, and showering them and other relatives with gifts last Christmas. "I definitely splurged. It wasn't anything major, but it was a lot of things that added up." Whitsitt recalls spending about $2,000 during the holidays, when she normally keeps it around $800 or so. "It was as if I was giving myself permission to spend," she says of handling her windfall.

Making matters worse, her boyfriend, the father of her daughters, now thinks she's hanging on to a big chunk of money, when in reality those funds have been spent. Whitsitt had put $15,000 into two online savings accounts, but little by little she tapped into them. She's afraid to look at the balances but thinks they may have about $1,500, combined, "and that's being generous," she admits.

"That money was supposed to be for emergencies," Whitsitt says. "But I had Internet accounts and with one of them, if you needed the money, it could he returned to you within 24 hours. That was a good thing and a bad thing because the money was so very accessible. If I had to do it all over again, I would've invested the money in something I couldn't touch right away."

For anyone coming into a huge windfall, Simmons recommends being conservative. "If you have it, then there's no need to splurge. It's all about making good choices and good decisions. That's the only way to success, financially and in life."

What to do--and to avoid--if you get a financial windfall:

1 Get help.

Money managers, certified public accountants, certified financial planners, attorneys, and financial psychotherapists can all offer invaluable assistance to help you manage your windfall properly. Select a team of financial and legal consultants, or a firm with a broad-based approach that you can trust. But even as you assemble a team, recognize that you're still the captain. "Surrounding yourself with a team of knowledgeable consultants is not grounds for letting them take control of your financial future," says Harold Hadnott of Merrill Lynch's Private Banking and Investment Group in San Francisco. Be involved in all aspects of decision making.

2 Set up a system to deal with requests for money.

Consider creating a set of guidelines that dictates the way in which financial requests will be handled. Guidelines provide structure for private and public philanthropy, and they also help manage the expectations of those making requests, Hadnott says. Having guidelines in place helps reduce unwanted solicitations and conflict. Additionally, you can "remove the difficult burden of saying 'no' by delegating that responsibility to an attorney or accountant," Hadnott suggests.

3 Think about giving in a structured way.

Dianna Smiley, vice president of the National Center for Family Philanthropy in Washington, D.C., says there are three primary ways you might direct your giving in an organized manner.

You can give through a "donor-advised fund," available at major fund companies or via some 700-plus community organizations throughout the country. Donor-advised funds typically require gifts of $10,000 or more. If you give very large gifts, of more than $5 million or so, Smiley says it may be time to consider whether it's worth it, from an administrative and cost standpoint, to establish a family or private foundation. Lastly, you can donate directly to an organization, establish a scholarship, or create an endowment for a cause you support. For more information on philanthropic giving, contact the National Center for Black Philanthropy (www.ncfbp.net) or the Twenty-first Century Foundation (www.21cf.org).

4 Plan before you invest.

"The first thing you need to do is plan. That should be your motto," says LeCount Davis, CFP and the executive principal of LRD Management Group. "You may not just have an income tax problem; you may also have estate tax problems or even gift tax issues," says Davis; who is also the chairman of the board of the Association of African American Financial Advisors in Bethesda, Maryland.

One strategy for windfall recipients, Davis adds, is to put a portion of the money into U.S. Treasuries. [Doing so:] will eliminate federal and state taxes, so your effective return is higher than the nominal return of, say, 4% that might be quoted for those Treasury securities."

5 Give yourself time to sort things through.

Bradley suggests that you wait before making major decisions. She adds that there are three stages people go through who achieve sudden wealth.

The first is "the ending of life as it was." Whether or not you want it to be the case, the reality is that your circumstances have now drastically changed. The second phase is the "passage" to whatever new life and new sense of normality you will achieve. Big emotional changes can happen in this phase, Bradley says. One day, you might regret what's lost to you (privacy, relationships, etc.), and the next, you might be excited about what the future holds. Confusion is also common at this stage, since you're still adjusting to your new circumstances. The last phase, Bradley says, is the "emergence" of your new life, in whatever form it takes.