Last November, Edwin Castro from Los Angeles, California, won a whopping $2 billion Powerball prize, but what he’s done with the money since winning is essentially whatever financial planner says not to do.
Little personal information is known about Mr. Castro as he would like to “largely remain private,” according to the director of the California lottery. But it has been made public that the new billionaire seems to be spending a lot of his money very quickly.
First, Castro bought a $25.5 million mansion in the Hollywood Hills; the house has a game room, a home theater, a gym and cold plunge, and a sauna, not to mention five bedrooms and six bathrooms, and neighbors such as Katy Perry and Ben Affleck.
But he didn’t stop there; Edwin Castro also purchased a $ 4 million home in his hometown of Altadena, California, as well as a $47 million mega-mansion in LA, and even a Porsche 911 for $250,000.
The mega-mansion has an almost unbelievable seven bedrooms, eleven bathrooms, a champagne room, a wine cellar, and, of course, a gorgeous view of the LA skyline.
His three new mansions are wildly expensive as is, but it’s important to remember that the annual cost for maintaining a home is about 1%-4% of the home’s worth; this means Castro will be spending an extra $765,000 to $3 million to upkeep these beautiful but costly homes.
Expert financial planners report that Castro has essentially broken every rule they recommend following for those who come into a mass amount of wealth. Most importantly, they say to never buy huge purchases such as multimillion-dollar homes and luxury cars within the first six months of receiving the new money.
Emily Irwin, managing director of advice and planning at Wells Fargo, told Forbes, “Don’t make any visible life changes. Don’t quit your job, don’t go out and buy a Ferrari, don’t buy a mansion.” Which is, of course, exactly what Castro did.
To make matters worse, Castro decided to take his money immediately, which diminished the amount he would receive; he was offered two options, one was to receive the $2 billion over 29 years or to receive $1 billion right away, which ended up being only $628 million after taxes.
These impulsive decisions likely mean that Castro is going to go broke in no time. Financial planner, Nicholas Bunio, explained, “People don’t understand there is a potential for loss. They only focus on the potential for gain.”
In addition to spending his million in mere months, Castro’s decision to invest in luxury real estate is also a big “no-no,” according to financial planners. These homes are difficult to sell if times get tough, and in the current housing market, mansions are becoming less and less profitable.
So with a few bad investments under his belt and almost no money left of what he won, Castro could likely find himself in financial trouble, and soon.