Winning the Lotto will change your life, but not necessarily for the better.
In fact, I think receiving a large and unexpected windfall causes more problems than it solves.
This may sound negative, but it’s backed up by evidence.
According to the National Endowment for Financial Education in America, 70 per cent of Americans who suddenly come into vast sums of money lose it within a few years.
Here are a couple of examples:
Bud Post won more than $16 million (US) in the Pennsylvania lottery in 1988, but within one year he was $1 million in debt.
His brother was arrested for hiring a hit man to kill Bud in the hope that he would inherit the cash, while an ex partner successfully sued him for a portion of the earnings.
Former garbage man Michael Carroll won $16 million in the British Lottery in 2002.
He embarked on a spending spree — we’re talking drugs, fast cars and parties — and was broke within five years.
These may sound like extreme examples, but there are plenty of them.
So why does winning the Lotto end so badly for so many people?
Here’s a few reasons:
1. IT DOESN’T REQUIRE ANY HARD WORK…
When you receive a large sum of money without any hard work or effort on your part, it can be overwhelming.
Initial feelings of elation can turn to fear and trepidation over what you’ll do with the money.
Very few people seek appropriate financial advice at this point.
They often just muddle their way through with disastrous results.
Or they may react impulsively and spend the money without realising how quickly it is disappearing. When you don’t earn the money you spend, it has less value to you.
2. IT’S A RESPONSIBILITY NOT A WIN
Winning the Lotto can feel like a big game to many people and that is certainly how it looks from the outside.
But winning millions and millions of dollars is a huge responsibility.
The problem is Lotto winners are often great at popping the champagne, but not so great at making it last.
They don’t see the money as an investment, they see it as something to spend.
And the last thing you should ever do with millions of dollars is spend it outright.
Rather, you should invest it in some great stocks and property, and live off the considerable returns.
It sounds basic, but the temptation to spend and spend big, is strong for many winners.
3. IT CHANGES HOW OTHERS SEE YOU
Lotto winners often report that upon receiving their windfall, lots of people they haven’t seen in years turn up with their hands outstretched.
Uncles, friends from high school and old colleagues will suddenly become very friendly and it’s hard to know who is genuine and who is just after the money.
Winners often share some of their windfall with friends and family, but this is a dangerous road.
You can’t help everyone and the friends and family who are left out often feel bitter and resentful.
Exes may also surface at this point to claim their portion of the prize.
It’s little wonder Lotto winners choose to stay anonymous, but you can’t hide that windfall from friends and family forever.
Deciding who to tell and who to give money to will throw up all sorts of conundrums and ethical dilemmas and will make your life pre-Lotto win seem like the real dream.
4. IT PLACES WEALTH AS AN END GOAL
Money isn’t just there to be spent and to make you feel good about yourself.
It’s about providing the freedom to live the kind of life you want to lead, whether that be one of travel, working less or pursuing a hobby.
But winning money is all about being rich and feeling rich.
And to feel rich you have to keep spending your money and so a vicious cycle begins.
5. MONEY IS HARD WORK
People think that money will solve all of their problems. And for a while it will.
But money is only as powerful as the person who has it, and winning the Lotto doesn’t make people any better at managing their money.
Just because someone has more of it all of a sudden doesn’t mean they don’t have to worry about it anymore.
They have a greater duty to their money than ever.
But many Lotto winners think winning money frees them from ever having to think about it again.
Which is so wrong.
If they work hard at investing their windfall correctly, and ridding themselves of old bad habits, they’ll reap the rewards years down the track.
But if they don’t look after their money, if they think it will all take care of itself, then in a few years’ time they’ll be back to square one.
Now, I’m not saying not to have a go at Powerball every now and again.
There is no harm in that, of course, and money has a positive impact on people’s lives when used wisely.
But in the (unlikely) event your numbers do come up, make sure you’re ready for the responsibility and the change a big windfall brings.
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