For lottery winners, suddenly being shoved into the spotlight can feel like a curse, which is the exact way many see lotteries: as curses. But the financial freedom that comes with winnings can lift a lifelong burden for people. In fact, many winners immediately pay their mortgages off, eliminate their credit card debt and pay for college for their children or grandchildren. Not a bad way to live, right? For those of us who wouldn’t know how that feels, we’re about to get a bit of a look into how lottery fever affects millions.
Lottery on TV
ABC has a new show this fall and it’s about 7 everyday people who won the lottery and then realized everything they thought they knew about fortune and wealth was wrong. The lucky winners are co-workers at a local gas station in Astoria, Queens. They chip in a few dollars every week to play the lottery, each time wishing they might win it all one day, but knowing it’s not likely. They all went into the agreement plan with open minds and big dreams.
There’s an interesting psychological twist in that the human condition always wins out over good intentions – even when art imitates life. Casual players are interesting to watch, explains behavioral economist George Loewenstein, who teaches at Carnegie Mellon University. “We compare things,” he said.
If there are a lot of jackpots, even though they’re all enormous numbers, people are going to start comparing them and if there are billion dollar jackpots, then 100 million jackpots that used to feel enormous are going to seem much smaller, even though in terms of the impact on your life of winning 100 million or 1 billion, it probably isn’t all that different.
That makes sense considering what happened this week.
Lottery Fever and $448 Million
As many know, there were three winners in this week’s $448 million Powerball jackpot. One has already come forward and he told the media today that he’s taking the lump sum, of which he’ll pocket slightly more than $58 million after taxes. From $448 million to $58 million; it’s almost surreal. We wondered if he too planned to pay off credit cards and mortgages and then quit his job. He told the media that he was waiting for the two weeks to pass to get the cash and he’d make more definitive decisions at that point. Financial attorneys say he’s going to need those two weeks to prepare themselves while making legal arrangements for the massive amount of cash that’s just made its way into his bank account.
Financial advisors will need to be found as well as insurance and other legalities. A few meetings with a psychologist would be well-advised, too. Not to suggest winners will have a traditional need, but because winners are rarely prepared for the changes those closest to him might start revealing.
For those who dream of paying off their parents’ debts and doing good things for the world, for some, it simply doesn’t play out that way. In fact, many turn to drugs and even bankruptcy; even as they know the money was used for things they never dreamed. Death often follows these “lucky” winners, too.
Many may remember Jack Whittaker. He too was one who wanted to pay off his bills and instead, after winning the largest Powerball jackpot in history, saw his life spiral out of control. The legal issues as a result of his actions after becoming wealthy were quite complex – and costly. Eventually, his wife filed for divorce and for the first time in his life, he became an addict.
In another instance, one man’s brother, jealous and full of rage, attempted to kill the lottery winner by hiring a hit man.
A woman in Minnesota won the lottery and thought her difficult days were behind her. Unfortunately, she found herself in jail being charged with “multiple counts of vehicular homicide”. Billie Bob Harrell, who won a Texas lottery, committed suicide after blowing through his winnings and seeing his wife leave him after learning he’d been having affairs.
If I’d known what was going to transpire, honestly, I would have torn the ticket up.
And then there are those who begin to believe the money is tainted and want to spend the money as quickly as possible so that they can return to their normal lives. One woman said her father was never happier than finally being rid of his lottery winnings.
Financial advisors have a host of safety precautions and other tips. Perhaps the one common bit of advice we noticed in our research efforts: financial experts encourage winners to set up a business such as LLC BEFORE you claim your winnings. It can move mountains later as you prepare for your long term efforts. It can also help with tax purposes, lawsuits and other legal considerations.
Also, the odds of winning are absolutely miniscule, so don’t sink too much money into the lottery hole week after week. If you’re not able to pay more than the minimum due on your credit card each month, maybe it’s time to set the ticket purchases aside for awhile. Your money is far better served being applied to debt.
Keep the communication open with your family. They are our most powerful allies so don’t underestimate that important reality. If you do win, you’ll need to update your will, estate plan and any other legal document you’ve completed in your adult life. Making your wishes known to your spouse will serve no purpose after your death – put it in writing and file it according to your state’s legal requirements.
Don’t chase your lost money by continuing to sink your hard earned cash. Lotteries should be seen as an occasional indulgence, not your retirement plan.
Remember, winning the lottery can change your life and those around you forever. Whether those changes are good or bad will be determined by the lottery winner. Leading with a healthy dose of reality is always the best approach.