Winning the lottery is a dream come true for some people, and a curse for most others. The thought of having enormous lumps of money to one’s name overnight can give life to a dying man. Ironically, not winning the lottery could have saved some lives if they knew what was at the other end for them.
Statistics show that over 70% of lottery winners lose all their money within 5 years of winning. Many would think that being made a millionaire suddenly isn’t a bad thing for a poor man who had been knee-stuck in debt and in need of an upgraded style of living. However, the once-poor man who had a lot of money to pay off his debts months later ended up spinning back to square one. In this blog post, we’ll be sharing with you 10 reasons most lottery winners get broke.
- Character issue
80% of lottery winners come from the low-income class, which makes them poor and with no significant amount of money as an inheritance to their offspring. Because they never handled so much money in the past, apart from the meager sums that went to feeding and rent, they are at risk of mismanaging their lottery money with the character that made or kept them poor.
Most often, their thoughts and feelings are overwhelmed with the desire to jump into meeting all their needs at once. All they see is their affluence as being the opposite of poverty, whereas in the proper sense of it, not having money isn’t poverty; poverty is a state of the mind. Everything they do revolves around trying to make an impression with money to show people that their wealth defines them. But that is where they got it wrong.
If they had been fully aware of the role money plays as a tool to make ends meet, they would have seen it as a secondary definition of who they are. The primary definition is that which they have become with or without overnight wealth. The poverty mentality prompts them to buy triple times the number of goods they do not need, in the first place.
- Inability to make informed decisions
With pride as a character flaw in them, a good number of lottery winners who went into bankruptcy were too proud to make informed decisions concerning their newly acquired wealth.
Recently, it is news that lottery organizers sponsor finance management classes for winners where seasoned financial advisors teach money management. The soon-to-be losers fail to attend such classes, instead choosing to go off on their own to run life as they deemed fit, with little or no information on the implications of such decisions. Before long, they spend the money on irrelevancies, albeit impulsively. Unlike people who worked and earned their millions over the years, most lottery winners lack the expertise and cool-headedness to handle sudden riches.
- Parasitic friends and family members
It is natural to be surrounded by well-meaning friends and family members when your life is usual and uneventful. Hit success, and you not only get surrounded by loved ones; you get drowned by their unending requests for help.
For lottery winners who turned poor suddenly, their charitable hands were swindled by parasitic friends and relatives who felt they were entitled to be generous. Instead of offering helpful advice to secure the money, they act as pressure facilitators for extravagant lifestyles. They do not end up milking the not-too-wise spendthrifts dry. They also distance themselves from their host by a forever pole when they smelled that the honeypot had run dry.
- Unbelievable tax payment
This is predominant in the United States. Whereas lottery money is taken as free money and so not taxable in many countries, the same is not obtainable in the country of stripes and stars.
A huge portion of the lottery money won by an individual is mopped up as taxes. It is much more pronounced when a winner opts to cash the entire sum won, rather than choosing to be paid a fixed amount of money from the win every year. The money deducted as taxes could paralyze the original amount. Coupled with a luxury lifestyle that is also taxable, the lottery win is a goner.
- Keeping the money in the bank
While it is a good idea to speedily head to the bank to save a newly found treasure for the keeps, it is unhealthy to bank money for long, in a savings account that has no high-interest rate.
Top of the reasons for the financial problems of a good number of lottery winners is the redundancy placed on the money in their no-interest savings account. Over the years, the value of the money lessened. What’s more, rather than feeding off the accrued interest if they had pursued an interest-accruing account, they ended up making withdrawals from the seemingly safe money in their savings account, with no replacements made.
- Pursuing their passion
Prior to winning a lottery, most winners had goals and aspirations for themselves. The enlightened ones had plans on how to pursue their dreams methodically, starting with acquiring meaningful, formal knowledge in the intended fields. Sadly, it is not so with the dreamers who had no intention of acquiring expert knowledge. Even after the win, they are too busy flinging themselves headlong into their passion and interest than sitting down for lectures. It could have been pardonable if they were not committing a lot of money to the clueless pursuit.
- Lottery winners are targets to con artists in the form of investors
There have been a lot of cases where lottery winners were scammed off their money by dupers in investors’ clothing. They are lured into signing off their wealth on paper, with unbelievable promises and investment benefits which eventually got lost with their money. Unfortunately, those scammers leave no real business address behind.
- Buying liabilities that have depreciating value
Most lottery winners go into buying expensive cars, wristwatches and houses that will not be worth half of what they bought them for, in the next 5 to 10 years. These masked liabilities are not as useful as I thought them to be when the time for maintenance sets in. Apart from the luxury wristwatches, which can be pawned for a reasonable amount, the prices of costly cars and houses may not be as impressive when sold, after taking into account the taxes, service, and insurance payments made on them.
- Improper documentation of expenses
By lavishing money on items they had little need of; the unfortunate winners do not see the need to keep track of their spending by taking proper documentation or engaging the services of a financial expert to do the job. In many cases, they employ an acquaintance who has his own selfish plans to manage their money. While they may think their money is in safe hands, the records suggest otherwise. Their awakening usually comes from a call from their bank. Your guess is as good as mine.
- Most Lottery winners do not see beyond the present
All they are after is the immediate gratification of their desires as they pertain to what they see and can afford. However, what they fail to understand are the aftereffects of their actions. For example, a $5 million worth of house may be affordable, but there are taxes to pay annually. If in the next 5 years the value of the house appreciates, the taxes payable by the owner follow suit. To the lottery winner, what is most important is the amount the house is sold, and perhaps, the taxes he can afford, too. But his undoing could come 5 years later when the taxes appreciate on property and maintenance.