The two questions in the title are qualitatively different. One asks the question we all know the answer to. The other one is a bit less obvious. Everyone sees what life would be like with a huge amount of money – glamour, traveling, room service, shopping sprees, power, influence, etc. We have enough TV shows and movies to show us how great life would be like to have money. However, I don’t know of any movie or TV show that shows what the immediate post-winning life is like for people who are not used to possessing such vast wealth. It was reported a few days ago that Amanda Clayton – who I blogged about here, regarding her unwillingness to cancel food stamps even after winning – has died after overdosing on drugs. She’s just the newest member of the list of people whose lives were ruined after winning the lottery.
Don’t get me wrong, I have nothing against the lottery itself; and this article is not really meant to bash the lottery, insofar as I must say what it really is: a tax on the stupid.
I will never buy a lottery ticket, or any other get-rich-quick scheme. It would certainly be nice to pay for education upfront, buy a house outright, and travel whenever I’m tired of the scenery. But this is as far as most people think when they think about what it must be like to receive so much money at once. The reality is quite different.
Keep in mind that you have to publicly receive your winnings, with your picture in the newspaper, with a big smile and an even bigger check that sends the message to other
suckers people, implicitly saying “Look at this schmuck guy! Next time, it could be you!” The only problem is that others like you are watching the news; and they might remember you.
Financial expert Dave Ramsey talked about the lottery half a year ago. He had this to say about the fantasy of winning money and living happily ever after (bolds are his):
The truth is very rarely does it work out like that for a lottery winner. Unfortunately, a new study published in the Journal of Behavioral Decision Making finds that people who feel poor are more eager to spend money in an attempt to get rich (this is a good “duh” moment). One recent report found that families who make under $12,400 spend about $645 a year on lottery tickets. [. . .]
Coming into a quick pile of cash usually means that people will come out of the woodwork looking to get a piece of your pie. Third cousins whom you didn’t even know existed will call and hit you up for money. You’ll get letters in the mail from complete strangers with every sob story imaginable (unemployed, sick children, in a wheelchair, etc.) in an attempt to get sympathy points and money from you. It puts a big target on your back, and most often it takes you out, too.
When you are feeling the money crunch, the last thing you want to do is spend what little money you have on a super-long shot for money. The odds of winning a lottery are literally about one in 125 million.
He then points out some comparisons, my favourite of which is “You are 1,488,095 times more likely to die in a car wreck on the way to the gas station to buy the lottery ticket” than you are to win the lottery. I also agree with Ramsey’s conclusion:
Forget the lotto. Working hard and saving money is the only surefire way to make money. It works every time unlike the lotto.
Ramsey explained in simple terms why it’s not easy being the recipient of so much money, but he didn’t go into recent anecdotes. For example *ahem*…
Just like Amanda Clayton, Willie Hurt won the lottery in Michigan, and was later affected by drugs (though hers were prescription drugs). Hurt’s poison was crack-cocaine, and he basically killed all of his $3.1 million on it. But at least he lived to tell about it, unlike Clayton. From the UK, Michael Carroll won about $15 million worth of pounds, and pretty much spent it all on prostitutes. He went back seeking his old job as a garbageman.
Evelyn Adams of New Jersey won the lottery twice – in 1985 an 1986 – and gambled all $5.4 million away, now living in a trailer park. Billy Bob Harrell Jr. was a preacher who won $31 in 1997. He bought six new homes, new cars, a ranch, and still had money left over. But in the end, he had trouble saying refusing people who asked for handouts. He eventually divorced and committed suicide.
In Canada, Gerald Muswagon won $10 million, and wasted it within seven years on drinking and partying. He would also go on to commit suicide. This was similar to British Callie Rogers in 2003, who unfortunately won $3 million worth in pounds at age 16, which basically means she had no chance at all. What 16 year-old knows how to manage that kind of money? She ended up having two children with someone she was dating, wasted the remaining winnings on partying, vacations, and gifts for friends. She has filed for bankruptcy and now works as a cleaning lady.
These are by no means the only stories of post-lottery winners whose lives were ruined. But how could this have happened? Ramsey’s brief explanation makes sense:
Think about this for a second. The less money you have, the more wisely you need to manage it because you don’t have as much room for error. When you make a budget and get out of debt, you have some breathing room.
Basically, people who win (i.e., usually poor people) have no idea how to manage so much money, that they start buying luxuries and spending in frivolous ways to the point that they spend more than they actually have. They believe that since they have so much money, they won’t need to worry about managing it. There’s an “absolute power corrupts absolutely” kind of thing going on there. Except instead of power, it’s money. This is why financial planner Ric Edelman often says “if you want to ruin your life, go win the lottery.”
One last anecdote I want to mention is of a Canadian senior citizen, Lucien Nault, aged 74 when he won the lottery in 2009. He said he wanted to “spoil his family” with the $17 million he won. Instead, his wife left him, and he got in a big spat with his son, Daniel. Daniel was angry that his father gave away $5 million to neighbours, who he alleges – in a lawsuit that began this spring – that they manipulated him, taking advantage of the fact that his mind is fading. Of course, Daniel received some of the money as well, spending it, among other things, on a pool. It was in that pool that Daniel’s wife was found dead one month ago. Then, just two weeks ago, Daniel was seen by neighbours running after his dog who had bolted into traffic, and he was hit by a car and thrown several meters. He died hours later. Some are calling it the “lottery curse.”
Whatever the case, poor people really ought to think about the fact that their dreams of instant wealth are not grounded in reality. If they’re not wasting it away by trying to continue their post-winning euphoria, they might be struggling to cope with being a target of assassins, both of which happened to a past lottery winner.
People who dream of a life of vast wealth usually only think about the fairytale ending. But this is real life. The lottery is like a broken system of gambling. The chances of winning are pathetically small; and even when you win, you still often lose.