Something that’s fascinated me for as long as I can remember is why so many lottery winners end up losing it all just as quickly as they made it! In fact, most of them do. In less than 5 years, 70% of winners will have either spent all their money or have lost it all. And within 3 years, 1 in 3 lotto winners will be broke.
I bet you can all recall a time when you saw a lottery winner in the newspaper who (yet again) managed to blow it all. Then we’d get all warm and fuzzy when we see a really down-to-earth couple win big but still drive their clapped-out car, live in the same small house and so on. That couple is the small minority. Most winners, sadly, spend it all within a really short space of time. Or, they end up losing it to robberies, gambling and greedy fam and friends!
When it comes to buying lottery tickets, most of the people who buy them are poor. Desperate for a way out. So they gamble a few quid on a ticket. I say gamble because your chances of winning are 1 in 14 million. A teeny tiny probability. So small yet not quite zero – where the hope comes from! You have an infinitely greater chance of hitting the million dollar mark! The odds of becoming a millionaire in America is 1 in 300. You’ve literally got a better shot at making your own money than winning the lotto. Focus on that and you’ll be richer than any lottery winner!
But sadly, the poorest people think that the lottery is their ticket to financial freedom. What’s more worrying is that 1 in 5 Americans believe the lotto is the only way they can accumulate a significant amount of savings. With inflation hovering at 40yr highs and interest rates the highest they’ve been in 14yrs, this is all squeezing our incomes. But anything’ possible. You’ve just gotta have the right mindset. Think you can’t and you won’t. Think you can and you will.
It’s the poorest of society who think they have no way out. People who make less than $10,000 spend on average $597 on lotto tickets which is about 6% of their income! Imagine if they’d have stashed that sum of money into the S&P 500, after 20 years they’d have more than $25,000! But these folks don’t have a financial education. They’d rather gamble their hard-earned money on an escape plan than actually plan for their escape, by investing.
It all boils down to financial education
Having loads of money won’t automatically mean you can manage it well. Quite the opposite. It’s much harder to manage £10k than £10 but the saying goes, if you can’t manage £10 you certainly won’t be able to manage £10k. The same skill set applies for any amount of money but if you can’t handle a small sum you’ll fall flat on your face when you’ve gotta manage a big one.
61% of all lotto winners are people from the bottom fifth socio-economic bracket. These are people from poorer neighbourhoods on really low salaries. So it’s no wonder they look for a way out. The trouble is that most of them aren’t financially literate.
Winning tons of money but not knowing how to keep it and use it properly is like having the keys to a lambo you can’t drive. Pretty (and pricey) but useless to you. Unless you know how to drive it, how it works and how to control it, it’ll be no use.
Easy come, easy go
It’s no surprise then that when lotto winners suddenly find themselves with tens (sometimes hundreds!) of millions of dollars, they lose it all. They either gamble it away, give too much away, have a chunk stolen from them or they simply spend it all without putting anything aside for later! Once family and friends get a whiff of this money, they often pressurise the winner into sharing their winnings. It can be hard to stand up to this.
It’s the same reason why child actors (or anyone who gets famous young, really) go broke! Unless their parents are smart enough to hire lawyers, accountants and whatnot on their behalf to stash their money in a trust and basically not let them get their hands on their own money until they’re 18+, they’re literally doomed for disaster. The stats are simply stacked against them.
Forget all that for a second, the fame alone is enough to ruin someone’s life. Imagine if everyone knew you were went from having a negative net worth (aka your debts > assets) to having one in the hundreds of millions, you’ll find people treat you differently.
This is the real downside to winning big. When people know you have money, and a lot of it, they’ll start acting differently towards you.
I had a close friend who was from a super-rich family but people judged her, were jealous of her but happily used her – and her Uber rides! She was so down-to-earth and kept on reminding me that money is empty. It’s what you do with it that really counts. Sadly, she passed away before her 21st birthday but I think of what she taught me everyday.
Keep your money and your private life private. No one needs to know how much you’re earning or how big your net worth is.
And instead of betting your hard-earned cash on the lottery, bet on your future. That a higher probability of working out!
And anyway, winning tens of millions is so overrated right?
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment
Knead Your Dough 