World, Writing, Wealth discussion

68 views
Wealth & Economics > Why so many lottery winners become broke?

Comments Showing 1-38 of 38 (38 new)    post a comment »
dateDown arrow    newest »

message 1: by Nik (new)

Nik Krasno | 13740 comments Winning a lottery is an immensely improbable lucky event. Lucky? Think again. Strangely enough different studies show that a sizable percent (some claim 30-40%!) of the winners go broke quite soon after the win:
http://www.businessinsider.com/lotter...
http://fortune.com/2016/01/15/powerba...
Of course, there are lots of explanations for this phenomenon, but what's yours?


message 2: by Justin (new)

Justin (justinbienvenue) Simple, most are greedy, have never had such an abundant amount of money before and don't invest or use it properly..thus they go broke.


message 3: by Ian (last edited May 29, 2017 04:03PM) (new)

Ian Miller | 9718 comments I think Justin is right. They think the money is so much they can't see it running out, and they splash it around liberally. Doesn't apply to me. Last year I won $20 in the 6th division prize pool, and while it did not take long to go, I did not do anything that unusual. (I think it went on a bottle of wine.)


message 4: by Nik (new)

Nik Krasno | 13740 comments I hear you, guys. But then maybe it proves a patronizing attitude that ordinary people don't know what to do with the money and it better trickle down in small portions through crafty businessmen lest wasted and got people in trouble or not?
Congrats on the win, Ian!


message 5: by Ian (new)

Ian Miller | 9718 comments Gee thanks, Nik.


message 6: by Scout (new)

Scout (goodreadscomscout) | 5516 comments Let's say you've earned a million dollars because you've worked and saved and invested your income. Along the way, you've probably bought most of the things you need or want. What do you do with that million dollars?

On the other hand, let's say you're given a million dollars with no effort on your part. You have a minimum wage job, or even a pretty good job. What do you do with that million dollars?


message 7: by Nik (new)

Nik Krasno | 13740 comments Scout wrote: "Let's say you've earned a million dollars because you've worked and saved and invested your income. Along the way, you've probably bought most of the things you need or want. What do you do with th..."

That's worth a separate thread of 'what to do with a million dollar'. If you'd want to set it up, I'm sure many might have an idea.
The one who sweat to save it would probably be much more careful than that who got lucky


message 8: by Scout (new)

Scout (goodreadscomscout) | 5516 comments That was my point. People who've earned it have a "glass full" mentality; most of those who are given it have a "glass empty" mentality. They spend the money trying to fill up that glass until the money's gone.


message 9: by Philip (new)

Philip (phenweb) Do we have any stats about those that waste it? I mean a few high profile I recollect stories about going back to Viv Nicholson who vowed on winning pools to spend, spend, spend.

Given UK has at least one lottery millionaire per month - how many out of 12 have thrown it all away on 'wine women and song' or to quote several, George Best among them - 'the rest I wasted.'


message 10: by Nik (new)

Nik Krasno | 13740 comments Many articles mention percentage, but I'm not sure where they take it from. Here for example:
http://time.com/4176128/powerball-jac... - 70%, really?
http://www.cleveland.com/business/ind...
http://brandongaille.com/22-lottery-w...
Also not sure, the above data are UK oriented, however found some that are:
https://www.thesun.co.uk/living/28545...
http://www.express.co.uk/finance/pers...


message 11: by Nik (new)

Nik Krasno | 13740 comments So, is easy money more likely to turn into a Trojan horse? :)


message 12: by Scout (new)

Scout (goodreadscomscout) | 5516 comments It depends, of course, on how one manages the money. Most people seem to spend it until it's gone. We have a local guy who won 30 million, and he's invested in local businesses and invested his money wisely and seems to be doing well. He's what we call in the South a good old boy, and he's not interested in impressing people with his wealth.


message 13: by Papaphilly (new)

Papaphilly | 2841 comments If you win big on the lottery, then you are probably not well off to begin with. The poor buy tickets in disproportional numbers. That is their retirement. The problem is that most of them are not money people to begin with and then have a boatload dropped on them. They go crazy with spending. Instead of investing in retirement, they spend it now or they invest it in bad investments. I think much of it has to do with the idea of getting the candy store and not realizing if you do not gobble it all up at once, it will always be there.


message 14: by Ian (new)

Ian Miller | 9718 comments Unfortunately, if you win big you become the target for every scam artist, and also the rather incompetent "financial advisor". The poor guy is silly enough to trust these parasites.


message 15: by Lizzie (new)

Lizzie | 1660 comments The IRS withholds 25% off the top of lottery winnings and generally people will still owe another 12% or so for federal taxes. Depending on which state you live in, it may also be taxed on the state and city levels. The highest is NYC which state and local adds up to 13%. Depending on your tax bracket, you could pay up to 50% in income taxes, especially likely if you win over $500,000. So, if you win a million, immediately you need to realize you only get half a million. (Again, it depends on your tax bracket and how much you win as the tax is progressive.) The average person doesn't realize that and their first stop needs to be a really good CPA.

Statistically, most lottery winners are the poor and working poor. Most of the time, they don't know how to handle that level of financial liquidity. I agree with Ian that mostly they end up with bad financial advisors because they don't know any better and con artists are all waiting to reel them in. Add in the rush to live better along with gifting to others and they are broke quickly.


message 16: by Scout (new)

Scout (goodreadscomscout) | 5516 comments A friend plays the lottery when the pot gets big. I never play. How about you?


message 17: by Nik (new)

Nik Krasno | 13740 comments Scout wrote: "A friend plays the lottery when the pot gets big. I never play. How about you?"

Nope, the chances are abysmal


message 18: by Nik (new)

Nik Krasno | 13740 comments Do I read a patronizing attitude that poor aren't to be trusted with the money? :)


message 19: by Ian (new)

Ian Miller | 9718 comments It is not so much patronizing but arguing that since they have never had any they have no experience on what to do with it. They have absolutely no skill at properly deploying it.


message 20: by Papaphilly (new)

Papaphilly | 2841 comments Nik wrote: "Do I read a patronizing attitude that poor aren't to be trusted with the money? :)"

It is not about being trusted. It is more about the realities if you never have any and then lots, you are not well prepared to handle it. Personally, I have never bought a lottery ticket. It is not my thing and if I get struck by lightening twice, then I will think about buying a lottery ticket.


message 21: by Nik (new)

Nik Krasno | 13740 comments Papaphilly wrote: "Nik wrote: "Do I read a patronizing attitude that poor aren't to be trusted with the money? :)"

It is not about being trusted. It is more about the realities if you never have any and then lots, y..."


Ian wrote: "It is not so much patronizing but arguing that since they have never had any they have no experience on what to do with it. They have absolutely no skill at properly deploying it."

Almost identical synchronous answers - genius minds think alike :)


message 22: by Lizzie (new)

Lizzie | 1660 comments Time and experience make a difference in how you deal with most things in life. Presumably, we learn. I know that the amount of knowledge I have about finances has increased and part of that is time and part of that is income increasing over the years. Also, statistically, people who are well off don't play the lottery near as much as the poor and working poor.

Personally, I never have bought a lottery ticket. I don't believe I will win. And, I feel my lack of belief adds to the odds against me winning, even though I don't actually believe in "luck".


message 23: by [deleted user] (new)

Lizzie wrote: "I feel my lack of belief adds to the odds against me winning"

The law of attraction is a very interesting concept. It would say that to stand a better chance of winning, you have to feel like you're going to win. I think there's something in it.


message 24: by Ian (new)

Ian Miller | 9718 comments You certainly won't win if you do not have a ticket. But not winning with one is not "bad luck". Luck is merely an example of probability. The probability of winning a lottery are extraordinarily low, but from the mathematical point of view, because for the poor that is the ONLY way of getting to a "rich" state, they buy tickets. How you feel about it has no effect on probability, or how a coin will come down in a toss.

On the other hand, some "lucky" people see the beneficial outcomes and make something of them.


message 25: by Scout (new)

Scout (goodreadscomscout) | 5516 comments Nik wrote: "Do I read a patronizing attitude that poor aren't to be trusted with the money? :)"

How in the world did you come up with that assumption?


message 26: by Scout (new)

Scout (goodreadscomscout) | 5516 comments I bought a ticket a week for three weeks because a friend told me that he was going to and if either of us won, we'd split it. After hitting only 3 numbers out of 3 tickets, I told him no way was I going to continue. Of course, if he wins the lottery, I'll be sorry, but what are the odds of that?


message 27: by [deleted user] (new)

Ian wrote: "How you feel about it has no effect on probability, or how a coin will come down in a toss."

I tend to agree with you on this, Ian, but the following book is well worth a read if you ever get the chance:

The Secret

Basically, its message is that training your thoughts to imagine future success helps realise it. I'm not saying I completely buy into it but a number of very influential people (Leonardo da Vinci being one) were powerful devotees of this philosophy.


message 28: by Lizzie (new)

Lizzie | 1660 comments Ian wrote: "You certainly won't win if you do not have a ticket. But not winning with one is not "bad luck". Luck is merely an example of probability. The probability of winning a lottery are extraordinarily l..."

I feel the same way about cooking. I can follow the same recipe exactly, but if I am not in the mood to cook, it doesn't come out right. It is edible, it just isn't really good. On my driving trips, I consistently treat the speed limit as a suggestion for someone else, but I don't expect to get a speeding ticket, and I haven't.

While i understand probability and that my belief system doesn't change the statistics of a coin toss, I do think attitude affects what I do and that attitude changes how I do things, which does affect the results.


message 29: by Scout (new)

Scout (goodreadscomscout) | 5516 comments I agree with you on that, Lizzie. Attitude matters, although I wouldn't count on it to help me win the lottery :-) You may be the only one here who will get this, but I find that there are times in my life when things are just going wrong and my relationships are in the tank. I expect this to happen every now and then, and I don't fight it; I know that things will get better if I just ride it out. It's like waves in the ocean: sometimes you're on top; sometimes you're in the trough. You just have to ride the waves.


message 30: by Lizzie (new)

Lizzie | 1660 comments Scout wrote: "I agree with you on that, Lizzie. Attitude matters, although I wouldn't count on it to help me win the lottery :-) You may be the only one here who will get this, but I find that there are times in..."

I get it, Scout. You expect to ride the waves. I keep expecting one to wipe me out. I will be looking for an expiration date or best if used by date on all future relationships. lol.


message 31: by Scout (new)

Scout (goodreadscomscout) | 5516 comments I just realized that I'm an optimist. I've never thought about being wiped out. That's a revelation. I won't give any advice, just sending you good vibes :-)


message 32: by Lizzie (new)

Lizzie | 1660 comments Scout wrote: "I just realized that I'm an optimist. I've never thought about being wiped out. That's a revelation. I won't give any advice, just sending you good vibes :-)"

I could use them. It would probably help if I didn't analyze and overthink everything. But, I just don't expect to "win". I don't think of myself as a pessimist, more of just a realist. Facts and experience I can count on; luck, I can't.


message 33: by Papaphilly (new)

Papaphilly | 2841 comments Lizzie wrote: "Facts and experience I can count on; luck, I can't. ..."

You can say that again, but still....I wish you all the luck.


message 34: by Lizzie (new)

Lizzie | 1660 comments Papaphilly wrote: "Lizzie wrote: "Facts and experience I can count on; luck, I can't. ..."

You can say that again, but still....I wish you all the luck."


I could use some. Thank you.


message 35: by Barbara (new)

Barbara | 176 comments Someone once said to me "The best thing your money can do for you is to make more money." So to paraphrase JFK, don't ask what you can do with your money, ask what your money can do for you.
This person was pretty well off by most standards, but rarely shopped retail, always looked for bargains, clipped coupons, bought "new" used cars, didn't take a lot of vacations but they were always in the "off season." He also said that other than necessities - food, gas, insurance - he hated buying anything that didn't appreciate, and that the best investment was a good piece of real estate in a desirable area.
It seems to me a lot of lottery winners start DIvesting themselves of the new found wealth on things like cars, boats, trips, designer items that lose money instead of INvesting it in things that make money.


message 36: by Papaphilly (new)

Papaphilly | 2841 comments Barbara wrote: "Someone once said to me "The best thing your money can do for you is to make more money." So to paraphrase JFK, don't ask what you can do with your money, ask what your money can do for you.
This ..."


That can also be said of sports figures going broke.


message 37: by Nik (new)

Nik Krasno | 13740 comments Barbara wrote: "Someone once said to me "The best thing your money can do for you is to make more money." So to paraphrase JFK, don't ask what you can do with your money, ask what your money can do for you.
This ..."


The real cool think is to do both DI and IN, but not all can keep a good balance.. Often even high earners would spend more than they make.


message 38: by Philip (new)

Philip (phenweb) But then again it would not be a news story if the lottery winner di not go broke - how many keep heads down and do well with new found wealth i.e. what are the actual statistics rather than the news story


back to top