If you have ever played the lottery or went to the casinos to test your luck I’m sure you’ve had The Dream. You know the one. It’s the dream of hitting it BIG and living the lifestyle of the Rockefellers, Bill Gates, or Hugh Heffner.
If you do hit the lottery, do you think you could handle your new found riches? The truth is that many people can’t. Too many lottery winners end up as lottery losers in the end, mostly due to poor personal finance habits. They were unable to manage $2,000 a month and they are no better suited to managing $20,000 or even $50,000 a month. It has nothing to do with the amount of money, but everything to do with how you handle it.
A Rags to Riches to Rags Story
Consider the story of William “Bud” Post III, an Erie, PA man who won $16.2 million in the state lottery back in 1988. He was said to have had $2.46 in his bank account on the day he won the lottery, and the winning ticket was one of 40 purchased with the proceeds of pawning his ring. Neither of these facts shows much personal finance sense, and after winning he didn’t magically receive the ability to manage his money.
Within just 2 weeks of collecting $497,953.47, the first of 26 annual payments, he had already spent $300,000. Three months later he had spent over a million dollars and was in debt to the tune of $500,000. He had purchased a liquor license, a used car dealership (complete with all the cars) for his brother, a restaurant lease in Florida for another brother and sister, and an airplane (though he didn’t have a pilot’s license).
Within 10 years, Mr. Post was once again broke and was even arrested on an assault charge he had received for shooting a shotgun at a bill collector who had come to his home some six years prior. He served a short jail sentence and after being released was reportedly living on a $450 monthly disability payment. He passed away penniless in 2006, and was known to have said; “I was much happier when I was broke.”
Going from Dead Broke to Just Dead
Spending too much money on yourself isn’t the only way to go from lotto winner to lotto loser. Spending on others can be just as deadly it seems. When Billie Bob Harrell Jr. of Texas won his state’s lottery in 1997, he immediately set out to use the $31 million for good. He bought cars and homes for family members, he gave a large part of his winnings to the church, and a substantial amount to his fellow parishioners in need. In fact, it seemed as if everyone needed his help. He was soon struggling financially himself, breaking an already strained marriage. Finally in May of 1999, just 20 months after collecting his first of 25 annual $1.24 million checks, Billie Bob Harrell Jr. stood alone in his new mansion and put a shotgun to his chest. He pulled the trigger, going from dead broke to just dead. He is reported to have once told a financial advisor; “Winning the lottery is the worst thing that ever happened to me.”
How to Remain a Lottery Winner
Winning the lottery in the first place is all about luck, but keeping your winnings is all about planning. If your hobby of playing games to try to win money ends up making you a multi-millionaire, hiring a staff of financial professionals (accountant, lawyer, and financial planner) should be your first line of defense against the dreadful slide to lottery loser.
It is common for new lottery winners to be subjected to hand out requests from all quarters. Family, friends, and even strangers come looking for some of your new found riches. All of this means that you need to make “No” the most important word in your vocabulary. Rich people stay rich by growing and protecting their money, not by falling prey to every bail out request they receive.
If you are ever fortunate enough to come into a fortune, be it from the lottery, a casino win, or even from an inheritance, you need to be financially smart if you want to continue to be a winner.