Most people would love to win a huge amount of money. They quickly think of all the ways they would spend the money. In the past several years the lottery jackpots have attained astronomical numbers. Powerball has reached $1.5 billion, while Mega Millions hit $1.6 billion dollars recently. I’ve gotten caught up with the lottery fever, but have spent time thinking about the “why” and if winning the lottery is all roses and sunshine.
Why would you not want to win the lottery?
There are several unique problems to winning it big. Let’s break it down:
For one, the odds of winning are practically zero.
But you might think “what if I win”? But the problem is in order to win, you have to beat incredible odds. And to take those odds, you have to pay money. Generally speaking, you have a one in 300,000,000 chance of winning the jackpot. As it is commonly put, the lottery is a tax on people who can’t do math.
If you did win, would you know how to use that much money wisely?
There are few things worst than losing a huge amount of money that you won. Most of us have difficulty managing the money we currently make, let alone multiple millions of dollars. In fact, the data suggest that 70% of large lottery winners end up going bankrupt in 5 years. The main reason for this is they go widely crazy when they win with their spending. Instead of growing their income slowly and learning how to budget effectively, they spend as if they were given a blank check. But even large sums can vanish when you purchase expensive cars, houses, etc…
Say goodbye to privacy!
You will long for the days when you were just like everyone else. Strangers will recognize you and will try to contact you for money. You will get onto the short list of non profits for donations. And people you didn’t know very well will “expect” you to be generous.
Friends and relatives can become piranhas.
When you win big, people you know may expect a piece of the pie. You thought Thanksgiving dinner was awkward? Wait until one of your relatives finds out you gave another relative more money than what they received! And the chance of your relatives using the money wisely is low….which means you can expect them to come back for a refill. Not only that, but you may find your relatives expecting things like paid vacations, extravagant birthday/holiday gifts, etc…
Yay for funding the government!
“I love paying taxes!”…. said no one ever. But big lottery winners have catapulted themselves into the highest tax brackets. Let’s say you win the $1.6 billion dollar jackpot and take the lump sum option. You would get about a $900 million paycheck. But you would have to pay around 50% in taxes! So you would “only” get about $450 million. Of course the government loves this, but who would really want to give that much money to the government?
The large jackpot sizes are not a coincidence.
The people who run the lotteries are not dumb. They realized that larger prizes bring out more people, which decreases the odds of being the sole jackpot winner dramatically. The formula was tweaked to decrease the odds of hitting the jackpot, which makes it much more likely the cash bag will grow week to week. They basically are tapping into the human psychology of taking home huge amounts of money.
Winning vs Earning
Is it better to win a huge amount of money, or earn your way to where you want to be? I think the latter is more rewarding and the safer option as it gives time to learn how to work with larger amounts of money slowly. Making mistakes, and learning from them, is easier done as you grow. In fact, lottery winners often are faced with this reality after they made huge mistakes with their winnings and are back to where they started.
No doubt, if you do win the lottery, it is going to be a happy day. But it takes huge amounts of discipline and motivation to not squander your winnings. You will need to surround yourself with people you trust that can help you make smart decisions. But playing the lottery is not investing in your future. Instead of throwing money at the lottery and “hoping” you will win, it is better to figure out how to get your current finances under control and be happy with what you have. If you have to win the lottery to be financially happy, then there is something else going on.
Have you got caught up in the “lottery” fever?
Chris Roane is a financial blogger who loves to be transparent about money-related issues. He’s paid off massive amounts of credit card debt and is the blog author of Money Stir. His main focus on Money Stir is talking about how money relates to our relationships, personal development, and how to plan for the future we want. He’s been quoted on Market Watch, The Ladders, and other publications.