that is because wealth is in the mind not in the wallet.
when i was younger my dad’s friend won the lottery. immediately he left his wife and took up with hookers. he also left all of his friends high and dry. he burned through his lottery money in about 3 years and then came back but by then nobody wanted to have anything to do with him. so that DOES happen.
however, i also knew a woman at my old workplace who won $11 million. she didn’t do anything crazy with her money, she paid her bills and invested the rest carefully. she’s still going strong 7 years later.
it all comes down to you. all money spends the same. if you’re bad with money now you’ll be bad with it later, if you know the value of a dollar now you’ll know the value of it later.
i do believe the riches to rags stories you hear are a hedge against poor man’s jealousy when people find out that others have won a prize.
however, having taken the time to not only learn about lotteries, but also to learn about how winners live after they win, i now know that about half of all lottery winners end up worth MORE after 10 years after they win. the other half are worth about the same because they elevate their spending habits but not their saving habits.
people who take annual payouts do less well. the smarter winners take a lump sum. you can do way more damage with a lump sum if you invest it wisely and take advantage of compound interest, which is your main weapon in wealth creation.
those who take the time to connect with a reputed financial manager and follow up by taking a financial management course and building a financial team to handle their money do the best.
anyone who spends more than 5% of their wins within the first 6 months is on the road to disaster. the actual key to winning and keeping a win is to calculate a safe return on investment for the lump sum and create a budget to live off of half of THAT amount, putting the other half back into investment.
example, if you won $10 million, instead of running out and buying a house, if you get your financial managers to find you securities investments that kick back 2.5% interest per year, that works out to $250k/yr. half of that is $125k/yr and THAT $125k is what you live off of. NOT the $10 million. the other $125k/yr goes to top up the $10 million you won, which you do not touch. the next year your livable income would be $253,125 and again you’d live off of half of that and reinvest the rest. and so on and so forth. at first you wouldn’t be worth a whole lot more than you are now but over time it builds up, especially if you find investments that have higher returns.
if you really look at those numbers you’ll see that $125k for a lot of people is just a middle class income and is not worth quitting your job over. that is why you often hear lotto winners say i’m not quitting my job just yet. those are the smart ones. they understand you can’t live high off the hog even with a lump sum, you have to put your money to work first and let it grow interest before you can walk away from your responsibilites. people with a broke mindset think that a win is a guarantee of a spending spree but that isn’t how life works.
you have to be smart with your money regardless of how much or little you have of it. winning a lottery isn’t a free ticket to anything, it’s just you getting upfront what others get in smaller installments. you still have to exercise your wisdom.
that to my way of thinking and based on what i have learned about lots and money, is how you get the real benefit of a lottery win, and how you properly thank the spirits for giving you that win.