Hoping to Win the Lottery? It Could Lead to Bankruptcy
Gigantic lottery jackpots have been in the news recently. First, there was the $1.6 billion Powerball lottery in 2016. Then, in late October 2018, Mega Millions offered a $1.5 billion lottery jackpot—which was won by a single person who bought a ticket in South Carolina.
We wish that we could tell the public that their lives will be automatically better after winning a gigantic lottery, but we can’t. As studies have shown, many lottery winners become alienated from friends and family, suffering depression and divorce. Others develop substance abuse problems.
And, believe it or not, many people end up going bankrupt even after winning millions of dollars.
About 1 in 3 Face Financial Ruin
Almost anyone can go bankrupt if they do not control their spending. According to the Certified Financial Planner Board of Standards, however, about 33% of people who win the lottery end up going bankrupt. This number is staggering. One third of the general population doesn’t even go belly up, so winning a lottery actually increases your chances that you will need to file a bankruptcy petition.
Why do so many “lucky” winners face financial ruin? Undoubtedly, the cause is a complete inability to manage money. Some lottery winners use their earnings to invest in businesses, which often leads to large financial losses. For example, if you invest $10 million in a company, you might suddenly be on the hook for $20 million in leases, other contracts, and employee wages. Instead of being out of $10 million when the company folds, you took on additional debt through your investment.
How to Handle Winning the Lottery
Financial planners exist for a reason. They can help people make sound financial decisions so that they do not end up deeper in debt than when they started. An adviser can recommend safe investments that will allow you to preserve your windfall. You can then splurge a small amount.
A financial advisor is also a good buffer between you and anyone trying to hit you up for money. When you receive a solicitation, you can refer the person to your advisor. The advisor can then let the person down, which can relieve you of the stress of turning people away.
Of course, some people discover a philanthropic side after winning the lottery. They might make community grants to different organizations, which can build good will. Often, people are happiest when they are putting their money to use to better the lives of the people around them.
Financially Distressed Consumers Should Contact Nowack & Olson
Insolvency can strike anyone at any time. As a leading bankruptcy firm in South Florida, we see how sudden job loss and medical bills can cause a cash crunch, making it impossible for our clients to pay their bills.
If you are in financial distress, contact us today. We offer a free initial consultation where we can assess your situation and help you decide whether bankruptcy is right for you. To schedule your appointment, please call 888-813-4737 at your convenience.