Why Do Lottery Winners Go Broke?

There’s something about winning the lottery that seems to put some people in a worse off state than when they started. Bad (or no) financial advice, extravagant parties, and debt are just some of the reasons many who play the lotto fall from their high flying wins into financial ruin. Let’s look at three lottery winners who were US Powerball winners and ended up broke, and look at some of the main reasons this happens to a lot of lottery winners.

US Powerball Winners That Ended Up Broke

Failure to Employ a Financial Advisor

One of the reasons lottery winners squander their fortunes is because they fail to procure good financial advice from advisors. Since many will opt to have their total winnings paid out in one large payment, they lose out on the benefits of restraining their spending. Choosing the annual payment plan is a much better option, as it helps the winner ease into his new lifestyle.

If you do happen to win big, be sure to use all of the resources provided by the national lottery. Also learn how to avoid taxes on lottery wins. Many countries’ lottery agents will suggest a financial advisor after a big win, although often this offer is refused. Knowing how to invest large sums of money isn’t common knowledge, so opt for the wiser route and get good advice about how to make your prize last.

Not Keeping Their Win a Secret

Family and friends mooching off their winnings is a big reason why lottery winners lose everything. Family and friends suddenly find any excuse to sue them over trivial issues, depleting their funds rapidly in legal battles or settlements. Not having a good lottery lawyer is a common reason for many lottery winners going broke mere years after their wins.

Many lottery winners would have avoided these pitfalls if they had kept their win a secret and spent their money discreetly. But it is the way of many to boast about their winnings to everyone they know, leading to their eventual downfall when people learn that they can get something out of the winner.

Extravagant Experiences

Vacations are a big cause of depleting funds from lottery winners. Although we might think of vacations as something we do once in a while, many of these individuals lived out their lives as a permanent vacation! This is not a viable form of living, even when you have millions at your disposal.

Winners have spent their winnings on experiences within those vacations too. And not just for themselves, but for their family and friends too. Once the money dries out, these friends and family members are often out of the picture, and some marriages even end up in divorce as a result.

Instant Gratification vs Long Term Planning

Spending on consumables rather than assets is an unwise way of using your lottery winnings. Investing in properties, stocks, and business endeavors takes careful planning and sound financial counsel. Many winners opt for instant gratification in the form of expensive cars, consumables, eating out at fancy restaurants, and of course drugs.

In fact, drug addiction is a major cause of financial ruin for many lottery winners. They come to a point where they realize that money can’t buy them satisfaction anymore, so they turn to the ultimate high by buying expensive drugs which drain their money faster than they thought possible.

Bad Investments

Some winners have endeavored to invest their money wisely, but did not do their homework beforehand. One winner tried her hand at starting a seafood restaurant, but it failed miserably because she didn’t know the industry or the risks that went with such an investment.

Good investments are ones like property, stocks & bonds, or investment funds that pay out monthly or annually. Most lotteries come with a default annual option for payout, which is a wise choice if you have won a great deal of money.

Getting Into Debt

Once the biggest lottery winners grow accustomed to a certain level of living, they invariably want to maintain that lifestyle at all costs. This causes them to take out loans, which the banks are only more than happy to give them. But paying off debt is an endless spiral that ends up draining their funds and leaving them with loans to pay. Possessions are repossessed, and winners end up in worse conditions than when they left off.

Debt has a way of making you pay for something that you don’t have. It’s a quick way to squander large amounts of money, especially if you’re used to living a certain way. A million dollars may seem like a lot to most of us, but when it comes to lending those large amounts from banks and institutions, you’re on the fast track to losing it rapidly.

Conclusion: Living Large and Squandering Their Winnings

Don’t let it happen to you. If you do strike it lucky when playing the lotto, be sure to spend your winnings wisely (and slowly). Remember, you may quit your job, go on vacation, and throw a party or two; but the real test on your financial savvy will come when you’re called to invest that money for long term use. And whatever you do, make sure you keep your win a secret.