The Pros and Cons of Winning a Fortune
What would you do if you won a million? Past winners offer models and red flags.
Posted March 24, 2014
Most people believe that winning $1 million would dramatically change their lives. But would it really? Would your life actually change for the better, or the worse? There has actually been quite a bit of research on lottery winners. Following are some of the findings:
Many people suspect that lottery winners will blow it all and end up back where they started. Research doesn’t support this. Although a couple of winners who've gone bust have made headlines, for the most part lottery winners don’t spend lavishly. A significant proportion use the money to support family members, and many give quite a bit of it to charity, particularly churches.
There is also a stereotype that lottery winners are most commonly poor, and spend too much of the little money that they have on get-rich quick dreams like the lottery. Again, this is not accurate. Lottery winners are more likely to be male, older, and relatively well-off. They are the kind of people who make enough money to allow them to purchase lottery tickets on a regular basis.
Also contrary to what some people believe, most lottery winners are not, and don’t become, addicted gamblers: A study of lottery winners showed that their levels of gambling stay about the same even after winning.
What is the “upside” of winning the lottery? Obviously, it can make life easier—allowing winners to take dream vacations, purchase a home, or send a child or grandchild to college. So do most million-dollar lottery winners quit their jobs and just relax? Whether a winner does depends on how “central,” or important, the job is to his or her life and identity. Continuing to work, even after winning the lottery, may actually increase happiness for many winners.
So what are the downsides of winning big in the lottery? Primarily, stress.
After the initial thrill of winning, beneficiaries of multi-million dollar lotteries may experience increased stress from the many requests for financial assistance from friends and relatives. They may also be flooded by solicitations from investment consultants, financial planners, even con artists. Winning a big lottery can bring new financial responsibilities and this become a very stressful experience.
Although it's rare, some lottery winners do indeed squander their winnings, primarily because they lack self-control and financial management skills. The power associated with newfound wealth can also lead a winner to excess and intoxicating feelings that “I can do anything.”
The most successful winners stay grounded and maintain their perspectives. They are prudent, and do not engage in reckless spending or behavior. They plan next steps and seek help from trusted investment professionals. They use the money to improve their lives and those of their loved ones. They realize that the most important aspect of winning the lottery is the freedom from financial pressures and the opportunities provided from additional resources.