How in the world can lottery winners wind up destitute?

[joshuagraham]

I was reading some articles about folks who have won lotteries (some as much as 9 figures $!), and am just amazed that folks could blow through cash like that. I suppose that folks that are lower class enough to never have enough cash to save just take the same attitude when they get a lot of cash.

I mean, if I were to win the lottery, the first thing I would do is squirrel away a few million into an account that could act as my retirement nest egg, then I would get a decent house, which in my area could be gotten very nicely for about $500K, with some decent furniture, perhaps get a Porsche Boxster along with a new station wagon for hauling stuff, get a tailored suit or two (my body type makes finding a suit that fits well very difficult, so I don't like wearing them), I think I'd keep my grand piano, which is a very good one, but get some cosmetic blemishes fixed. After that, I couldn't think of much more stuff to get that I already would get. I would start going in a bit of style on vacations, not staying at the modest places far off from the action, but even then I wouldn't get too ridiculous; I think I would fly first class though, as with the seating they have now, that would be something worth splurging on if I had lots to be able to splurge. I couldn't see myself spending more than $100K a year on vacations no matter how hard I would try.

And finally, as a bachelor, obviously I would entertain at a level higher than what I do now, but I would still stay clear of women who just want me to throw away money. And I would make sure that any wife I would get - well protected by a pre-nup on the order of what Donald Trump would get - does not need to live on a level higher than what I have just described.

http://www.washingtonpost.com/wp-dyn/articles/A36338-2005Jan25.html

http://theweek.com/articles/493775/7-lotto-winners-who-lost-all-updated

http://www.businessinsider.com/17-lottery-winners-who-blew-it-all-2013-5?op=1

http://nypost.com/2012/03/30/winners-beware-meet-the-four-who-went-from-jackpot-to-jack-squat/

[TXskyblue]

If you took all the money in the world and divided it evenly among all people, most of the people who were rich before would end up rich again and most of the poor people would end up poor again.

[Geeznowwhat]

First, most do that...go buy a "nice house". Then..how do they pay for the huge property taxes, year after year? They have covenants on the property that require a standard of care..so there will be landscapers and various people to take care of it. The HOA will take a big chunk each month..somewhere about $500. I knew a fellow who have $5,000 in utility bills alone each month. So..think about the large cost of keeping the place. Same with those cars. New cars cost huge to register, insure. And they keep costing year after year.

Most people cannot keep living the same life they were...people with their hands out are not going to let them

Then...think about the lawyers. Yes, your life will be filled with lawyers. Either before you claim the money (the smart move) or after to defend you against a hoard looking to get that money from you. If you fail to get a lawyer to protect you and hide you..you will be inundated by everyone with a hand out...believe me you will have relatives you never knew you had!

One poor fellow in PA was forced to move...he hired a security firm to guard him at home..finally went into hiding.

And..every person who ever crossed your path is suddenly going to have a life debilitating injury caused by you!

You will find that everything you do will cost a great deal more than you ever paid before. That Porsche Costs $500 per hour in labor. Etc.

Yeah...if you only win 10 mill or so...you can be broke in just a couple years and end up deep in debt.

[LadyInTheRed]

As soon as you start spending money, you have to spend more, as Geenowwhat explains well. The smart first move of a lottery winner is to hire a financial advisor before putting away money for retirement or buying that nice house and starting to live an even modestly improved lifestyle. It really is easy to increase your financial obligations exponentially before you realize what happened. This is why you hear of so many very highly compensated professional athletes and other celebrities who found themselves suddenly earning very high income eventually ending up bankruptcy.

I remember when I changed jobs about 15 years ago and my salary increased from $35K a year to $60K a year. It is nothing like winning the lottery, but it seemed like such a huge increase at the time and I increased my spending without any planning. That is partly how I ended up in BK.

If you win $3 Million in a lottery, it is easy to think you never have to worry about money again. If you don't worry about it, you are likely to spend it before you know its gone, even if you don't fall prey to crooks.

[bcohen]

It's really not difficult at all to blow through tons of money, and have little to show for it. Just look at all of the professional athletes who earned jaw-dropping salaries of millions of dollars per year, yet somehow end up broke within a few years of retiring.

The problem is twofold. First, people always think that good times will never end. People generally assume that their income will rise as time progresses, and often spend (and get into debt) accordingly. A good example of this is people buying expensive vehicles with costly loan payments, or expensive houses with costly mortgage and HOA payments when a much cheaper used car and much cheaper small house in a less desirable neighborhood would do the same thing for a lot less money.

Second, people often feel pressured into spending money simply to keep up appearances. I constantly have arguments with my wife because she wants to piss away money on stuff we don't need, because supposedly everyone else has (whatever she wants me to buy) or because people will think we're poor if we don't buy (whatever she wants me to buy), or if I don't want to spend money on (whatever she wants me to buy) then I'm a cheapskate. I personally do not care whatever other people think, and have no problem wearing old clothes, driving an old car, etc. Anyone who would look down on me for these things is not my friend, and I could care less about them. Many people who attain wealth suddenly--such as professional athletes or lottery winners--feel the need to spend extravagantly in order to keep up a certain appearance to "impress" others.