The Downside of Winning the Lottery

We have all heard the tales of woe that often ensue the rapid acquisition of wealth. But we dont believe it. And few would turn down a windfall of wealth, if given the opportunity. We are all certain that wealth is the answer to most of lifes struggles. It fixes anything. With money you become better liked, better dressed, better looking, and better . . . at everything. People listen to you because when you have money, you must be smarter. You have something everybody else craves. But be cautious. Before you buy into the fairytale, pause to evaluate who, and what, is drawn to your newly acquired magnetism . . . and for what reasons. Money is like rain. When you dont have much, you thirst for it. But when it comes in a storm, it can flood everything you own.

Andrew Carnegie, one of the richest men in American history, wrote a provocative article entitled The Gospel of Wealth. In it he declares: I would as soon leave to my son a curse as the almighty dollar. He concluded that leaving your children money beyond their basic needs is damaging to their future contentment. One has to wonder why a man who created his wealth from nothing, who suffered as many failures as successes, and emerged victoriously wealthy, was so passionate about penning this admonition to the future generations . . . to you! How difficult it must have been to give away all of that hard earned cash. Why in his experience was money so destructive?

Bill and Melinda Gates created the Gates Foundation. They will eventually transfer the super majority of their personal wealth to fund their charitable organization that will bring change to some of the worlds most persistent struggles. What do Bill and Melinda know about the foibles of crowning their children with wealth they did not earn? They answer is experience. They also earned their way to this lofty financial station. The process of amassing wealth by itself teaches indelible lessons, and equips one with tools to carefully navigate the difficulties of having and maintaining wealth. They have been pushed down, buried, cheated, pursued, disappointed, bullied, sacrificed, defrauded, sued, and faced peril scores of times. But through experience and persistence, they learned to rise up and overcome setbacks and detours. Such an exercise develops a pro status in dealing with wealth. Never easy, but manageable.

Now consider a newly crowned NBA player, Hollywood diva, or musical icon. Many of them have struggled much of their career with only small advances, and often repeated setbacks. Then whoosh! Stardom! And typically lots of money! Their long arduous road to fame may help a star navigate the god-like adoration from fans, but handling the instant wealth without gradual wealth management experience is more challenging, and rarely without substantial risk to both their money . . . and their peace of mind.

Last month we all cheered at the good fortune of a Massachusetts Powerball Jackpot winner. I dont know Mavis Wanczyk and I am prayerful she is one of thirty percent of lottery winners who do not end up penniless five years after winning the lotto. Hopefully, she will have the fortune of hiring several wealth managers who can assist her in avoiding changing her lifestyle too rapidly. However, despite the expertise available, few people having no wealth experience will listen. And even if a new winner does heed the sage advice, it alone will not address the mental health strain and family melee that is about to follow.

The following things that will occur with, or without, a lottery winners consent:

1. Its all mine! Those things you once recognized as pure luxuries, and not something you really need, morph into wants you can now afford. With your new found wealth, you begin to buy material things. At first, you acquire the comforts of life . . . a better car, bigger house, (or houses), clothing, electronics of all types, and finer services, including upgraded travel, full time help in the home, a driver, lawyers, accountants, and wealth managers. Eventually, you just order the best of everything, from the best electric bicycle, to the menus finest bottle of wine. You dont think you will, but just wait and see.

2. Make my wish come true! You become the fairygod-mother of your immediate household, and after a short time, your more distant relatives. The tricky part is recognizing your own predisposition about doing good things for others. At first, you have a desire to make others dreams come true, just like yours did. But after showering your family with things, they will always want more, and you will begin to say no to their requests. They will soon resent you for not handing over more cash, especially when you have so much of it! They will make you feel like you owe it to them, that your fortune should be their fortune. Many will ask you for loans with a promise to repay. You might as well dump your money into the ocean as to expect them to pay you back. And if they do . . . they will ask for another loan . . . usually a bit larger.

3. I have a great investment idea! You will be amazed at how many people can tell you how best to invest and multiply your fortune. Notice that most of these people are not wealthy themselves and have not built their own successful enterprises, however, they claim to have the formula to help you build and maintain yours.

4. Lets be friends! Everyone wants to be your friend. They want one of two things from you: a) financial support, a gift, loan, or a business opportunity, or b) they want to be associated with you because it gives them social advantage to be a friend. Sadly, in the process of being courted by this new wave of hangers-on, your real friends grow tired of your elevated attitude and inability to relate to their meager everyday life and problems.

5. They didnt earn their money! The community of wealth is relatively small and very discriminating. They know their own. When a newcomer joins the club, they make it their business to know how much you have, and how you got it. It sounds intrusive and unfair, but the makers of fortune discriminate against those who inherited or did little to achieve their financial success. The lotto winner is an islander. They typically lose touch with the people they lived around most of their lives, and are not accepted into the circles of real money. But maybe you always wanted to live on your own private island. Aloha . . . you made it!

6. There is no place like home! Eventually, you will recognize what you had before the lottery win was better than what you have now. It will take a while, but the lotto winner will learn, first hand, that money cannot buy happiness. It may assist in the pursuit for a while. But in the end, you will long for a simpler life. The hard lesson is realizing you cant return. And so you will accept living in a place of broken relationships, business dealings, fractured families, and the lack of recognition you somehow feel you are entitled to.

So what should a lotto winner do? Easy. Do NOTHING! For a certain period of time, maybe a year, maybe two, you should do nothing different. Dont increase your lifestyle, dont quit your job, and dont give or loan money to your family or friends. Put up a wall and electric fence on your property until the hysteria of reporters dies down. Then get a couple of top-notch wealth advisors to map out your expenses for the rest of your life. Put that amount aside. Be generous to yourself, but not frivolous. Create a living trust to provide on your death for only your childrens basic needs. Tell them this is all they are going to inherit. They are more likely to accept it if you make it clear up front. Then put the rest in your own newly created private family foundation to be eventually gifted to people and organizations you (and your family) deem needy and worthy.

I know. You say you cant. There are so many reasons why you cant. And they all make sense now. Just try to remember, the richest person is not the one who has the most . . . but the one who needs the least. Youve been given so much. Dont let a gift turn into a curse.

Perhaps if Andrew Carnegie were alive today, he would say, I would rather leave a dreamer a curse, than to have them win the Lotto Jackpot!

By Richard Watts, author of Entitlemania: How Not to Spoil Your Kids, And What to Do If You Have and Fables of Fortune: What Rich People Have That You Dont Want

Website: www.entitlemania.com

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Twitter: @richwatts