Curse of the Lottery
Historians may disagree on who started lotteries, but there are references to one in the Bible (Numbers: Chapter 26) where Moses used a lottery to award land west of the River Jordan. The first references to lotteries are Keno slips from the Chinese Han Dynasty between 205 and 187 B.C. They are believed to have helped finance major government projects. Even today, winning a multi-million dollar lottery would seem to be a God send for most, since chances of winning are astronomical to begin with. Americans spend over a whopping $25 billion a year on lottery tickets, many bought by those least able to afford them.
First, most instant millionaires purchase a new home, complete with new furniture. Next on the list is usually an expensive car to replace their old clunker followed by an expensive wardrobe to establish their new status.
However, research into the lives of past lottery winners reveals not all were made happier because of it. In fact, for many it became a nightmare. They found out money doesn’t solve all problems. It only temporarily covers them up. Once the novelty of being extremely wealthy wears off, any unsolved problems are still present.
Unfortunately, some still believe money can solve most problems. And for those it can’t, at least they can afford to be unhappy about them. Surprisingly, recent studies show nearly one third of multimillion dollar lottery winners became bankrupt in just a few short years. One problem was inexperience with handling large finances. Being broke after being filthy rich could easily throw many into the depths of depression.
One New Jersey lottery winner won twice in 1985 and again in 1986. The money was gambled away. Another winner from New York had been thrown out by his wife prior to purchasing a winning ticket worth $149 million. She briefly reconciled with him then filed for divorce taking half of his winnings. Many winners claim to have lost friends and family because of the money. Here are a few more who didn’t find utopia:
· May 1999: A $31 million Texas state lottery winner in June 1997 commits suicide.
· December 2001: A British lottery millionaire is found dead after drinking himself to death.
· September 2003: A 16-year-old British lottery millionaire lost her boyfriend, fought with her father, was mugged and accused of stealing someone's man. She says she has never felt so miserable.
· October 2005: Another million dollar jackpot winner was arrested after Oregon authorities discovered the winning ticket was purchased with a credit card stolen from a deceased relative.
· December 2005: After spending $10 million prize in seven years, a Winnipeg lottery winner hangs himself.
This is not to say hitting the jackpot is a bad thing. There are those who are skilled in handling large amounts of money and thus avoid many of the pitfalls encountered by the less experienced. Of course, winning a $10 million lottery doesn’t mean the winner gets $10 million. Even though state and federal governments didn’t buy the ticket or pick the winning numbers, they have to get their fingers into the pie, with the exception of those states having no tax on lottery winnings.
There are a few other things to consider when buying lottery tickets. If you purchase a lottery ticket with a group of others, a winning lottery ticket can become a nightmare. For instance, if the ticket is purchased in one name, the lottery reports only the SSN of the purchaser to the IRS, making them solely liable for federal income taxes. When the winnings are distributed among group members, gift taxes are additionally added. To avoid this, use a do-it-yourself legal kit to draft a simple group partnership agreement. A free government SS-4 form including Federal Employee Identification Numbers for joint winning lottery claims should also be obtained.
And if by some long shot someone finds themselves a winner, steps must be taken to get an unlisted phone number, post office box and security system installed to protect their privacy. Shirt tail relatives, reporters and charitable organization representatives will quickly beat a path to their door. There can also be more serious problems associated with winning a jackpot. There are security and safety risks involved with publicly announcing lottery winners…such as holding a family member for ransom.
Those buying lottery tickets should be careful not to fall for one of the many “How to Win the Lottery” scams. Some scams on the Internet are based on lotteries. They begin with email “congratulating” the recipient on their recent lottery win. It goes on to explain in order to receive their winnings they must pay certain taxes or risk forfeiture.
Another scam is "systems" and software which promise to improve chances of selecting winning numbers. Although legal, they state there are no product guarantees. Several companies say they will buy tickets for online clients in countries otherwise inaccessible to them. Of course the catch is usually a huge mark up.
The best advice for the uninitiated is to hire a qualified, reputable financial planner like a CPA or a CFA, then learn how to budget and invest wisely.