Why Winning Powerball Won't Make You Happy
Would winning the $500 million Powerball jackpot tonight make you happy? Studies and anecdotal accounts of lottery
winners suggest that joy is by no means assured. Though there are stories of people whose lives improved after landing
a big lottery pay-out, there are seemingly as many winners whose lives got worse.
Academic research on the subject is mixed.
The most frequently-cited study was published back in 1978 in the Journal of Personality
and Social Psychology. Researchers interviewed Illinois State Lottery winners and
compared them with non-winners and with people who had suffered a terrible accident
that left them paraplegic or quadriplegic. Each group answered a series of questions
aimed at measuring their happiness level.
The study found that the overall happiness levels of lottery winners spiked when they
won, but returned to pre-winning levels after just a few months. In terms of overall
happiness, the lottery winners were not significantly happier than the non-winners. The
accident victims were slightly less happy, but not by much. The study showed that most people have a set level of
happiness and that even after life-changing events, people tend to return to that set point.
A March Wall Street Journal story recounts three other relevant studies that lend some support to the notion that a
lottery win could make you happier:
A 2006 British study in the Journal of Health Economics found that U.K. lottery winners go on to demonstrate
“significantly better psychological health.” That study also found that the general mental well-being of winners vastly
improved.
A study in Florida showed that about 1% of lottery winners go bankrupt every year. That’s roughly twice the average for
the general population. But the study looked only at winners of $150,000 or less. It doesn’t really apply to the $500
million drawing tonight. Among those in the study, people who won six-figure prizes were less likely to go bankrupt.
A British study showed that winners spent 44% of their lottery winnings after five years, but only a few spent their entire
winnings in their lifetime. Again it depended on the amount people won.
One other study: a 2008 University of California, Santa Barbara paper that measured people’s happiness six months after
winning a modest lottery prize in Holland, equivalent to eight months’ worth of income. That study found that the win
had no effect on happiness.
The takeaway: sudden wealth is most likely to exaggerate your current situation, but it won’t fundamentally change your
sense of well-being. If you’re unhappy, you’re not good at managing money and you’re surrounded by people you don’t
trust, a big win will probably make your problems worse. If you feel fulfilled, you are a careful financial planner and you
have strong relationships in your life, a lottery win is likely to build on those strengths.
Cautionary tales abound. Like Jack Whittaker, a West Virginia man who won a $315 million Powerball jackpot back in
2002. At first he gave millions to charity, including $14 million to start his own foundation. But later, a briefcase with
$545,000 in cash and cashier’s checks was taken from his car while it was parked outside a strip club. His office and
home were broken into and he was arrested twice for drunk driving. His granddaughter died under suspicious
circumstances and by 2007, he had spent most of his money. He told reporters, “I wish I’d torn that ticket up.”
There was Alex Toth, a Florida man who won $13 million in 1990. By the time he died in 2008, he had split with his wife
and he faced fraudulent tax return charges.
There was also Evelyn Baseshore of New Jersey, a former convenience store manager who won twice, taking away a
total of $5 million in the mid-1980s. She was confronted by people who wanted a share of her money. “Everybody had
their hand out,” she is quoted as saying.
In 2007, a paper published in the Journal of Academic Psychology asked why achieving major life goals, including winning
the lottery, or the more basic goal of getting married, doesn’t wind up making us as happy as we expect. As the 1978
student showed, a big positive event like a lottery win can impact happiness, but its effects diminish over time Why?
Because while a lottery win can make a difference, it won’t affect the other conditions of your life, like who your siblings
or parents are or your basic disposition.
That said, there are lottery winners whose lives have definitely improved. One example: Sandra Hayes, a social worker
who was making $25,000 a year when she and 12 of her coworkers won the $224 million Powerball jackpot in 2006.
After taxes and splitting the money with her colleagues, she had $10 million. She bought a Lexus, her dream car, a half
million dollar house in St. Louis, and she paid off her current home and gave it to her daughter and grandchildren who
had been living in a downtrodden neighborhood. She quit her job, started writing and published a book. But Hayes
agrees that the win didn’t transform her outlook on life. “Just because you win the lottery, it does not change you as a
person,” she told NBC News.
January 22, 2013
Mega Millions Lottery Could Make
You More Likely To Go Bankrupt
The Huffington Post | By Alexander Eichler
Strange but true: an extra-big lottery prize means you've got an
extra-big chance of going bankrupt.
That's the implication of a paper published in 2010 by researchers
at Vanderbilt University, the University of Kentucky and the
University of Pittsburgh. The authors looked at lottery winners as
separated into two groups: those who won sizable cash prizes
(between $50,000 and $150,000) and those who won more
modest prizes of $10,000 or less. They found that five years after
the fact, the big winners were the ones more likely to have filed
for bankruptcy.
We're bringing this up today, of course, because America went
crazy for lottery tickets this week, buying up so many entries in
the Mega Millions drawing that the jackpot soared to a record-smashing $640 million. That number could get higher still: if a winner
isn't picked Friday night, according to The Boston Globe, the pot will climb to an estimated $975 million.
It's tempting stuff -- especially at a moment when half of all Americans earn less than $27,000 a year, and more and more people
can't afford the basics. But this paper -- plus a wealth of additional evidence, anecdotal and otherwise -- suggests that winning the
lottery may not be the best thing that could happen to you.
The researchers, led by Mark Hoekstra of the University of Pittsburgh, found that five years down the line, there were almost no
meaningful differences between the big lottery winners and the small. The two groups had comparable assets and debts. But there
was one big distinction -- the big winners were more likely to have gone bankrupt, for the simple reason that, as the authors put it,
they had "consumed their winnings."
The study notes that the researchers controlled for the financial health of the lottery winners -- meaning that before they actually
won, the big winners were no more or less likely to file for bankruptcy than the small winners were. So the risk of bankruptcy seems
to have been directly linked to the size of the prize.
Obviously, $150,000 is a sum on a totally different scale from $640 million -- or even $324 million, after taxes. So whoever takes
home the Mega Millions cash may not have exactly the same experience as the people in the study.
Still, recent history is thick with examples of people who struck gold in the lottery and saw their lives take a sharp turn for the worse.
Business Insider has a collection of numerous grim cases, including people who lost their money to gambling or drug addiction, and
one Pennsylvania man whose brother tried to have him killed in the hopes of inheriting a share of the cash. And Jen Doll at the
Atlantic Wire offers an even more comprehensive primer, including people whose lottery wins prefaced social ostracization,
destitution, suicide and other tragic outcomes.
Big lottery winners offer advice, cautionary tales as $550M Powerball drawing nears
Published November 28, 2012
COLUMBIA, Mo. – So you just won the $550 million Powerball jackpot, the second highest in lottery
history. Now what?
Perhaps it's time for a tropical vacation or a new car. There are bills to pay, loans to settle, debts to
square.
Past winners of mega-lottery drawings and financial planners have some more sound advice: Stick to
a budget, invest wisely, learn to say no and be prepared to lose friends while riding an emotional
roller-coaster of joy, anxiety, guilt and distrust.
"I know a lot of people who won the lottery and are broke today," she said. 'If you're not disciplined,
you will go broke. I don't care how much money you have.'
- Sandra Hayes
"I had to adapt to this new life, "said Sandra Hayes, 52, a former child services social worker who split
a $224 million Powerball jackpot with a dozen co-workers in 2006, collecting a lump sum she said
was in excess of $6 million after taxes. "I had to endure the greed and the need that people have,
trying to get you to release your money to them. That caused a lot of emotional pain. These are
people who you've loved deep down, and they're turning into vampires trying to suck the life out of
me."
The single mother kept her job with the state of Missouri for another month and immediately used her
winnings to pay off an estimated $100,000 in student loans and a $70,000 mortgage.
She spent a week in Hawaii and bought a new Lexus, but six years later still shops at discount stores
and lives on a fixed income — albeit, at a higher monthly allowance than when she brought home
paychecks of less than $500 a week.
"I know a lot of people who won the lottery and are broke today," she said. "If you're not disciplined,
you will go broke. I don't care how much money you have."
Lottery agencies are keen to show off beaming prize-winners hugging oversize checks at celebratory
news conferences, but the tales of big lottery winners who wind up in financial ruin, despair or both
are increasingly common.
There's the two-time New Jersey lottery winner who squandered her $5.4 million fortune. A West
Virginia man who won $315 million a decade ago on Christmas later said the windfall was to blame
for his granddaughter's fatal drug overdose, his divorce, hundreds of lawsuits and an absence of true
friends.
The National Endowment for Financial Education cautions those who receive a financial windfall —
whether from lottery winnings, divorce settlements, cashed-out stock options or family inheritances —
to plan for their psychological needs as well as their financial strategies. The Denver-based nonprofit
estimates that as many as 70 percent of people who land sudden windfalls lose that money within
several years.
"Being able to manage your emotions before you do anything sudden is one of the biggest things,"
said endowment spokesman Paul Golden. "If you've never had the comfort of financial security
before, if you were really eking out a living from paycheck to paycheck, if you've never managed
money before, it can be really confusing. There's this false belief that no matter what you do, you're
never going to worry about money again."
David Gehle, who spent 20 years at a Nebraska meatpacking plant before he and seven ConAgra
Foods co-workers won a $365 million Powerball jackpot in 2006, used some of his winnings to visit
Australia, New Guinea and Vietnam. He left ConAgra three weeks after he won, and now spends his
time woodworking and playing racquetball, tennis and golf.
But most of his winnings are invested, and the 59-year-old still lives in his native Lincoln. He waited
for several years before buying a $450,000 home in a tidy neighborhood on the southern edge of
town.
"My roots are in Nebraska, and I'm not all that much different now than I was before," Gehle said. "I'm
pretty normal. I never was the kind of guy who went for big, expensive cars or anything like that. I just
want something that runs."
In the first year after he won, Michael Terpstra would awaken many nights in a panic. Had he slept
in? Was he late to work the night shift?
"At times I'd wake up and this would all seem like a dream," the 54-year-old said. "I'd have to walk
around the house and tell myself, I did win. I'm not working anymore, and I do live here. I didn't get
drunk, break into someone's house and go to sleep. This is where I'm supposed to be."
His new home is a roomy, two-story house in south Lincoln with a big-screen television and paintings
of Jesus on the walls. He no longer uses alarm clocks and spends his days taking his 92-pound black
lab, Rocco, on walks.
He was terrified when he first won, convinced that he would lose all of the money and have to return
to work. So he lives carefully off the interest from conservative investments, with help from
accountants and lawyers. He bought the new house and a truck, but struggles to name any
extravagant purchases.
"I can't buy a super yacht. I can't buy a Gulfstream," he said. "Then again, I don't think I'd use either
one, so why would I buy one?"
That said, some mega-winners still can't resist the lure of big jackpots, at least not the two-buck
chances. On Tuesday, former ConAgra worker Dung Tran, a Vietnamese immigrant, walked into the
same Lincoln U-Stop where he purchased the winning ticket six years ago and bought 22 more from
the very employee who sold him the first prize-winner, said cashier Janice Mitzner.
"We joked about it," she said. "I told him, 'Wouldn't it be something if you won again?'"
Hayes is also hoping to strike rich again — she bought 10 tickets at a Dirt Cheap liquor store on her
way home Tuesday while speaking with an Associated Press reporter. Unlike many big winners, she
has kept a visible public profile instead of going underground, appearing on a 2007 reality TV show
("Million Dollar Christmas"), writing an online Life After the Lottery blog and self-publishing a short
book, "How Winning the Lottery Changed My Life."
"We have this drawing tomorrow, and if somebody wins, God bless them," she said. "They're going to
need those blessings."
Read more: http://www.foxnews.com/us/2012/11/28/big-lottery-winners-offer-advice-cautionary-talesas-500m-powerball-drawing/#ixzz2IklCqznu
Winning Big Can Lead To Folks Filing Bankruptcy
Lisa Arcand won $1 million in the lottery she thought it was a dream come true. She bought a home and
new furnishings, took a couple of vacations, enrolled her son in a private school and opened a restaurant.
Then, she says, the reality set in.
Arcand, a single mom, said "Winning the lottery is not all it's cracked up to be. Actually, it's been very
depressing."
It has been less than four years since Arcand won big on a scratch off lottery ticket, and she is closing her
dream business, the restaurant that she opened with her winnings only five months ago. She says she
used up all her savings to open the business.
Sadly enough, many lottery winners find themselves broke, in debt and even filing bankruptcy after the
money is gone. Susan Bradley, a certified financial planner who runs a practice that specializes in helping
people who suddenly come into money, says that many lottery winners end up worse off financially than
before they won.
Bradley says, "A lot of people who win are financially OK when they win. You hope they become really
financially secure after they win. But many are in a worse position after winning because of financial
commitments. It's not unusual for them to start borrowing, and that's how you get more into debt."
According to Chelmsford wealth counselor Szifra Birke, roughly one-third of lottery winners find
themselves in serious financial trouble or in bankruptcy within five years of turning in their winning ticket.
Birke says, "For many people who come into wealth suddenly - whether they win the lottery, receive an
insurance settlement or an unexpected inheritance - if they have not acquired good money skills prior to
this windfall, often they struggle and make poor choices. If someone is in trouble financially, if they're
spending more than they are making or are relying emotionally on the lottery to bail them out, then that's
a big problem."
There is often serious financial trouble if a person who suddenly comes into money has no concept of
money and spending and decides to splurge with reckless buying binges. There is almost a certainty of
bankruptcy in the forecast for people who decide to use their winnings to start a new business. This is true
because having money does not make you an expert at handling it, nor does it give you specific
knowledge that you would need to go into business for yourself.
"If a person is not business savvy, they don't know what it takes to run a business - $300,000 could
disappear very quickly," Birke said. "You have to really understand the true cost of things. If you make a
purchase (on your credit card) that costs $50 and it takes you two years to pay it off, you spent a lot
more than $50. Sometimes people just don't compute the numbers."
Robert Glovsky, director of Boston University's Program for Financial Planners and president at Mintz Levin
Financial Advisors says that the best thing to do if you suddenly come into a large sum of money is to hire
someone with expertise handling money. That makes sense, right?
Glovsky said, "On the positive side, the lottery allows winners to do things they could never do before,
whether it's consumption or charity. But what happens when the money runs out? Do they return to their
old lifestyle? I would think that would be very difficult."
He says that a good financial advisor can help put the realities into perspective.
That advice would have been great for Arcand, but instead of getting in touch with a financial advisor, she
was contacted by a company that actually takes money away from lottery winners.
Shortly after she won the lottery in April 2004, Arcand said she was aggressively pursued by a cash
settlement company. She says that Stone Street Capital, a financial services company, offered her a lump
sum of money up front in return for all or a portion of her $35,000-a-year lottery proceeds.
"They call people who hit the lottery and offer to buy the ticket off you," she said. "The offer was less than
half the cash value. But I sold a piece of it - $15,000 a year, and I got $200,000 up front."
Getting the lump sum payment up-front helped Arcand buy some of the things she'd never been able to
afford, but it also put her in a higher tax bracket, which led to a further erosion of her winnings.
"They don't tell you all this," she said. "You end up with this little bit of money, and then you lose."
A spokesman for the Massachusetts State Lottery, Dan Rosenfeld, said the state is aware of these
companies and advises winners to be wary of dealing with them, or anyone else, for that matter.
Rosenfeld said, "We have a whole list of groups that will buy your winnings. We say, "Be careful, and only
talk to who you want to talk to."
People who win the lottery are often given advice by lottery officials about how to handle their new-found
wealth. Some of the best advice is for the winners to get a lawyer and a financial adviser. And that may
be the best way to avoid making mistakes that could lead to bankruptcy.