Earlier this year, we witnessed the biggest Powerball jackpot in U.S. history: over $1.5 billion. Even more amazing, it was only split three ways, leaving each winner over $300 million dollars, if each one decides to take the lump sum payment.
Most of us will never come close to seeing that kind of money; if we had been one of the lucky winners, we couldn’t conceive of spending even a third of it before we die. Yet, as one article points out, almost 70% of lottery winners end up bankrupt in as little as 5 years.
How does this happen? A number of factors are at play, but they all seem to stem from the fact that these normal people, with normal lives and regular jobs, suddenly become extraordinary. They are overnight superstars, with their pictures gracing the front of major newspapers and websites. They may go from struggling to make ends meet to having enough money for their own private estate. All of this fame and fortune in a short period of time can go to their heads and cause them to behave in destructive ways they never thought they would; consequently, it can end up ruining their finances, and possibly more. Here are a few bad decisions that can bankrupt even the wealthiest lottery winner:
1.) They give away a lot of money
Often lottery winners are happy to give money to family members; those who win enormous sums obviously find themselves with cash to spare, and it makes them happy to share the wealth. What’s more, a lottery winner may suddenly receive an influx of visits from relatives, friends, and co-workers hoping to receive a slice of the money pie. A newfound generosity coupled with the greedy attitudes of those around him could lead to financial trouble. A person who comes into thousands or even millions of dollars needs to be careful not to give away too much because, as one financial planner from the article puts it, it can be “difficult to reverse course and turn off the spigot.”
Some winners may end up giving their money away in the form of addiction. Their newfound wealthy status can be hard for people to deal with, causing them to turn to unhealthy means of coping like drugs, alcohol, or gambling. Addiction can burn through cash like lightning, leaving you with just a vague memory of what it was like to be rich.
2.) They do not seek assistance from professional financial advisors
It’s amazing how many people come into a huge amount of money and either enlist financial help from improperly vetted people or just forgo the help altogether. Suddenly having a significant amount of money is not the same as knowing how to properly save, spend or invest that money, which is why it’s a good idea to seek help from the professionals. Finding a team of people who will help you make smart money moves could save you and your family from losing your entire fortune.
3.) They spend too much money on depreciating assets
People who have won the lottery are naturally going to feel the need to buy something flashy: new clothes, jewelry, a sports car, or even a house. While this feeling is pretty normal, some lottery winners blow through all their funds on assets that immediately begin to depreciate once they own them. Lottery winners are encouraged to pursue investment options, start a trust fund, or find a way to make the money produce rather than just disappear. Vacations and expensive stereo equipment may be nice to own, but they cannot provide long-term equity or financial security for anyone.
4.)They invest in businesses without properly vetting them
Some lottery winners try to do the right thing by investing in real estate deals or other businesses in the hopes that they can make a nice profit. However, unless you are already a savvy business person, you should not be attempting to break into this niche on your own. An average person who knows little about the business world usually cannot perform a proper analysis of the business deal. Not doing your research or learning the ins and outs of the business can sink you, causing you to be out a ton of cash.
How an Ohio Bankruptcy Attorney Can Help
You don’t have to be a lottery winner to know that a few financial missteps could put you in financial disrepair. If you struggle to make ends meet, you may want to speak to an Ohio bankruptcy attorney about your situation. The attorneys at Cleveland Bankruptcy Attorneys can teach you about all your options available and help you get back on track. For a free consultation, call (216) 586-6600, or email advice@clevelandbankruptcyattorney.com.