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Frugality is essential for any household outside of a few select multi-billionaires that are dotted around the world. And that includes people who have even won big on the lottery. In fact, did you know that 70 percent of all lottery winners end up bankrupt eventually? That’s an incredible statistic, and there are a few reasons why it happens. We’re going to take a look at some of those reasons today and find out why every family – lottery winners or not – should approach their finances with a careful eye.
The giveaways
The vast majority of lottery winners are incredibly generous with their winnings. After all, who wouldn’t be when you have just lucked out and now have the wealth to help out family and friends? The trouble is, even a few million dollars doesn’t stretch very far when you start handing out financial help to other people. And you will be surprised at how many old, good friends start to come out of the woodwork and start asking you for help. At some point you will need to turn people down, and, of course, this can lead to problems in of itself.
The lifestyle changes
If you have lived a relatively normal lifestyle all your life, the temptation to become a ‘player’ is a great one for lottery winners. Often, the first thing winners do is move home, throwing a few million casually at a luxury house in an exclusive area. But running a house that size is an expensive job. You’ll find your average bills – such as the heating – are enormous. And if you start buying more luxury goods, eating out more, or taking more luxurious vacations, the truth is your money won’t last five years. And if you don’t reinvest any of that money or use it to earn a better income, you will end up one day waking up to a stark reality.
The psychological impact of lump sum
Huge lump sum payments can make it seem like you have solved all your financial problems. The trouble is, once you start spending bug, it’s incredibly difficult to stop. According to this Senecaone structured settlement review, one way of getting around the ‘bulk sum’ issue is to use a formal settlement payment plan that gives you a little money every so often. Don’t forget, with a multi-million lottery win in a standard interest bank account, you have enough wealth generated just from interest to live well.
Bad habits
A lot of lottery winners end up not getting anything out of life, either. Some run away from this issue by drinking too much – others get into gambling. And the end result is often always the same – a dwindling bank account and eventual bankruptcy.
Lack of advisors
Ultimately, the reasons are given above occur for one apparent reason – people who aren’t used to money don’t know its value. If you ever end up winning the lottery – or even another form of windfall – make sure that you speak to people who understand that amount of many. Surround yourself with a team of trusted, reputable financial advisors who know what they are doing, and will keep your money growing, not shrinking.
