Why Do Lottery Winners Lose Their Wealth?
There is danger in sudden wealth. Teresa Dixon Murray wrote a January 2016 article for The Plain Dealer with this simple headline: “Why Do 70% of Lottery Winners End Up Bankrupt?”
The book of Proverbs cautions on the dangers sudden wealth. Proverbs 13.11 says that wealth gained hastily will dwindle. Proverbs 20.21 similarly warns, An inheritance claimed too soon will not be blessed at the end.
Murray cites Steve Lewit of Financial Wealth Group of Chicago:
People who were little, ordinary people all of a sudden become extraordinary. They’re euphoric. They lose all sense of reality. They think they’re invincible and powerful. They think they’re Superman.
Many of the suddenly wealthy squander their wealth by giving away too much money to family and friends. Put differently, the problem of sudden wealth is that those who receive are not prepared to handle it.
A Whole New World of Options
For the first time these people have options. They have options on lifestyle, housing, cars, food, travel, etc. Piled on top of those options are people—friends and family—who bring them more options and rely upon emotion rather than logic to extract financial gain.
When confronted with these options for the first time, most people with sudden wealth don’t have a filter for these choices.
Murray writes that the key is to be surrounded with a team of advisors who can provide objective advice and grounding on investments, requests, and lifestyle.
Indeed, whether it’s the lottery or an inheritance, sudden wealth can be a burden. But unexpectedly wealthy people can avoid the pitfalls with preparation and wise counselors.