When the Fairytale Is Over: How Many Lottery Millionaires Go Broke?

Winning the lottery – the ultimate dream, the chance of a lifetime? You probably think that becoming a lottery millionaire is your ticket to a better, more fulfilled, and luxurious life. Many others who got their hands on the jackpot had precisely the same thoughts… until things went south.

It’s not uncommon for people who had a modest income and won the lottery to go overboard with their expenditure.

World travel, yachts, expensive cars, drugs, and castles – these are just some of the things that lottery millionaires have splurged on.

Without a sound investment strategy, however, the well soon starts running dry.

There are many stories of lottery winners losing everything – the millions, the property, the luxuries, and even the most important people in their lives. How many lottery winners go broke? While there aren’t exact statistics, a significant percentage of lottery millionaires end up being very, very poor in the end.

What Do Statistics Have to Say?

Some statistical analyses suggest that approximately one percent of lottery millionaires go broke.

It’s not clear exactly how this number has been conceptualized. There isn’t information for all lottery winners out there. Some parts of the world allow lottery millionaires to remain anonymous. Hence, it’s impossible to keep track of how all these people live their lives.

There are even more pessimistic studies out there than the one quoted above.

According to one published research paper, one in three lottery winners will eventually go broke. That’s a much higher percentage than the one percent already mentioned in the introduction.

Analysis from the US shows that lottery winners are much more likely than the general population to declare bankruptcy within five years of winning a prize. Some study suggests that up to 70 percent of lottery winners will declare bankruptcy within three to five years.

While it’s impossible to tell exactly what portion of the winning population will go bankrupt, the phenomenon is significant enough to get noticed. What exactly is the explanation behind it?

From Rags to Riches

Studies show that lottery tickets appeal the most to people who have a limited income. The poorest segments of society are the ones responsible for the purchase of most lottery tickets. Middle-class individuals could also buy an occasional lottery ticket for fun, but the trend isn’t as pronounced.

These people usually do not have the financial education or the habits to do effective money management.

When they end up winning, such people don’t think about the future.

All they want is the lifestyle of the rich and the famous right here, right now.

The very same is typical for young winners who refrain from getting a financial advisor to help them invest.

Statistics show that only 37 percent of lottery winners will end up investing the money to continue receiving dividends in the long run. More than 20 percent will use the funds to buy a house, and 37 percent of lottery winners will first take an expensive vacation before considering debt repayment or investment.

The lifestyle of the rich involves expensive purchases that don’t bring in a return on investment. Drugs, plastic surgeries, designer jewelry, travel, costly villas, and private planes cost millions. Eventually, the resources run dry. In such instances, the winners end up worse than they used to be before. They have now gotten a glimpse of the VIP lifestyle that they will potentially never get back.

Because of this phenomenon, many lotteries offer financial advice and guidance to the biggest winners. In the absence of such help, winners will often end up making the wrong choices that make them go bankrupt in a couple of years.

Robberies, Scams and Ill-Wishers

One other important element has to be taken into consideration, especially when lottery winners do not remain anonymous.

People who win millions all of a sudden and who’re presented on TV for the whole world to see, quickly become the targets of scam attempts.

Recently, a lottery winner in the US needed to have police protecting her house after she became a millionaire. That’s how worried the authorities became over her wellbeing.

Even if scammers don’t target winners, the brand new lottery millionaires will have to deal with friends, relatives, coworkers, and even neighbors asking for money.

There have been dozens of stories about people getting divorced in the aftermath of winning the lottery. Their former spouses often take the lottery millionaires to court, demanding a considerable portion of the money won.

A few stories have also reached the media about relatives offering to manage the money of their lottery millionaire loved ones. Due to mismanagement, the funds get lost, and families become entirely estranged.

Just recently, an elderly lottery millionaire took her son and caregiver to court because he mismanaged the millions that she acquired from the lottery.

Protecting Your Winnings Isn’t That Difficult

The most important thing to understand is that winning the lottery will promote massive changes in one’s life.

Hence, the winnings should never be taken lightly.

It’s essential to have a strategy.

Yes, dedicating a portion of the money on travel and pleasure is a good idea. There are so many things to see and do if you have the financial resources. Still, pleasure shouldn’t be the only thing to pursue.

Hiring an investment consultant and coming up with a good, diversified portfolio is also very important. This way, a winner will end up being financially better off for life.

Even if the sum isn’t large enough to afford many luxuries and investments, it can still be used soundly. Buying a new house or remodeling existing property can both be good choices for creating value and receiving some return on investment.