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My mom loves to play Mega Millions when it gets high. Normally that is somewhere in the vicinity of $200 million or more. The odds of winning the lottery are normally somewhere between 1 in 170 million and 1 in 250 million.
Here are somethings that are more likely to happen than winning the lottery.
Becoming an Astronaut: 1 in 12.1 million
Dying in a Plane Crash: 1 in 11 million
Being a Movie Star: 1 in 1.5 million
Being Crushed by a Meteorite: 1 in 700,000
Getting Audited by the IRS: 1 in 175
Speaking of the IRS, tax season is coming upon us. For those that do their own taxes, TurboTax is a great tax software program.
I am under no illusion that we will win the lottery, but in terms of entertainment value, we definitely get our money’s worth by spending a couple bucks. We converse about all the amazing dreams that would be fulfilled.
I talk about how I’d reach FIRE even earlier, travel around the world and volunteer as a financial counselor. My wife talks about how she would love to work in an orphan ministry abroad and also travel as well. My mom talks about how she’d help those less fortunate to obtain adequate medical and dental coverage. Finally, my dad would love to play golf around the world on some of the most prestigious courses.
It’s an incredibly fun conversation. Like I said, well worth the couple of bucks it costs to play into the lottery. Here’s the thing about it; while the chances are low that we’d ever be able to actually win the lottery, the chances are incredibly high that if we did, we would become bankrupt and miserable.
According to this article by NY Daily News, 70% of lottery winners are bankrupt within 7 years. I had to double check that stat because it seemed awfully high to me, but it was confirmed by the National Endowment for Financial Education.
Typical Lottery Story
If you google “lottery winners bankrupt”, you will come up over 200,000 results and fascinating articles on how people blew through their money. Most of them go like this… the person was living paycheck to paycheck when they won the lottery. They then quit their job, buy a big house and new cars (usually plural), and spend tons of money on partying and exotic vacations and further lavishness. Then the money runs out, and they are forced to go back to working the same job they had before the lottery.
What My Financially-Minded Self Would Do
I thought to myself, how in the world can people really become bankrupt within 7 years after winning millions in the lottery. I realize that I am in the personal finance space, so I probably have an obsession that exceeds the normal person. If I won $10 million and even if taxes took half, I would still have $5 million to play with. Based on that, I would probably invest it all in the stock market and live off the 2% dividend. I don’t live a luxurious lifestyle, so I know I could more than live off of $100,000. Thus, I wouldn’t touch the principle, so my financial seed could grow.
Implications of Overnight Wealth
So I started to research what others do, and I found it astounding. While I may not know any lottery winners, I do know some people that have made money overnight. I go to church with a bunch of NFL players who became wealthy overnight through the NFL.
I’m not sure who gave them financial advice, but a couple of them drive really nice cars, and they always dress well. A friend shared with me about his experiences in the NFL. It definitely provided a great deal of insight into what is going through many athletes’ minds.
Sports Illustrated ran an article a couple of years ago that said 78% of NFL players are either bankrupt or are under financial stress within two years of retirement. An estimated 60% of NBA players go bankrupt within 5 years after leaving their sport.
Who Your Friends Are Matters
I read this quote the other day, and I think it really explains why athletes and lottery winners go broke. Basketball player Danny Schayes stated, “Guys go broke because they surround themselves with people who help them go broke.”
This got me thinking about the concept of who you surround yourself with is who you will become. This is something that my parents impressed upon me constantly from a young age and something that I still try to incorporate today. I also adhere to, “If you want to have greatness in your life, surround yourself with great people.”
I can definitely say that I wouldn’t be where I am today if it wasn’t for my parents, my wife, and my small group of friends that have encouraged and pushed me to where I am today. Of course, it’s easy for me to sit on the sideline and say that I would never go broke if I won the lottery. But as I said before, who you are connected to matters. And above all, happiness doesn’t come from any amount of wealth you can obtain.
So readers, if you won the lottery, what would you do? Do you think the people that you surround yourself with would help increase the chances of your wealth remaining, or do you think you’d get swept into bad money habits? Share your thoughts below.