Researchers at Vanderbilt Law School studied data from 35,000 mid-level lottery winners (those who won between $50,000 and $150,000). What they found might surprise you.
Compared to small winners, the study group was 50 percent more likely to file for bankruptcy three to five years after winning. About 2,000 of the lottery winners in the study had a bankruptcy in the five years following their big win.
Even more surprising are the numerous tales that abound of HUGE jackpot winners (we’re talking millionaires) who end up losing it all. You might be asking yourself: Just why do lottery winners go broke?
Lottery winners go broke because of poor impulse control, bad financial decisions, winner’s remorse, trouble with the law, exposure to risk, unfiltered external pressures, and substance abuse. Stories of addiction, abuse, loss, and even murder help highlight the nuances of each reason.
Anyone who’s ever struggled to pay their bills wants enough money to stop worrying. Yet, as one lottery winner after another goes broke, it seems that millionaires who insist that “money doesn’t make you happy” have a point.
So, what is it? Why does money set some people free, while others curse the day they realized they held a winning ticket? In this article, we’re going to take a hard look at seven reasons that caused real life lottery winners to go broke, so you can avoid the same tragic fate.
We also cover this fascinating topic in our video “7 Reasons Why Lottery Winners Go Broke.” You can check it out now:
Reason 1: Losing poverty’s moral safety net
Perhaps the truth about money isn’t what it buys, but what it takes away. For some people, that means impulse control.
In the case of Chicago’s Jeffrey Dampier, a $20 million jackpot took away one too many guardrails.
After winning that life-changing sum in 1996, Jeffrey divorced his wife, cutting his windfall in half. He remarried and moved to Florida, only to begin an affair with his new sister-in-law, a 15-year-old whom he showered with gifts. Years later, the sister-in-law and her other boyfriend kidnapped Jeffrey, robbed him, and shot him in the head.
A poorer lifestyle offers an artificial — but often effective — safety system.
Most of us simply don’t have the money, or time, to indulge our every whim. But those limits don’t actually change what’s in our hearts. For those few who do end up winning jackpots, the training wheels vanish overnight.
As we see in the lottery stories in this article:
- Men who’ve dreamt of a sexier woman or a new car can get both.
- Women who gaze longingly at Gucci purses can afford them.
- Lonely teenagers can buy the popularity they’ve always craved.
- Drug addicts have an unlimited supply of “the good stuff.”
You could argue this one issue is responsible for every lottery winner who’s ever gone bankrupt. With money and freedom suddenly dumped in their laps, they get what they’ve always wanted. And in many cases, they find themselves acting on desires they didn’t even know they had.
Reason 2: Making disastrous financial decisions
Reportedly, Jack Whittaker, West Virginia winner of a $315 million Powerball, went into a strip club shortly after his win and slapped $50,000, cash, onto the bar. Another penchant of Jack’s was gambling (and often losing) at Atlantic City casinos. With that kind of financial planning, in five years he was flat broke.
Lottery winners often come into money with no idea how to handle it. In Jack’s case, he’d been born into poverty, and over 55 years raised himself to middle class comfort.
However, he didn’t have the experience to manage multi-millions once he got it, and so the money destroyed him. Along with poor lifestyle choices, Jack did everything wrong when it came to managing his new wealth.
- He sought little (if any) expert financial advice.
- He made poor investment mistakes, including over-expanding his existing business.
- He also opened a no-limits charitable foundation.
Reason 3: Haunted by winner’s regret
From the outside, winner’s remorse or regret may not make sense. But the truth is winning the lottery can change the winner’s life in a way they simply were not prepared for. It can lead to a profound and overwhelming sense of loss as their newfound wealth haunts them with unpleasant surprises.
In the case of Billie Bob Harrell, Jr., it only took 20 months for winner’s remorse to kill him. Going from a broke Pentecostal preacher who worked at Home Depot, to the winner of a $31 million Texas Lotto jackpot initially seemed like a good thing.
He was finally able to give generously to those he cared about. He gifted cars and homes to friends and family, donated large sums to his church, and gave freely to the poor in his community.
But the joy of lavish spending and giving soon became a heavy burden for Billie Bob. His good intentions turned on him as he became inundated with demands for money from complete strangers. He changed his phone number several times just to evade the endless stream of begging and pleading.
Still, his spending continued to spiral out of control. The stress worsened as his marriage crumbled less than a year after winning. He even lost a huge chunk of his money to an unscrupulous company he’d hired to help him manage his winnings.
Despondent at this horrible turn of events, he reportedly expressed his regret by saying: “Winning the lottery was the worst thing that ever happened to me.”
Billie Bob Harrell, Jr. killed himself shortly thereafter.
In one of his last notes to his ex-wife Barbara Jean, he reportedly expressed his heartfelt remorse: “I didn’t want this. I just wanted you.”
Reason 4: Rich people do pay the piper
Imagine this conversation between a husband and wife:
“How was your day, sweetie?”
“Oh, you know, same as always.”
“Good. I’m divorcing you.”
Similar words just might have been spoken by Denise Rossi to her shocked husband Thomas in 1996. Perplexed at her sudden divorce demand, Thomas nevertheless agreed and went on with his life.
Until two years later, when he realized just a few weeks prior to announcing their divorce, Denise had won the California State Lottery. By keeping the win a secret and divorcing him, Denise had cheated him of his half of $1.3 million under California’s community property laws.
In such an open-and-shut case that even Denise’s lawyer admitted she’d committed fraud, Thomas won every penny of his ex’s windfall.
Much of the world believes that the rich are above the law.
So, when some lottery winners realize they’re rich, they honestly believe that consequences are old news. After all, the rich folks on TV shows get away with:
- breaking the speed limit,
- defrauding their spouses, and,
- cheating the IRS.
Except that’s not the way it works much of the time in real life. Those who seem to get away with it have other things going for them. Things like the right political connections and teams of lawyers who’ve found — possibly immoral but definitely legal — loopholes.
Tax issues, in particular, seem to take down a whole lot of newly minted millionaires.
And, like Denise, a simple lack of respect for your state’s divorce court could cost you everything.
Reason 5: Target painted on your back
Despite all the opportunities that money can give you, it also attracts risks.
Some of these risks seem obvious. Yet the number of people who’ve fallen prey to armed robbery, kidnapping, and bad investments prove that being taken advantage of is easier than it looks.
Florida man Abraham Shakespeare didn’t stop a predator by giving away most of his $30 million lottery winnings. A woman named DeeDee Moore was later convicted of befriending Abraham, shooting him twice in the chest, and burying him under a concrete slab…all to steal what remained of his money.
This video from ABC News paints the grim picture of Shakespeare’s death and Moore’s conviction for murdering the lottery winner:
Reason 6: Nowhere to hide
Less than a decade after winning $10 million dollars in a Canadian super jackpot, Gerald Muswagon hanged himself in his parents’ garage.
Many lottery winners who’ve later gone broke described feeling like they “couldn’t go anywhere.” Fame comes with expectations of lifestyle, behaviors, and spending and giving habits.
For Gerald, the combination of fame, money, and external pressures on his choices rapidly launched him on a destructive path. This path included drugs, wild parties, and extravagant gifts including buying friends 8 big-screen TVs in one day.
Sadly, Gerald couldn’t hide from his fame, and he couldn’t say no to the expectations.
Reason 7: Addicted to death
Cars, vacations, and mansions may claim a lottery winner’s fortune. But drugs and alcohol claim lives.
While many of these stories end with a funeral, Ronnie Music, Jr. got lucky. After winning Georgia’s $3 million lottery in 2015, he quickly purchased 11 pounds of crystal meth. Fortunately, he was arrested before he could overdose.
Other times, family members pay the price for sudden fame and riches.
In the earlier case of Jack Whittaker, his granddaughter Brandi sought refuge from her crazy new world in cocaine. She died at the age of 17.
And substance abuse doesn’t stop at the obvious.
Anything with an addictive quality can prey on the right victim. Sex, shopping, food, adrenaline, and, yes, gambling.
Habitual gambler Evelyn Adams broke all kinds of odds when she won the lottery twice in 1985 and 1986. And nearly all $5.4 million of her winnings ended up in the hands of Atlantic City casinos as that same addiction pushed her to lose every penny.
Cultivating the right mindset to not lose it all in 5 years or less
There’s a moment in the story of almost every lottery winner who lost it all when reality comes back. For a while after they cash the check it seems like the world’s their oyster. Then it turns out that they’re still the same person, with the same:
- beliefs,
- family,
- education (or lack thereof), and,
- impulses
If you ever receive any substantial windfall, remember, all money can do is make you rich. It can’t make you a good person, or a bad person. It can’t make you a drug addict or a philanthropist…
…It can only provide access to the tools that build either life.
Rich people might have nicer things, bigger opportunities, and fancier parties. But they’re not necessarily happy, personally successful, or safe. Those qualities are only the result of taking the time to make intelligent choices with the resources you do have.
Learning about the people who’ve blown their windfall wealth is an important step. So is learning about people who’ve done amazing things with their money.
If you can master the “It’s my responsibility…my choice…my opportunity…my life…and therefore I’ll make good decisions,” mindset when it comes to money, whether you’re talking $1 or $1 million, then you’ll be well on your way to creating your own wealth success story.