NEW YORK — Certainly, everybody wants to win the current $1.4 billion Powerball jackpot, and even though most people know that their chances of winning are minuscule, they keep buying tickets. What few people realize, though, is that a winning lottery ticket could be a fast track to bankruptcy.
The bankruptcy rate among lottery winners is about twice that of the general population, and roughly 70 percent of all lottery winners go broke within seven years, according to debt adviser and attorney Leslie Tayne.
“Sometimes it’s a curse to win the lottery,” said the New York based lawyer who specializes in advising clients with large amounts of assets on how to remain out of debt. Some of those clients, Tayne said, have been lottery winners. “It’s wreaked some havoc on their lives.”
Tayne’s Amazon best selling book, Life & Debt: A Fresh Approach to Achieving Financial Wellness, could be on an assigned reading list for lottery winners. A random sampling of would be winners may offer insight as to why.
One man PIX1 encountered a moment after he bought his Powerball ticket said, when asked what he’d do with his winnings, “I don’t know. I don’t know.”
While many of us would respond the same way, Tayne said its much better to have a plan.
“It doesn’t matter what you win,” she told PIX11 News, “it’s what you do with it, especially if you win smaller numbers.”
By “smaller,” she said that a lump sum payment in the single digit millions can, and should be thought about as small because “$2 million can go very quickly if you don’t plan for it.”
Another person with two dollars and a dream at a Midtown bodega said that when he wins he would “go to Disney World… do something for the kids, do something for the community.”
That sentiment, said Tayne, particularly, the desire to provide for children and to give to charity, is noble. In order to achieve that, she said, “It’s a really great idea to put a large chunk of it away for the future. If you go out and just buy a lot of material items, that money is going to go very quickly, and that’s the tendency.”
It’s not just this Tayne saying this. One of the most comprehensive studies of lottery winners http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845 shows that winning jackpots of all sizes evaporate fast. It indicates that jackpots aren’t income, they’re an investment. The bottom line, literally, is key, according to Tayne, for all people, not just lottery winners.
“You need to think about it,” she said in an interview. “Understand what your expenses are, know your budget, what you can and cannot spend money on.”