Check out this piece from the Washington Post:
William "Bud" Post III, 66, whose $16.2 million in lottery winnings brought him debt, despair and heartache, causing the kind of trouble often recounted in country-western songs, died of respiratory failure Jan. 15 at a Pittsburgh area hospital.
"Everybody dreams of winning money, but nobody realizes the nightmares that come out of the woodwork, or the problems," he said in 1993, five years after winning the Pennsylvania lottery.
His problems included a brother who tried to hire a contract murderer to kill him and his sixth wife; a landlady who forced him to give her one-third of the jackpot; and a conviction on an assault charge, after Mr. Post fired a shotgun at a man trying to collect a debt at his deteriorating dream house in northwestern Pennsylvania. He went bankrupt, came out of it with $1 million free and clear and spent most of that windfall, too.
"I was much happier when I was broke," he moaned.
Ok, so we can dispel the "lots of money makes you happy" myth with this one, huh? ;-)
Seriously, if you know how to manage it, I think more money can make you happier -- up to a point. The main benefit to me of more money is that it can buy you time that can then allow you more experiences -- which ultimately make you happier. On a recent podcast of the Personal Finance Hour, Jim noted that possessions usually deteriorate with time while experiences get better (in our memories) over time. I think that's very true.
But I didn't really mean for this to become a money/happiness post, but wanted to highlight another instant millionaire who knew very little about managing money, made bad mistakes, was taken advantage of, and wished in the end that he never had won the money. This sort of result seems more the rule with lottery winners than the exception.
For once, I'd like to see how someone with a shred of financial literacy would do with $16 million. Maybe they do ok and we just don't hear about them. Or maybe they don't play the lottery in the first place. Interesting thoughts.
Anyway, to prove that winning the lottery isn't all bad, I'm willing to be the guinea pig. If each state lottery would kick in only $250k (a fraction of their marketing budgets) and give it to me, that would be over $10 million (wikipedia says 43 states have lotteries). I would then spend the money wisely and all the lotteries could market the fact that winning the lottery doesn't doom you financially -- that it's really the bozos who have won in the past that give winning a bad name. :-)
Or, another idea, make winning the lottery contingent upon accepting financial advice from me. For a small fee (maybe 10% of the winnings), I'd help winners manage their fortunes and stay out of money trouble. Sounds like a great idea to me. Any lottery executives out there listening? Do you like either of these ideas?
Ok, I'm signing off now since I'm having way too much fun with this topic...
"a landlady who forced him to give her one-third of the jackpot"
Seriously? The fact that your landlady got 1/3 your jackpot should be a tip that you're doing it wrong.
Posted by: Moo | October 22, 2009 at 04:14 PM
How does a landlady force you to give up millions of dollars? Was he renting a mansion or something?
I have often made the comment that nobody would ever hear a peep about my bad luck if I was a lottery winner...other than family and friends, nobody would hear a peep from me very often period! Well except for a cruise reservationist or two...
Posted by: Crystal | October 22, 2009 at 04:19 PM
"Or maybe they don't play the lottery in the first place."
"it's really the bozos who have won in the past that give winning a bad name. :-)"
Both these statements are probably mostly true. People who buy lottery tickets tend to be vastly more poor and under educated. That's why its often called a tax on the poor. Certainly there are plenty of exceptions to that but everything about it that I have read shows it to be predominately those with no money and a crappy life that are looking for their one shot out. And yes these people are mostly financially inept, come from messed up families with messed up family members, and are probably all around bozos. Again, not always, not even necessarily a very large number of the time, but probably more than half the time the winner is a "loser" in life and the winning will just excacerbate the type of life he already has.
Look at this guy. His brother tried to kill him? What kind of family is this? His landlord gets 1/3, how does that happen? He blows it all files bankruptcy and realizes what a huge mistake he made and somehow walks away with 1 million free and clear but now he has learned his lesson and he won't repeat that right? No, he quickly blows the final million too.
This is not a problem of money made me do foolish things. This is a problem of I am a fool and we know from the time tested cliche what happens with a fool and his money.
So I am not so sure the lottery stories show as much about money's affect on people as they show foolish people's affect on money. If you give a bunch of money to someone who is inept at managing money (or their family or most anything for that matter), well why not just put it in a paper shredder, the result will be about the same.
What happens if you give a gun to a lunatic?
What happens if you give pearls to a pig?
What happens if you give money to a fool?
Fortunately the percent of lunatics is small.
Unfortunately the percent of fools is not.
Posted by: Apex | October 22, 2009 at 04:48 PM
I think that the bozos get more attention. I was reading a reddit post by a guy who won $19.2 million after tax a few years back. His goal is to go to every country in the world. He has $14 million in a blind, irrevocable trust that pays him about $100k/year, $2 million in a "f*** you I have money" account, and $3 million to his family. He maintained his anonymity with the trust, because he had a lawyer set up the trust and collect the lottery winnings through the trust. He also owns a lot of frivolous things (Porsches, for example) and has basically done very well with the money. He's a very happy lottery winner.
People figured out who he was, so he deleted his account on reddit because it had too much information.
Posted by: Mneiae | October 22, 2009 at 05:53 PM
Notice that he has a 6th wife. There's some lack of sense in there when you fail at marriage that many times and keep doing it again. Not to mention have a family so screwed up that your brother thinks killing you (presumably for the money) is a good idea and you get conned out of a 1/3 of it by your landlady rather than moving (did she blackmail him with something?). This goes beyond just lack of financial literacy, this guy has problems going much deeper than that.
I have a feeling there are probably plenty of people out there who've won the lottery and are living quite comfortably right now. They are also the ones smart enough to never go seeking publicity about their winnings so we mostly only hear about the failures.
Posted by: Noadi | October 22, 2009 at 05:55 PM
This is a story that I have read about many times before.
How about all the very high paid professional athletes that end up broke or in bankruptcy. Often they trusted their manager or their financial advisor too much.
Maybe this is why I don't trust anyone else to manage money for me. In fact I tend to distrust people that I meet until I get to know them well and find out for myself that they are honest and reputable.
Just try knocking on my door and trying to get some money out of me, I'm polite but I get rid of them fast.
The old proverb "A fool and his money are soon parted" says it all.
Posted by: Old Limey | October 22, 2009 at 05:57 PM
"How does a landlady force you to give up millions of dollars?"
I guess he failed to read all the small print in the lease. :-)
Posted by: Jim | October 22, 2009 at 06:03 PM
This doesn't surprise me, and FMF touched on it:
Um, consider the universe of big lottery winners.
This universe consists of 100 percent...lottery players!
So we can EXPECT the existence of money management issues among this group.
Posted by: Terry | October 22, 2009 at 06:21 PM
Terry:
Very good point! I wonder how many readers of this blog buy lottery tickets - very few I would imagine since they realize that lottery tickets are nothing more than a tax on the financially illiterate.
Posted by: Old Limey | October 22, 2009 at 06:51 PM
Well, I'm sure I'm going to hear about it, but I buy a lotto ticket for every Texas Lotto and every Mega Millions drawing. It costs $20 for 5 weeks and comes out of my $75 a month entertainment money. I see it as bits of hope and day dream material. :) Now I feel dirty...lol...my un-frugal confession...
Posted by: Crystal | October 22, 2009 at 07:43 PM
Well I imagine there's many winners we never hear about. A friend of my mum's won the lottery. He's a big-shot heart surgeon and needed the cash like I need an extra 20 cents. So unfair!
Posted by: guinness416 | October 22, 2009 at 10:33 PM
I think you don't hear about the "smart" winners because they are smart enough not to tell. The guy who had the trust set up has the right idea.
I admit that my husband and I occasionally play, not because we don't understand the odds, but because we just spend time together daydreaming and it is cheaper than going to the movies!
If we win, we would set up a trust and have decided not to tell anyone!
Posted by: Paula | October 23, 2009 at 12:28 AM
Money will solve more problems than it creates, if you are smart with it. If you don't have to worry about your kids education, house payment, retirement, etc. I think you would be much happier.
Posted by: Marc | October 23, 2009 at 09:17 AM
Positive lottery winner story:
http://tinyurl.com/324zqj
Posted by: EXS | October 23, 2009 at 10:38 AM
This is more of an issue with fame than money. If he had a ton of money and nobody knew about it, this would never have been an issue.
Posted by: rhui | October 23, 2009 at 12:15 PM
I only play the lottery when we have a pool for tickets at work. It's in self defense. If we win, I don't want to be the only one left here in the office LOL!
Posted by: threadbndr | October 23, 2009 at 02:21 PM
What a mess. I'd suggest the guy sell his story, but I doubt he'd hold on to that money.
Posted by: VT | October 24, 2009 at 06:28 PM
We have a family in town who won 3-4 million about ten years ago. They just go on living their life like nothing major happened. They drive a minivan and an SUV...live in a nice house, nothing extravagant. In fact, if you met them, you'd never know. Not everyone is an idiot, but idiots make great news.
@Terry: Great Point!
Posted by: dan | October 26, 2009 at 10:07 AM
It probably wouldn't hurt if the winners, especially of large jackpots (over 50 mil) get set up with a lawyer, CPA and financial planner right away. The first thing they need is an education on finances and investing. The second thing they need is a solid plan for the money. Third, they must learn to live off the interest and not spend the winnings (except to seed things, like advisors, or within their spending plans-investment assets, etc). That's the hard part if your not smart about money: saving and living off what it produces. That's hard for most of us since we do live paycheck to paycheck and depend on that for all we do with money. Most of the big failures were winners who didn't follow advise (they had advisors) and just blew the cash. Those are the folks who generally run out of money within a few years. I doubt, however, that 70% of all winners go bankrupt but I bet it's near 40% or so.
Bud Post, the guy mentioned here, died a few years ago. He was 66 and totally out of cash. Old Bud wasn't very well educated, drank a lot and would go on crazied spending sprees. He gave away some, lost some (40% to another person who sued him as a co-winner), was conned out of some and invested some in losing business deals. Bud ended up bankrupt, selling out to a structured settlement to pay off massive debts, but still had $1 mil left, which he quickly blew on worthless things. With his cash gone, Bud went back to being broke, living off a few hundred a month in Social Security and food stamps. But, he was happy not having to deal with the cash. I think Bud never had a realistic idea of what it took to manage his money. He became more paranoid (probably helped along by being a boozer-DT's) and isolated from real life. He figured everyone was trying to get money from him, which caused him a lot of stress (which led to more boozing,etc). Plus, his own brother tried to have him wacked). With no cash, he wasn't bothered anymore and could just sit around a drink beer all day.
Posted by: The Ghost of Jack Whittaker | December 08, 2009 at 03:07 PM
If I got back like $10 million after taxes I would still work. Hire a lawyer to represent the winnings while I protect myself from the media. Do not show your face on TV and change the name to protect your identity. I would take a couple of millions to pay the bills and bless my folks and the rest hire a finanial advisor to manage my money. Invest the money and see in 5-10 years if you have invested alot to quit or retire. Think about it people, especially men who are paying child support including myself. Check it, if y'all quit and livin large dont let the state find out you quit because they will take about 20% of your winnings instead of taking 20% of your bi-weekly salery. Plus save some green because uncle sam will be after the money that is your only income instead of keeping a job and keeping your mouth shut. Because once you leak it out and i dont care who including a trusted best friend. Once the word is out get ready for some trouble. Now those who win $50 million or more, thats another story. Still protect yourself from the hungry media that will burn you than TMZ!
Posted by: Jamal | December 08, 2009 at 04:08 PM