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So, you won the $2B Powerball haul. Congratulations. Any interest in buying Twitter in a month? I digress. We’ve got stuff to discuss. Psychology stuff. Your brain and money stuff.
According to the National Endowment for Financial Education, about 70% of people who win the lottery, or receive a large windfall, go bankrupt within a few years. Why does this happen? Mental Accounting has something to do with it. US Economist Richard Thaler coined the term, and it looks at the ways in which we view and consider the money we have.
When someone wins the lottery, they tend to view that money differently than the money they’ve earned. They value it differently, and so they tend to treat it differently, and spend it more easily. Actually, lottery winners are more likely to declare bankruptcy within 3 to 5 years.
Combine the reality of Mental Accounting with the stress of family… and neighbours, and friends, and dogs, and your friend’s cousin’s boyfriend’s roommate all thinking they’d like a piece of that sweet lottery pie, and suddenly you can understand why the few States that allow lottery winners to remain anonymous are praised, mostly by the winners of their lotteries.
What are we getting at? The lottery is not a good investment. The return on your lottery ticket investment is almost always nothing. Zero. Zilch. And studies show that the majority of winners end up with less than they had before winning.
So, instead of spending $2 on a lottery ticket every week, put that money somewhere you know it will grow. But also… remember I’m your best friend and could use a new TV Car House.
Kidding! Just not about the lottery stuff. x
