Abacus: The Drawbacks of the Lottery

JoeLena

Many people are familiar with the highly improbable odds of winning pronounced sums of money from a lottery. The probability that someone wins even a $1 million lottery jackpot is about 1 in 11,688,054. It is far more likely that someone encounters events like getting struck by lightning or experiencing a shark attack than it is they win a multi-million-dollar lottery prize.

And yet, so many people continue to partake in lottery events anyway.

And despite any misconceptions, low-income citizens do not make up a majority of those who buy lottery tickets.

According to a 2017 survey conducted by Gallup, the lottery's most frequent players earn an annual salary of anywhere between $36,000 and $89,999. Moreover, 40% of those who make less than $36,000 bought at least one ticket in the past year, while approximately 53% of those earning an excess of $90,000 purchased one.

Of course, these statistics do not consider the dollar amount spent on lottery tickets by income level. One study published by the Journal of Gambling Studies found that people in the bottom 20% of the income bracket disproportionately purchase lottery tickets.

Regardless, it is apparent that lottery games attract people from all different tax brackets. And from a certain point of view, it should not be all too surprising why so many people engage in gambling activities.

Games like Mega Millions and Powerball represent an escape for so many people, even those who are well off. The belief that a single correct prediction can enhance one's life with a revitalizing amount of money can persuade many people to buy a single ticket once in their lifetimes.

But winning the lottery is not all it is made out to be.

In fact, some have argued that people would be better off if they don't win such a contest.

It is not uncommon for lottery winners to not only lose all of their gains but to have their lives entirely fall apart. From falling into debt to receiving death threats from family members, no aspect of a lottery winner's life is off-limits from internal or external factors.

It might be surprising to some that so many people could mismanage millions of dollars. But from a certain perspective, such scenarios are not all that uncommon.

For ordinary individuals who suddenly come across a windfall, decisions about what to do with their new money, as well as requests from family, friends, and strangers, can be overwhelming. But one context offers a better analogy for what happens to lottery winners: the life of professional athletes.

For many young and brilliant athletes, many of whom may have come from low-income backgrounds, signing multi-million-dollar contracts just after leaving college can offer significant advantages to them and their families, as well as challenges

The "30 for 30" documentary "Broke" offered insights into former athletes who endured severe financial problems. Indeed, according to a Sports Illustrated article, 60% of former NBA players are without sufficient funds within five years of retirement. Similarly, 78% of ex-NFL players have either declared bankruptcy or are in severe financial stress within two years of retirement.

While it can be hard to imagine, the situations of some lottery winners and that of professional athletes are not entirely different.

For someone who has not built large amounts of wealth slowly or may not have extensive knowledge of personal finance, winning excess amounts of money in such a brief period can have a devastating effect on their short-term choices.

Sound financial logic would permit someone to secure enough money in emergency reserves, in addition to saving and investing for future goals, such as purchasing a home and retiring. But such logic is typically directed towards those who have a steady stream of income and need to assign a so-called "task" for each dollar earned.

Although the logic should theoretically remain the same for those who suddenly receive millions of dollars, the undertaking can be much harder to accomplish. One reason is that many people who "win big" fall under the belief that their money can never run out. Although tens of millions of dollars are indeed a lot of money, it is essential to note that expenditures on some of the rarest and most valuable things in life, whether it be mansions, sports cars, or deluxe vacations, can quickly lower a millionaire's net worth.

Additionally, many family members and friends may feel entitled to a share of a loved one's winnings. Such feelings can create a divide within a family.

With numerous case studies to choose from, consider the life of Jeffrey Dampier Jr. Dampier won a $20 million ticket in 1996, and proceeded to spend much of his new fortune on his wife’s family. His good intentions were not reciprocated, as Dampier’s sister-in-law murdered him in 2005.

According to Don McNay, a financial consultant who advises lottery winners, many victors struggle with problems of depression, suicide, and divorce. These emotions often stem from having to reject requests from family and friends, thus giving the winner and their loved ones the impression that the new money is of greater meaning than any prior affection.

One study found that lottery winners are more likely to file for bankruptcy within three to five years compared to the average American. This issue largely stems from spending and giving away an overwhelming amount of money in such a short time span.

The infamous case of Jack Whittaker serves as a great lesson. Whittaker, who won a $314 million Powerball jackpot in 2002, became known for giving much of his winnings to others until he had none left. Whether it was family members, waiters, churches, or a number of other institutions, a bevy of people and places were not free from Whittaker’s generosity.

In considering the possible repercussions of winning the lottery, from handling alienating family matters, deciding how to spend and save the winnings, or even accounting for the possibility of being robbed or murdered, one could reasonably wonder if it is worth even playing the lottery.

For a lot of people, the answer is likely a resounding "no."

One lesson that the lottery can teach a society is the significance of holding vital personal relationships above the value placed on money. Regardless of how much someone might want to buy a fancy new car or go on an exotic vacation, the bonds people can create with others should be of far greater importance than material desires.

Winning a million dollars, for as lovely as it may sound, can put those values to the test.