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Unlucky in lottery riches
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"These people believe they are millionaires. They buy into the hype, but most of these people will go to their graves without ever becoming a millionaire," says Wallace, who has been in the business for almost a decade.

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"In New Jersey, they manipulate the reality of the situation to sell more tickets. Each winner takes a picture with a check that becomes a 3-foot by 5-foot stand-up card. The winner is photographed standing next to a beautiful woman and the caption reads, 'New Jersey's newest millionaire.' "

Winning plays a game with your head
Bradley, who wrote "Sudden Money: Managing a Financial Windfall," says winners get into trouble because they fail to address the emotional connection to the windfall.

"There are two sides to money," she says. "The interior side is the psychology of money and the family relationship to money. The exterior side is the tax codes, the money allocation, etc. The goal is to integrate the two. People who can't integrate their interior relationship with money appropriately are more likely to crash and burn.

"Often, they can keep the money and lose family and friends, or lose the money and keep the family and friends -- or even lose the money and lose the family and friends."

Bill Pomeroy, a certified financial planner in Baton Rouge, La., has dealt with a number of lottery winners who went broke.

"Because the winners have a large sum of money, they make the mistake of thinking they know what they're doing. They are willing to plunk down large sums on investments they know nothing about or go in with a partner who may not know how to run a business."

What if you get so (un)lucky?
To offset some bad early-decision making and the inevitable requests of friends, relatives and strangers, Bradley recommends lottery winners start by setting up a "DFZ" -- a decision-free zone.

"Take time out from making any financial decisions," she says. "Do this right away. For some people, it's smart to do it before you even get your hands on the money.

"People who are not used to having money are fragile and vulnerable, and there are plenty of people out there who are willing to prey on that vulnerability -- even friends and family," she cautions. "It's not a time to decide what stocks to buy or jump into a new house purchase or new business venture. It's a time to think things through, sort things out and seek an advisory team to help make those important financial choices."

As an example, Bradley says that on a list of 12 things people who come into a windfall will spend money on, buying a house is at the top of the list, while investing is No. 11. "You really don't want to buy a new house before taking the time to think about what the consequences are," she says. "A lot of people who don't have money don't realize how much it costs to live in a big house -- decorators, furniture, taxes, insurance, even utility costs are greater. People need a reality check before they sign the contract.

Evelyn Adams, the N.J. lottery double-winner, learned these lessons the hard way.

"There are a lot of people out there like me who don't know how to deal with money," laments Adams. "Hey, some people went broke in six months. At least I held on for a few years."

Bankrate.com's corrections policy -- Updated: March 29, 2006
 
 
More stories by Ellen Goodstein
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