Recently I was given a Lotto ticket in a card, and I find myself also buying them as gifts for other people. This caused me to ponder the question.. “Does winning the lottery (or inheriting a lot of money) really make people happy?”
Whilst people think that having plenty of money would solve all of their problems, it can also create new problems.
If you are currently struggling financially and have never had a lot of money, suddenly having money can actually make you feel uncomfortable. If you are unable to manage your current finances then having more money, just gives you the opportunity to make a bigger mess of the task. That might sound depressing, but it’s also a fact that people often end up worse off after winning the lottery than they were beforehand. Those who are used to having no money will get rid of the money as quickly as possible, whether they realise that they are doing it or not.
Everybody will have their hands out. People will come out of the woodwork all around you and want a piece of your newfound wealth. Winning the lottery has ruined many friendships and families. Some people have even said that they wished they hadn’t won.
Things that you buy will only make you feel good temporarily and then they just become part of your ‘stuff’. This is true whether you have won the lottery or not.
If your lifestyle changes hugely due to your buying power, you’ll find the people you mix with will also change. You’ll be living a more expensive lifestyle than your current friends can keep up with, but you won’t be accepted into the truly wealthy group because you haven’t earnt your wealth. Just having money doesn’t mean that you’ll belong with those who have made their money through growing companies. Self-made wealthy have different life experiences to those who win their wealth. If your bank balance is the only thing you have in common with your new acquaintances, that won’t be enough as the basis for a friendship. The truly wealthy have most likely had different life experiences to get to where they are, and they may not be living as high a life as you imagine, even if they can afford to. See The Millionaire Next Door.
So, does this mean that I don’t want people to buy me Lotto tickets? Absolutely not! Like many people I suppose, I believe that I have a well-considered plan for any future winnings and I honestly don’t think that anyone would notice if I won Lotto. I might buy a nice car that I’ve had my eye on, but it would still be ‘used’, not ‘new’, and our planned future trips would be in business class, but the destinations would be the same, and our house would stay the same.
What should you do if you win the lottery?
- Don’t tell anyone!
- Leave the money in the bank for a bit until you get used to the idea, don’t rush out and do anything crazy. You can go out to dinner to celebrate though.
- If you have no idea what to do, you could speak to a financial advisor, but make sure that they are independent and not trying to sell you certain products for a commission. If you are doing relatively well financially, then all that will change is the size of the numbers that you’re dealing with. You may not need a financial advisor if you are already sensible with your money.
- See if you can keep enough of the capital to generate an income in interest to support you indefinitely. If you spend the capital then the money won’t last you very long. If you keep the capital and only spend the interest, then you may not need to worry about money ever again. Do be aware though that the first division Lotto prize here in New Zealand is not going to set you up for life if you just put it in the bank. The prize has been one million New Zealand dollars since the 1980s when one million dollars had much greater buying power than it does today. Then there’s a good chance that you’ll have to share the first division prize with others who have the same winning numbers, so you could end up with as little as $250,000 if 4 people have the same numbers. That’s not to be sniffed at, but in Auckland particularly, it’s not going to go very far if you were wanting to, for example, buy a house!
Interest rates for bank deposits in New Zealand are low, so your Lotto winnings may not even generate enough interest to replace the income from your job.
Don’t pin your hopes on winning Lotto. Planning to create wealth is a much better idea!