Rich and unhappy: the curse of lottery winners
Time is money
When we think of winning the lottery, what we picture is abundance of money. Our attention is instinctively drawn to the money part of it, but to see the similarities with retiring early, we should focus on the abundance bit instead: what is early retirement if not abundance of time? From this perspective, the two scenarios are much more similar, in that they lead to the same question: what are we going to do with all this money (time)?
This is a difficult question, and it doesn’t look like many lottery winners have got this right. If anything, there is evidence of the opposite: lots of the ones who won big ended up broke or depressed!
Some of the lottery winners who lost it all
Jack Whittaker. In 2002 he won the Powerball jackpot, worth $314.9m (he got around $90m after tax). He was already wealthy at the time – a fortune of around $17m he had made himself from scratch – so you would expect him to be able to cope with large amounts of money. But that wasn’t the case. In the end he said “I think if you have something, there’s always someone else that wants it. I wish I’d torn that ticket up.” More Info
Curtis Sharp. Won a $5m jackpot in 1982. Contrary to Whittaker, he was rather poor when he won, so one you could expect would be careful with his money. Nope. He immediately started spending all his new money on parties, cars, women, houses. He developed a drinking habit and in a few years run out of money. After a drunk-driving incident he decided to become a priest. More Info
William ‘Bud’ Post. In 1988, he won $16.2m. He opted for yearly payments, of around $500,000, but due to his extreme expenses, in just two years he was already around half a million dollars in debt. His brother tried to have him killed to get his money as inheritance. His former girlfriend sued him and was awarded 1/3rd of the winnings. After a series of legal issues – one of them, a conviction for firing a shotgun at someone who was coming to his house to collect a debt – he run out of money and survived on food stamps until his death, in 2006. More Info
Willie Seeley. Together with 15 of his colleagues (a group called the ‘Oceans 16’), Seeley won a Powerball jackpot in 2013. His slice was $4m. He announced the winning on television, and almost immediately his life changed as reporters, relatives and complete strangers started following him and his wife. He found it impossible to relax, and even bought a rifle “for protection”. His advice to a fellow winner a few years later was: “Just disappear. Get lost while you still can.” More Info
Abraham Shakespeare. Won $30m ($17m after tax) in 2006. He was generous with his money, but had so many requests for money that he said “I’d have been better off broke. I thought all these people were my friends, but then I realised all they want is just money.”
In 2008 he met a woman, Dee Dee Moore, who purportedly wanted to write a book about him. Soon after though, she managed to steal some of his money and in 2009 ended up killing him. More Info
Billy Bob Harrell. Won $31m at the Texas Lottery in 1997. Similar to Abraham Shakespeare, he was generous with his winnings, but received a constant stream of requests for money. “We had to change our phone number about seven times”, said his son Ben. He divorced his wife, and ended up killing himself just two years after the lottery win. More Info
Jeffrey Dampier Jr. Won $20m in 1996. He used the money to move to another city and start a business. He spent quite a lot of money to buy cars, apartments and holidays for his wife’s family, but that apparently wasn’t enough: he was murdered in 2005 by his sister-in-law, who wanted to steal his money. More Info
Luke Pittard. Won £1.3m in 2006. After an initial ‘spending’ phase, he went back to work at McDonald’s. He and his wife didn’t run out of money though – they simply realised “there’s more to life than money”.
Vivian Nichols. Won £152k in 1961 (around £3.3m in today’s money). She famously promised to ‘Spend, spend, spend”, and she managed to do it: all the money was gone in around 3 years. Her husband died in a car crash in 1965, after which she declared bankruptcy, and struggled with alcohol and depression.
Having read all these stories (there are more, just google it!) one should feel scared of winning the lottery!
No one can think long term
You know those chats with friends, “what would you do if you won the lottery?”? Every time we have one, I’m the only one who openly says that I’d be scared to win lots of money. I would love for it to happen, of course, but I would feel a lot of pressure to use the money wisely.
My friends usually dismiss my concerns with jokes along the lines of “Don’t worry! If you ever win the lottery, give us the money, we’ll know what to do with it!…”.
However, when I ask them to elaborate on that, very few go past the ‘usual’ things. Buy a big house. Give something to friends/family. Travel.
All these ideas are good, obviously, but I’m always surprised by how short-term they are. Their longevity is, what, 1-2 years? What happens after that? This is what almost nobody is able to answer. And it seems to be the problem many lottery winners have: after the initial elation (and related trips, parties, sport cars, silly purchases, etc.), many of them don’t know what to do next.
Why are lottery winners not (super) happy?
A classic 1978 study compared 22 lottery winners with 22 non-winners and 29 people who were paralysed in accidents.
As expected, the lottery winners reported being happier than the people with paraplegia or quadriplegia — a 4 out of 5 versus a 2.96 out of 5. Perhaps more surprisingly, the non-winners averaged 3.82 out of 5, not significantly different from the winners. In particular, lottery winners reported getting the least enjoyment from (usually) pleasurable aspects of everyday life, simple things like eating breakfast or talking with a friend.
According to the study, winning the lottery didn’t increase happiness as much as others thought it would, and a catastrophic accident didn’t make people as unhappy as one might expect.
A 2008 study of Dutch lottery winners (with a much higher sample: around 2000 observations) reported similar findings.
The concept at play here is called hedonic adaptation. People have been shown to go back to a sort of set point of happiness after events that we assume will have a big effect on how we feel.
So what can go wrong with lottery winners, and what can we learn from them?
Lottery Winners problem #1: They mismanage their winnings
Many lottery winners have no experience managing such large amounts of money. Research actually suggests that the typical lottery player is not wealthy to begin with. The bigger the difference between what they had before and after winning the lottery, the more the potential problems.
Could you mismanage your time in early retirement?
The sudden amount of ‘free’ time experienced by early retirees can be very unsettling. It is important to give structure to the days, even if this requires a bit of effort. In my case, for example, my temptation would be to lay in bed in the morning and have a very slow start of the day. However, I know that if I don’t do anything ‘productive’ before 11am, I will have the feeling my day was kind of wasted. So despite my inclination to sleep and staying in bed in the morning, I’ll set the alarm (almost as if I had to go to work! Can you believe it?) and will make the effort to get up early.
Lottery Winners problem #2: They expect it to make them a lot happier
After a big windfall, it is normal for expectations to raise one (or two!) levels.
Sooner or later though, the joy of winning the lottery wears off. New experiences and pleasures unlocked by the new wealth continue to ‘raise the bar’ that new experiences have to reach to generate the same level of pleasure. So, all new pleasures will be experienced in a less intense way. This is fairly intuitive, if you think about it: if you go to Michelin starred restaurants every day for 3 months, the next restaurant you go to must be pretty spectacular to live up to the expectations! At this point many winners decide to throw more money at it (maybe ordering the most expensive wine on the list in the hope it will provide that extra kick) which backfires as it ends up raising that bar even more. After a while, any new experience will add very little to their general level of happiness, which goes back to whatever level it was on at the onset.
How do you keep expectations in check in early retirement?
As aspiring early retirees, we all probably have a mile-long to-do list. Unfortunately, especially at the beginning, the temptation can be to do too much. If you dedicate too little time to too many activities, you simply won’t have enough time to become good at anything. This leads to dissatisfaction, and to fight it one may be tempted to sign up to even more activities, in the hope one of them would be the holy grail, which generates a vicious circle of dissatisfaction.
By all means, do try new things! But give yourself the time to learn and enjoy it, instead of hopping from one activity to another just because during the first session you haven’t fallen in love with it!
Lottery Winners problem #3: They fall out with family and friends.
The amount of greed and resentment experienced by lottery winners is astonishing. It looks like as soon as they make people aware of their new wealth, there is a rush to take a slice of it. Long lost relatives resurface; friends start making requests; family members question why they weren’t given more. Also, winners start feeling there is an expectation that they will pay for everything (meals, trips etc.) because, you know, they’re rich.
Soon, they are not able to recognise the real friends, and can’t trust anyone.
It’s no surprise the typical recommendation to lottery winners is to avoid telling anyone. Apparently Camelot (the company which runs the UK national lottery) has a team of people who visits lottery winners after a big jackpot win, and one of the first suggestions they give them is to disappear for a few days. They book them in a hotel a few hundred miles away from home, so that the news can sink in without external pressures or temptations to tell anyone.
You’ve retired early. Do you tell friends and family?
Early retirees face a similar scenario when they start telling around they have retired. Although a few people around them will be supportive, the likelihood is that quite a few will be aggressive, envious, or generally intrusive. Lots of questions (and assumptions) will follow. How it is possible you retired young? You must be rich then! How much do you have? The same people who wouldn’t give a monkey about your job, will start being very interested in all your choices when you don’t have one anymore.
Moreover, there is an assumption that your time is less valuable than theirs. ‘Do you mind coming my way for lunch? You’ve got time…“.
Just like lottery winners, a better strategy would be to avoid telling people you are retired. Pretend you work from home, and spare yourself lots of useless and annoying conversations!
Being rich, in itself, is not a measure of success. It doesn’t automatically make you a better person, or make you enjoy life more.
It’s how you use this new found wealth (or, in our case, time) that is key to fulfilment and happiness. In fact, Research shows that having purpose has positive impact on life – including remaining healthier and stronger.
How will you make sure you don’t run into these problems in early retirement?
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