Why Do Lottery Winners Go Broke?

We often think that our feelings should track with our circumstances. If our life is good, we should be happy, right? But life is more complicated than that. Things that seem good from the outside can end up destroying us.  

Just ask Jack Whittaker.

Within a few years of winning $315 million in a West Virginia lottery, he faced hundreds of lawsuits, began drinking heavily, and lost his granddaughter to drugs. He regretted winning, saying, “I wish I’d torn that ticket up.” Or ask Abraham Shakespeare, who won $30 million in a lottery and later told his brother that he would have been better off broke. Shakespeare was later murdered, his body found buried under a slab of concrete.

Whatever it is that lottery winners are searching for, they often go broke before finding it.  According to the CFP Board of Standards, nearly one-third of lottery winners eventually declare bankruptcy. How can someone win millions of dollars and lose it all?

It can be tempting to put the blame on the lottery winners themselves, in part because it makes us feel better about our own decisions. If they went broke because they spent their money recklessly or fell for a scam or made bad investments, we can convince ourselves that we have nothing to fear from their failures. We’re certain that we wouldn’t make the same mistakes, so we won’t suffer the same ill-fated consequences.

But here’s the thing, lottery winners aren’t so different from you and me. And we make a lot of the same mistakes. Here are three lessons about money and happiness that we can all benefit from, no matter how much or how little we have:

Money can’t buy happiness, but it can make you really unhappy if you think that it can.

Happiness doesn’t just depend on how nice our current circumstances are. Happiness depends on a lot of factors: our genes, our actions, and even aging. Another factor that can affect how happy we are is how happy we expect to be. When reality doesn’t match our expectations, we can feel disappointed, even if that reality is objectively pretty good.

If you expect that winning the lottery will give you lasting happiness, you will be disappointed by reality. Once we reach a certain point, more money doesn’t always mean more happiness. In fact, research has revealed, emotional wellbeing doesn’t rise much beyond an annual income of around $75,000.

Contentment is not our default.

Why doesn’t money make us happy? One reason is that we adapt over time to both positive and negative events. A new Porsche might seem awesome at first, but eventually you’ll get used to it. And if you still hold onto the belief that money can buy happiness, you might continue trying to spend your way to happiness. If the Porsche didn’t do it, maybe you need a Ferrari? But what happens when you get the Ferrari and, a week later, you’re back to being as unhappy as you were before?

Of course, most of us probably don’t think the key to our happiness is a Ferrari, but we all face our own version of the problem. The lesson isn’t about wanting a Ferrari; the lesson is in figuring out what the Ferrari is for us.

It’s easy to get stuck on the hedonic treadmill — as we get more money, we often adjust our lifestyle and our expectations. Most of us do this gradually as we get a promotion or a job with better benefits. We might eat at nicer restaurants or travel to more exotic places or buy a bigger house in a better school district. We just keep raising the bar, requiring more and more, to make us happy. It’s easy to become consumed by what we don’t have, and, if we’re not careful, we can make the same mistake of trying to spend our way to happiness.

We’re not wired to be content with where we’re at. Here’s how Daniel Lieberman, professor of biological sciences at Harvard, puts it in his book The Molecule of More: 

From dopamine’s point of view, having things is uninteresting. It’s only getting things that matters. If you live under a bridge, dopamine makes you want a tent. If you live in a tent, dopamine makes you want a house. If you live in the most expensive mansion in the world, dopamine makes you want a castle on the moon. Dopamine has no standard for good, and seeks no finish line. The dopamine circuits in the brain can be stimulated only by the possibility of whatever is shiny and new, never mind how perfect things are at the moment. The dopamine motto is ‘More.’

The world can’t tell you how much is enough.

If we want to be content with where we’re at — whether we’re a teacher or a lawyer or a lottery winner — we have to learn how to say “enough.” And, unfortunately, giant checks from the lottery — or promotions or major accomplishments — don’t come with signs that say, “This is enough.”

If we look to the world to know when is enough, we will never feel like we do. There will always be people with cooler jobs or bigger houses or more accomplished children. There will always be something the world will try to convince us we still need. And as we can see from the unhappy plights of so many lottery winners, if “enough” always means “just a little more than we currently have,” then we’ll always be in trouble, no matter how much money we have. We can spend our whole lives chasing that carrot, but it’s always dangling just a little too far away.