Lottery winners at larger risk for bankruptcy

Last week’s record setting Powerball jackpot had three big winners. The only ones to come forward publicly so far are a couple from Tennessee. The Tennessee Lottery reports that the spouses will walk away with a lump sum cash payment of more than $300 million. While such an incredibly large windfall sounds like a dream come true, in reality many lottery winners eventually end up in a worse financial situation after their big win and many go on to declare bankruptcy.

While the odds of winning the lottery are incredibly small, the odds of blowing through one’s lottery winnings are startlingly high. According to Fortune magazine, 44 percent of large lottery prize winners go broke within five years and one third end up declaring bankruptcy. This is in addition to the other misfortunes that befall many winners such as depression, substance abuse, suicide and divorce.

The biggest downfall for most lottery winners is irresponsible spending. Gigantic mansions, fancy sports cars and expensive art collections are just a few examples of what people spend their lottery winnings on.  Additionally, those who hit it big are often approached by family members, friends and even strangers asking for handouts and donations. They may also be inundated with potential business opportunities, many of which are not sound investments, as well as be contacted by scam artists who convince them to turn over power of the money to them.

It is possible to win the lottery without succumbing to financial ruin, however. Experts advise that big jackpot winners should practice caution and always hire a financial planner and attorney to guide them on what to do with their newfound riches.

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