There was one winner in the Mega Millions lottery that gained nationwide attention.  The winning ticket was sold in South Carolina and is worth over $1.5 billion. If the winner decides to take a lump sum, it will still be worth $877.8 million.

The government – in this case, at multiple levels – will get its take.  Of course, the lottery itself is sort of like a voluntary tax, so the state makes out quite well with it.

The top income tax rate in South Carolina is at 7%.  The U.S. federal rate is 37%.  So when all is said and done, nearly half of the payout will go to government at some level.

We don’t know yet whether the winning ticket was bought by one individual person, or whether it was bought by a group of people.  It is common to have office pools.  With this jackpot, even if it were split 20 ways, the winners would be making out really well.

Or so we think.

I heard a statistic that one-third of lottery winners end up in bankruptcy.  I’m not sure what qualifies as a lottery winner. There is a big difference between winning $100,000 versus $5 million.  Also, there are many lottery winners who don’t actually file for bankruptcy, but end up near broke.

The lottery really is like a tax on the poor and those who tend not to be future oriented.  I think it is ok to play to dream a little, but I find that most people dream a little too much, while taking too little action in their lives.  Going to a convenience store and buying lottery tickets is not taking action. It is gambling with extremely low odds.

Before the last two drawings of this mega jackpot, I was asked if I was going to buy a lottery ticket, or if I wanted in on a group pool.  I don’t mean to be a party pooper, but I really didn’t want to play. I responded to someone that I really didn’t want to win that much money.  It really does ruin lives.  Either you hand out money to everyone who comes knocking on your door, or you keep your money really tight and probably ruin some relationships. When someone wins the lottery, you really hope that they already have a good set of friends in place.

The other thing that has puzzled me for a long time (I actually remember commenting on this when I was an older child) is why suddenly everyone feels compelled to play the lottery when the jackpot gets up so high.  What, was the $5 million jackpot last week not good enough for you?

I suppose it could make sense for a large group of people playing.  If you have 20 people in a group and you win $3 million total, that is “only” $150,000 each.

I don’t play the lottery and haven’t for quite a while.  I did participate in an office pool a long time ago for a few dollars per week. But if I did play the lottery, I would rather buy a ticket for a scratch-off or for my state’s lottery where you win at least $3 million.  The odds are far better than the Mega Millions because you don’t have to pick a powerball.  I’ll take the better odds and the lower payout.  For me, $3 million would be life changing.  Even if it were $1 million after taxes, that would still be quite significant (although not enough to retire forever, even though I wouldn’t retire anyway).

You Can’t Handle the Money

With great power comes great responsibility.  When you win, say, $500 million, that gives you great power.  You have to be quite responsible.

One of my most popular posts ever on this blog was about the television show My Lottery Dream Home.  I observed that some lottery winners were spending a good chunk of their fortune on buying a house.  It was bad decision making, at least from what I could observe.  You never know for sure if someone already had a lot of money, but it was doubtful in the cases that I saw.  If you are living in a small rundown place and then are all of a sudden buying a mansion, you probably didn’t have much money before winning the lottery.

I have continued to watch that show on several occasions, and I have seen the decision making get better.  I have seen people win multi-millions and then look for houses in a range of less than $500,000. I have seen some really conservative people even looking at houses in the $200,000 or less range.

If you ask people their number one reason for wanting to win the lottery, I think the number one answer by far is that they want to quit their job.  In other words, they want more freedom with their time, and this money could buy them their freedom.  Yet, curiously, some people go out and start buying stuff with it.

If you win $5 million and then buy a $1 million house (and all of the major expenses that come with it), then you are losing your financial freedom.  The rest of the money will likely disappear within a few years time.

This usually happens to people who were already poor, which happens to be a lot of the lottery winners.  If someone was already accustomed to making money and saving money, then that person is going to be more responsible with it and know how to handle it better.

I said that I wouldn’t want to win the jackpot that will probably be about $500 million after payout and taxes.  But if I started a business and grew it into a huge successful business that sold for $500 million, then I wouldn’t have any issue with it.  My name wouldn’t be plastered everywhere. My friends and family would have already known that was my line of work.  It isn’t like working an office job for a middle class salary and then all of a sudden quitting the next day because you struck it rich.

If you do happen to strike it rich with the lottery or some other way, such as an inheritance, my best advice is to find some continuity and grounding.  Maybe it is best not to quit your job right away. It is best not to move right away, unless you are in really miserable living conditions.  Take things slow and be methodical with where your money goes.  And don’t make any promises to anyone.  If you want to help out any friends or family members, then don’t tell them. Once you have decided you want to help and the amount you want to give after careful thought, then can just do it.

There will be a tendency to treat the money with less respect because you didn’t really earn it or have to work for it.  You just bought a lottery ticket.  This would be a mistake.  And if you can’t avoid feeling this way, then you are better off giving it all away so that it doesn’t ruin your life.

If you really can’t stand your job, then I think you should still find work that is meaningful to you.  As human beings, I think it is best when we are productive, at least to a certain extent.  It is good to have goals.  Sometimes it is good to have a routine.  This will give you grounding.