Friday, March 30, 2012

Will Winning the Lottery Ruin Your Life?

Will Winning the Lottery Ruin Your Life?

Will Winning the Lottery Ruin Your Life?

Posted: 30 Mar 2012 08:14 AM PDT

With a $540 million lottery drawing tonight, we hear lots of stories of lottery winners gone bad.

Everett Collection

There was Jack Whittaker, the West Virginian who won $315 million in 2002. He was robbed at a strip club, and his granddaughter died under strange circumstances. By 2007, he said his bank accounts were largely empty. He told reporters “I wished I'd torn that ticket up.”

Or Evelyn Baseshore of New Jersey who won two payouts totaling more than $5 million in the mid-1980s and was besieged by thieves and hangers on. “Everybody wanted my money," said the former convenience-store manager. "Everybody had their hand out.”

Yet the story of the miserable lottery winner may be more myth than reality.

According to several academic studies, a majority of lottery winners turn out just fine. And some wind up happier, healthier and wealthier.

Consider:

  •  A 2006 study in the Journal of Health Economics of lottery winners in Britain found that the winners "go on eventually to exhibit significantly better psychological health." It also found that improvements in their mental well-being vastly improved.
  • A highly publicized study of Florida lottery winners found that about 1% of the winners went bankrupt in any given year. That's about twice the average rate for the population. But the study only looked at those winning less than $150,000. And those in the study who won six-figure sums were far less likely to go bankrupt.
  •  A study in Britain found that 44%of the earnings earnings of lottery winners were spent after five years, yet only a few blew their winnings in their lifetime. Again this depends largely on the amount won.
  • A study by University of California researchers found that the overall happiness levels of lottery winners spiked up when they won, but settled back down to pre-winning levels after a few months. So if people were generally happy before they won, they would return to natural level of happiness.

The take-away is that sudden wealth only exaggerates your current situation. If you're unhappy, bad with money and surrounded by people you don't trust, money will make those problems worse. If you're fulfilled, careful with money and enjoy a life of strong relationships, the lottery could make those strengths better.

Of course, we all think that we would handle wealth even better than everyone else. But the entertaining media stories of failed lottery winners don’t seem to reflect the more banal reality: most lottery winners turn out OK.

Billionaire Attacks ‘Fast-Buck Culture’ Among Kids

Posted: 29 Mar 2012 09:55 AM PDT

There was a time when wealth creation used to be incremental.

Bloomberg

You started a private company, or took over the family business, and grew it larger one brick at a time. Wealthy families lived off the profits, which also grew incrementally. Wealth creation – and wealth destruction – was a gradual, multi-generational process.

Suddenly, around the mid-1980s, personal fortunes became more sudden and much larger.  Exploding financial markets allowed for IPOs, stock-based pay and rapid stock-fueled business expansions. Globalization and technology fueled the boom.  The result was that a Bill Gates or Mark Zuckerberg could become among the richest men in the world in just a matter of years. (John Rockefeller didn't hit billionaire status until his 50s).

Now, a British entrepreneur says  the U.S. and U.K. need to return to the age of incremental wealth. Too many kids, he said, are seduced by the “fast-buck” fortunes of tech tycoons like Gates, Zuckerberg and Steve Jobs.

Alan Sugar, the British billionaire, entrepreneur and peer (that's “Baron Sugar” to you),  told the Scottish Sun that “Too many youngsters are waiting for the opportunity to become one of them. They don’t realize that it’s a trillion-to-one chance.”

He added that: “What’s been lost in this country is the culture of starting off with £100, buying some bags, printing on them, selling them — and coming back at the end of the day with a useful profit. You do that five times and come back at the end of the week with £1,000. That’s what we’ve lost, that’s what we need to get back."

Sugar is the Donald Trump of Britain's “The Apprentice” TV show, and he said this year's show will go back to basics when it comes to wealth creation.

Of course, Zuckerberg, Gates and Jobs have created massively popular products and changed industries.

Still, Sugar's point is worth repeating at a time when the glamor and ease of quick internet fortunes seems far more attractive to today's debt-laden college grads than making a dollar at a time selling printed bags.

Do you think idolizing Zuckberg and Jobs is harming our youth?
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