Strange but true: an extra-big lottery prize means you've got an extra-big chance of going bankrupt.
That's the implication of a paper published in 2010 by researchers at Vanderbilt University, the University of Kentucky and the University of Pittsburgh. The authors looked at lottery winners as separated into two groups: those who won sizable cash prizes (between $50,000 and $150,000) and those who won more modest prizes of $10,000 or less. They found that five years after the fact, the big winners were the ones more likely to have filed for bankruptcy.
We're bringing this up today, of course, because America went crazy for lottery tickets this week, buying up so many entries in the Mega Millions drawing that the jackpot soared to a record-smashing $640 million. That number could get higher still: if a winner isn't picked Friday night, according to The Boston Globe, the pot will climb to an estimated $975 million.
It's tempting stuff -- especially at a moment when half of all Americans earn less than $27,000 a year, and more and more people can't afford the basics. But this paper -- plus a wealth of additional evidence, anecdotal and otherwise -- suggests that winning the lottery may not be the best thing that could happen to you.
The researchers, led by Mark Hoekstra of the University of Pittsburgh, found that five years down the line, there were almost no meaningful differences between the big lottery winners and the small. The two groups had comparable assets and debts. But there was one big distinction -- the big winners were more likely to have gone bankrupt, for the simple reason that, as the authors put it, they had "consumed their winnings."
The study notes that the researchers controlled for the financial health of the lottery winners -- meaning that before they actually won, the big winners were no more or less likely to file for bankruptcy than the small winners were. So the risk of bankruptcy seems to have been directly linked to the size of the prize.
Obviously, $150,000 is a sum on a totally different scale from $640 million -- or even $324 million, after taxes. So whoever takes home the Mega Millions cash may not have exactly the same experience as the people in the study.
Still, recent history is thick with examples of people who struck gold in the lottery and saw their lives take a sharp turn for the worse. Business Insider has a collection of numerous grim cases, including people who lost their money to gambling or drug addiction, and one Pennsylvania man whose brother tried to have him killed in the hopes of inheriting a share of the cash. And Jen Doll at the Atlantic Wire offers an even more comprehensive primer, including people whose lottery wins prefaced social ostracization, destitution, suicide and other tragic outcomes.
You won Mega Millions? Congratulations! Now don't go broke ...
Record $540M jackpot sparks Mega Millions mania - CBS News
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The Huffington Post | By Alexander Eichler Posted: 03/30/2012 4:49 pm Updated: 03/30/2012 4:59 pm