The Lottery Changed my Life - Have you watched it?

[Culture]

The learning channel has an interesting show called "The Lottery Changed my Life." It profiles lottery winners, mainly in the US but some overseas.

I realize that show must select winners who 1) are willing to be on TV and 2) make an interesting story. However, if the people on the show are a realistic profile of the population, I cry for America. About 20% seem reasonable in how they approach their good fortune. The rest are clueless. It is like watching a train wreck. Highly recommended, if for no other reason that to understand what you don't want to do with your money.

The most interesting part is people's perception of wealth. You have people who have won $2 to $3M, giving them an effective income of $60-150K/year (depending on your belief about SWR), living like they are making $500K/year. They clearly have no idea about the relationship between "lump sum wealth" and sustainable income. Multiple houses, multiple new cars, funding business start-ups for families, etc. These are the ones who will be back working in a few years.

The show also confirms that you want NO ONE to know you are financial independent.

There are a few "winners" in all senses of the word who are profiled.

 

[avengerki]

I haven't watched it but I am still waiting for my mana from down below. I have this whole strategy already mapped out and when I implement it I won't have to worry about money ever again. Of course the strategy is just a further extension of my FIRE planning with some extra spending and luxuries, that is as long as it meets my minimum requirements otherwise it would just get added to the FIRE pool and sit till I'm ready. And I have been practicing saying "No" for 16 years so I am ready for those unwanted solicitors. If the winnings are big enough I have plans to give each family member a portion and saying don't ask me for anything more I have given you what I feel I can easily part with invest it wisely.

Edit: Of course this is all in my dreams and when I rarely purchase a lottery ticket. I try to avoid gambling at games of chance the money tends to disappear to quickly that way.

 

[Bestwifeever]

It's the lump sum option that does them in, I bet. Hard to handle a big windfall. Of course, there's that schadenfreude about someone else's good fortune going bad. I bet there are way more winners who manage the money well, but they don't make good stories (and probably want to stay out of the public eye).

We saw this story while traveling earlier this month: Binghamton woman hits $1M lottery jackpot | pressconnects.com | Press & Sun-Bulletin

Winner gets $1,000/month for life and she's only 34, so likely will get more than the $1 million minimum.

 

[FANOFJESUS]

I wish it was on hulu. Any place to watch it online free?

 

[MasterBlaster]

If you do a search on winning a million or winning the lottery you'll find millions of posts. Evidently that's the FIRE plan of most people.

Me personally, I feel as if I have already won the lottery.

Nonetleless, If I won the (real) lottery I would spend half of it on fast cars, fast women, and fast times.

and the other half I would just blow.

 

[Dawg52]

The most interesting part is people's perception of wealth. You have people who have won $2 to $3M, giving them an effective income of $60-150K/year (depending on your belief about SWR), living like they are making $500K/year. They clearly have no idea about the relationship between "lump sum wealth" and sustainable income. Multiple houses, multiple new cars, funding business start-ups for families, etc. These are the ones who will be back working in a few years.

Before I retired, a low wage guy who worked in our w/h inherited an unexpected sum of about $40k. He quit. People tried telling him it wouldn't last long, but he didn't listen. Not sure whatever happened to him.

 

[traineeinvestor]

The show also confirms that you want NO ONE to know you are financial independent.

That should be rule #1 for anyone who has a windfall. Keep your mouth shut.

In the event that I ever had a windfall, I would park it in bank deposits or similar for at least 6 months and carry on as usual before making any big decisions. Of course my chances of receiving a windfall would improve significantly if I actually purchased any lottery tickets.

 

[kumquat]

Of course my chances of receiving a windfall would improve significantly if I actually purchased any lottery tickets.

The mathematician in me says "not true", near zero ~= zero.

 

[Culture]

It's the lump sum option that does them in, I bet. Hard to handle a big windfall.

Actually, they profile plenty of annuity winners who borrow against future payments, bankrupting themselves well before the end of the annuity stream.

 

[Culture]

Before I retired, a low wage guy who worked in our w/h inherited an unexpected sum of about $40k. He quit. People tried telling him it wouldn't last long, but he didn't listen. Not sure whatever happened to him.

OK, your guy wins the prize.

 

[Culture]

The mathematician in me says "not true", near zero ~= zero.

You and your calculus-like "facts" .

 

[rescueme]

I was lucky - I won $5M.

Unfortunately, it was paid at $1/year for 5 million years

 

[kumquat]

You and your calculus-like "facts" .

Sorry

 

[Nords]

I realize that show must select winners who 1) are willing to be on TV and 2) make an interesting story. However, if the people on the show are a realistic profile of the population, I cry for America. About 20% seem reasonable in how they approach their good fortune. The rest are clueless. It is like watching a train wreck. Highly recommended, if for no other reason that to understand what you don't want to do with your money.

We see this all the time on HGTV and other "reality" shows-- the real stories have no drama potential, while the drama queens (and the drama kings) have no story. Or at least there are no new lessons to be learned.

I'm sure that TLC's screening crew passes right by anyone who says: "Yeah, we're going to pay off the mortgage, put some aside for the kid's college fund, and split the rest 50/50 between TIPS and Vanguard's Wellesley." Maybe they give the show candidates a multiple-choice quiz with their screen test?

The show also confirms that you want NO ONE to know you are financial independent.

Financial independence is completely different from showing the trappings of wealth is quite another. Spouse and I are living proof that if you drive a 13-year-old beat-up sedan, dress like beach bums, do all sorts of handyman projects, and talk incessantly about your Craigslist finds then people will actually feel sorry for you. You're not financially independent, you're chronically unemployed.

But our real friends-- the ones who spend a lot of time with us-- they "get it".

 

[TooFrugal]

I met someone at a thrift shop who was starting a nonprofit seeded with inheritance money. She had a store opened up and was hiring different kinds of workers. I think her product was selling some kind of salsa like Paul Newman.

I was off work at the time and it seemed like an admirable project so I tried to give her help with her business plan. It soon became apparent that she wouldn't even break even if she annually sold one bottle of salsa to every man, woman and child in the city she was operating in. She just had all of the grandiose plans including a store, employees and delivery trucks when all she inherited was around $80K.

 

[harley]

I had a coworker many years ago who won $1M. He took the $50K/yr for 20 yrs option. He wisely understood he couldn't retire on that (kids near college, suburban DC area lifestyle), so he kept on working, but had a nicer life. His attitude definitely changed, more laid back. I've lost touch over the years, and the 20 years should be over. I wonder what it's like to lose that after so long. Of couse, he should also have been retired for 15 years by now.

 

[Culture]

I had a coworker many years ago who won $1M. He took the $50K/yr for 20 yrs option. He wisely understood he couldn't retire on that (kids near college, suburban DC area lifestyle), so he kept on working, but had a nicer life. His attitude definitely changed, more laid back. I've lost touch over the years, and the 20 years should be over. I wonder what it's like to lose that after so long. Of couse, he should also have been retired for 15 years by now.

This is an interesting point. Many of the profiles are of people with no job skills, who have been living large on an annuity for 20 years without saving, and the gravy train is about to end.

 

[traineeinvestor]

The mathematician in me says "not true", near zero ~= zero.

I stand corrected.

It is often said that lotteries are a tax on people who are bad at maths. The financial behaviour of many of the winners would seem to support that view.

 

[Nords]

I stand corrected.

Stick to your guns! They're focused on the absolutes and you're looking at the relative magnitudes. These are the same kind of people who told Taleb that there was a near zero ~=zero chance of a black swan too.

People who are bad at math probably think that it's easier to win the lottery than it would be to improve at math. The vicious downward toilet spiral continues...

 

[traineeinvestor]

Stick to your guns! They're focused on the absolutes and you're looking at the relative magnitudes. These are the same kind of people who told Taleb that there was a near zero ~=zero chance of a black swan too.

Another debate on how many angels will fit on the head of a pin?

In this case I accept that there is a difference between the absolute magnitude and the relative magnitude, but, IMHO, that difference is not meaningful....unless, of course, you happen to hold the winning ticket.

 

[chris2008]

I know the close to 0 probability of winning - but then, how comes that there are winners at every drawing?

 

[BigNick]

I know the close to 0 probability of winning - but then, how comes that there are winners at every drawing?

That's amusing in the context of the lottery, but it's surprising how many people don't realise that this phenomenon affects their lives every day. When it appears as the Prosecutor's Fallacy, it can have serious consequences.

 

[saluki9]

I disagree that all of the people profiled are train wrecks.

Last night they showed a woman (an MD) who won 17.5m net and only bought a $600K house, 3 college educations for her nieces, and a NYC apt. She also has kept working.

On another episode they profiled a man who won $30M (annuity) who used each years payment to buy an income property. Now with two years left he has a net worth larger than what he won before taxes.

 

[scrabbler1]

I consider my "lottery" win to be the ESOP I cashed out when I left my company nearly 2 years ago. It was worth $300k and I invested it in a high-yield (not junk) bond fund which is funding nearly whole ER income stream.

 

[Sarah in SC]

I am an avid reader of books about these kinds of "sudden money" situations but I've never seen this show. I'll try to look it up next time I'm around a TV.
One book I found fascinating on the subject of annuity buyouts was Edward Ugel's Money for Nothing.
From his website:
Ed met hundreds of lottery winners and saw up-close the often hilarious, sometime sad outcome when great wealth is dropped on ordinary people. Once lottery winners realized their “dream-come-true” multimillion jackpots were not all that they were cracked up to be, Ed's job was to sell them the cash they wanted—and often needed. Winners were rarely in a position to walk the other way. As Ed learned, few of them had the financial savvy to keep up with the lottery-winner lifestyle. In fact, some just wanted their old lives back.