Skip navigation
Here's Why Lotto Winners Often End Up Bankrupt Ingram Publishing/Thinkstock

Here's Why Lotto Winners Often End Up Bankrupt

Sudden wealth can be a surprisingly fleeting blessing. Advisors can help.

By David Geller


Imagine this: You’re approached by a potential client who’s recently won the lottery (or received another unexpected windfall). He feels like his wildest dreams have come true. After years of struggle, he imagines that all of his problems will disappear overnight.

But in your experience working as a financial advisor, you know the truth is more complicated. You know that bankruptcy rates for lotto winners soar just three to five years after their wins. So how can you help your client avoid that fate? The answer lies in his behavior.


Navigating Uncharted Territory

In the Western world, daily societal messages tell us that happiness means driving a luxury car, wearing designer clothing and living in opulent homes. It’s easy to think that enough money means limitless free time, zero responsibilities and all the happiness in the world. Many people who receive a windfall end up using one of two strategies to reach that goal:

  • Spend a lot of money very quickly.
  • Try to invest it all and make more money.

Those who follow the first strategy spend money on extravagant products and experiences. They might even hire a group of people to handle their day-to-day responsibilities. Those who take the latter route buy into the idea that rich people have access to investments that offer high returns with no risk, falling prey to unscrupulous investment advisors who take advantage of them with high-risk, high-cost investments.

When the excitement of being rich begins to fade, bewildered lottery winners often realize they’re not happy and double down on their initial strategy. Eventually, the money runs out. But this sad outcome isn’t inevitable.

In reality, the components of a life well-lived are intimate and vulnerable relationships, challenging activities that stretch the mind and actions that make a positive difference in the lives of others. Each of these components requires making commitments: to show up, to be present, to work hard, and to tell the truth with wisdom and compassion.

A great life is lived at the intersection of joy and meaning. A comfortable financial lifestyle can help one achieve that goal because it removes the daily stress of paying the mortgage and putting food on the table. It also provides access to things like quality health care, reliable transportation, and fun experiences with family and friends. These needs are a far cry from millions of dollars, and with a smart strategy, lottery winners can meet them without going overboard.


Building the Foundation for Confident Choices

As wealth management advisors, it’s our goal to help our clients make smart choices that lead to a successful future. Using a method we’ve dubbed “behavioral wealth management,” it’s possible to help clients reject long-held cultural beliefs and focus on what really matters to them. In practice, we’ve found the following strategies to be helpful.

• Evaluate existing money messages: We’ve all internalized certain money messages based on our upbringings. Perhaps a client’s parents told him it’s always better to buy than rent. It’s possible that such a message has served the client well so far, but it’s important to point out and evaluate those money messages before making important financial decisions.

That doesn’t mean abandoning principles entirely—just ensuring they align with clients’ values. Eighty-five percent of Americans feel anxious when dealing with money. We want to bring any subconscious feelings to the surface so we can figure out how to remove that anxiety from a client’s financial life.

• Identify multiple opportunities: Smart choices can be made only by considering all of the available information. Expand the definition of wealth by bringing a client’s time, talents, wisdom, relationships, intelligence and physical capacity into the picture. That way, she’ll see her wealth on six metrics instead of just one, allowing her to spot opportunities she might have never noticed otherwise. 

• Create a list of true priorities: It’s one thing to say “no” to the things that don’t matter in life. It’s much harder to turn down things that do matter in order to reserve resources for the things that are most important.

We use one exercise to help clients identify their highest priorities. Together, we create a list of priorities and gradually narrow that list down to the five (or even three) things the client cares about most—whether that’s giving back to the community, leaving a legacy for children or donating to a charity. From there, we can talk about choices that can put the client on a path to reach those goals.

• Embrace emotional responses: Financial outcomes, while important, are just one part of the full picture of a client’s life. We give clients a way to measure options based on our paradigm of a meaningful, joyful life.

To illustrate, let’s say one opportunity would result in higher financial returns but another would bring more joy and fulfillment. It’s important to carefully consider which of those priorities would be most meaningful, rather than automatically opting for the “better” financial choice. Using the same one-to-10 scale psychologists use, clients can determine how much sway they should give certain priorities and make more informed decisions.

Winning the lottery offers an incredible opportunity to improve one’s life. The newfound wealth can help free up time to develop close relationships, explore new challenges and make a difference in the lives of others—all with the peace of mind that one’s family is financially secure. With a wealth management approach that emphasizes the effect of behavioral psychology, it’s possible to help clients establish goals that matter and take steps to create more meaning and joy in their lives.


David Geller is CEO of JOYN, the United States’ first behavioral wealth management firm. Investment advisory services offered through JOYN Advisors Inc., registered investment advisors; insurance offered through JOYN Atlanta Inc.; securities offered through Securian Financial Services Inc., member FINRA/SIPC. JOYN Advisors Inc. and its affiliates are not affiliated with Securian Financial Services Inc.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.