Full disclosure: I plead guilty to the sin of sometimes playing the lottery. I figure it is a dollar’s worth of entertainment just to take a couple of minutes and daydream what I would do if a pink square of paper suddenly translated into millions of dollars.
Fortunately, Richmond, Ky., author Don McNay takes a more serious approach to the lottery in his book, “Life Lessons from the Lottery: Protecting Your Money in a Scary World.” McNay, a financial consultant and author of several best-selling books on finance, chooses to look at the lottery as an opportunity for understanding money — both how to make it and hold onto it.
The result is an insightful, helpful guidebook that explores both the conscious and subconscious relationships people have to money.
McNay could have begun the book with an exploration of why people play the lottery. His probing is more vital as he begins with a question that should be asked by everyone, lottery winner or not: Why do people run through money, even large sums, quickly?
Be it a lottery, inheritance or salary bonus, people often end up doing stupid things with their money, McNay says. This seems to apply not only to lottery winners but also highly paid sports stars, wealthy business people and nearly everyone else. The National Endowment for Financial Education reports that 70 percent of those who receive a lump sum from any source run through it in a few years.
Universally, McNay says, people have a problem holding onto money, particularly when received in large sums.
He compares this to how high-fructose corn syrup in food can lead to obesity. Fructose, he says, hits the body too fast for people to process it. Money, particularly big money all at once, can be overwhelming as well.
In 30 years of experience in working with injury victims, lottery winners, those who have received inheritances and others impacted by “high-fructose” influxes of cash, McNay concludes there are five reasons why people blow through money.
The first comes from those nearest and dearest — friends and family. People try to buy love, McNay says. He quotes Will Rogers in this context, “They are spending money they don’t have to impress people they don’t know.”
A lack of knowledge, bad advice or simply bad habits is the second reason. People with poor money management skills will not suddenly be “cured” if they come into money.
McNay notes that taking money in a lump sum instead of over time is a common mistake. From his experience he has found that people run though a lump sum quickly and are then broke.
The fourth reason is impulsive decisions. People don’t think before they spend.
Not having a purpose for their money is the final reason people lose it.
Having explored why people cannot hold onto money, “Life Lessons from the Lottery” moves into territory usually not explored in personal finance books. The author encourages “taking a deep look into your soul, finding out what you are looking for in life and using the money you have to get you there.”
The remainder of the book is divided into five sections, counterpointing the five reasons people can’t hold onto money. Each section discusses one of the insights that experience with lottery winners has provided McNay and that he shares with clients.
In summary, the five things to do when you win the lottery:
1. Tell as few people as possible (preferably no one) that you won. “Once you have told the world that you received money that you never expected to have, everyone has their hand out, and you are not prepared for it,” McNay said.
2. Work with a financial advisor who works with more money than you have. Hire an expert, not a friend, preferably someone who has worked with tax, estate and planning issues.
3. Take the money in annual payments instead of the lump sum. This allows you to make adjustments as the money comes in over time.
4. Take a deep breath and make some good, long-term decisions. Lotteries often allow you to take months or even a year to cash a winning ticket. Take time to plan your strategy.
5. Give back to society. It is a proven fact that people who use their wealth to make an impact on society are happier than those who don’t.
McNay says he has one goal for any person he deals with: making sure that their money brings them happiness. This is definitely my plan if I win the lottery — but don’t expect to hear anything about it. I’ll be happily — and quietly — following McNay’s rules.