All too often, lottery winners struggle to manage their winnings and stay financially afloat despite their stroke of luck — and for the rest of us, it just seems unfathomable that you could blow through so much money so quickly. But to be fair, the majority of American households aren’t perfect when it comes to managing debt and keeping lines of credit as low as possible; in fact, it’s estimated that around 40% of all American homes typically spend more than they bring in each year.
Add that tendency of overspending to the instant reward of thousands of dollars, and it’s easy to see how someone could be so enthused by their lottery winnings that they start spending and making rash decisions. without really planning for the future.
It’s actually pretty common for lottery winners to go bankrupt — some estimates state that around 70% of lottery winners end up broke, sometimes in just a few years after collecting their lottery payments. In most cases, these people are the ones who choose to receive lottery winnings in a lump sum rather than in a lottery annuity settlement; moreover, these people don’t really know the best way to handle such a large amount of money all at once.
An annuity may be the better option for anyone who isn’t too skillful when it comes to financial management, but annuities come with their own set of problems. For starters, these types of lottery payments will be given out over a long period of time and may not be enough for the recipient if he or she is using that money as a source of income. Annuity payments can only be withdrawn in full if the person is willing to take a substantial cut to the total amount, since early withdrawal fees are pretty steep and don’t include all of the additional taxes that the person will have to pay, too.
So is winning the lottery really worth all the fuss? Well, there’s no doubt that it’s definitely exciting and can give you a chance to pay off bills, take a vacation, or find a new career that you really enjoy. But as long as you’re careful about planning and managing your lottery payments, it’s not that hard to do!