Lottery Winners Beware
Why More Money Does Not Solve Our Problems
Until we learn to manage the money we have by changing our mindset about spending, even winning the lottery will not solve your problems.
Society programs us to spend more when we make more. In the movie National Lampoon’s Christmas Vacation, Clark Griswold represented the mindset of most Americans when he made a down payment on a swimming pool before discovering that his annual bonus was a Jelly-of-the-Month club subscription instead of a fat check. This kind of mindset is dangerous to our financial health. What follows is an object lesson in how not to think about spending.
Former lottery winners, nicknamed the Clampetts to protect their identity, provide a perfect example of what happens when we combine new money with old spending habits.
This couple, in their 60’s, won close to $5 million playing the lottery. This should have allowed them to live in comfort for the rest of their lives. Instead, they launched a spending spree with their newfound wealth, buying houses for themselves and their daughter. Next, they purchased a round of Cadillacs for themselves, family, and friends. The fun was just beginning, however, as they soon installed an in-ground swimming pool and redecorated their new digs.
Inside the house, the furniture and décor from their trailer park days would certainly not match their newfound slice of the American dream.
A constant stream of deliveries outfitted their three-bedroom ranch, including gold-trimmed mirrors and a pair of purple recliners. Mrs. Clampett bought herself a wardrobe of muumuus for lounging poolside. At Christmas, their yard dazzled with an array of inflatable decorations.
In lieu of a reputable wealth advisor, Mr. Clampett sought the advice of a guy down at the VFW, where he was a member. It seems the gentleman advised him to follow the “You Only Live Once” spending strategy. If they had hired an experienced professional, the couple could have received guidance on realistic spending decisions to make their money last.
Alas, they outlived their lottery party. Their money ran out. The stream of deliveries ground to a halt. The holiday decorations deflated. Strapped for cash, the Clampetts took out a $300,000 loan against the house, during their last years, to support themselves.
The Clampetts died in debt. The bank kept the house because the estate had nothing left to pay off the loan except flashy furnishings and depreciated Cadillacs.
Instead of taking the time to plan how to use their funds so they could enjoy life and make their money last, they focused on what they could buy. The Clampetts bought into all the marketing campaigns that have plagued our airwaves for decades. They believed they needed the right things to show that they were living the American Dream.
If you think about it, did the Clampetts act differently with their sudden infusion of cash than we might act with a bonus or raise? Instead of saving and investing the funds we have thus far survived without, we plan for the new car, the house in our dream neighborhood, the celebratory new shoes. Our thoughts always turn to our wish list, which has grown far more expensive since we fit on Santa’s lap. The “lifestyle creep” from spending every salary increase prevents us from pursuing our passions because we are too busy running on that hamster wheel. We must figure out what we really want out of life before we spend too many of those bonuses and raises on items that only depreciate in our closets.
Learning about values and goal setting will help us to use our money for the life we really want—instead of the life the marketers tell us we should have. By defining our top three values, we develop our compass to remain true to ourselves and how we define wealthy. The flexibility that increased savings gives us can bring more joy than that new car.