Over the past few years, I've heard or read a number of stories of lottery winners who, soon after winning the lottery, end up bankrupt, miserable, and with a long list of relationships that were destroyed by the lottery winner's sudden wealth. This sad outcome generally comes about through general ignorance about basic financial management, and the stories often imply, or state outright, that the lottery winner would have been better off if they had never won the lottery at all.
I became curious about this. I had heard the story repeated so many times, I began to wonder just what percentage of lottery winners actually ended up in this category of "broke and/or miserable."
While it's easy to go online and find a bunch of stories about individual lottery winners whose lives have taken a downward spiral, it's more difficult to find hard data on the population of all lottery winners. One study, a 1999 survey of winners of the UK's National Lottery in the previous 5 years asked, among other things, how happy they were. Over half of the respondents (55%) said they were happier now than before they won their money, and almost all of the rest said winning the lottery had not affected their happiness; only 2% said they were less happy. Not only that, but two thirds of the respondents (67%) said that "they had not experienced any negative effects on family life or friendships following their win."
Another article says that "Virginia state lottery officials found in 1999 that of 300 millionaire winners, as many as 60 eventually encountered financial problems." While one might find it incredible that any lottery winner would encounter financial problems, this is still only about 20% of Virginia lottery millionaires; more than you might think, but not a ridiculously high number.
Compare those numbers to this claim from a Connecticut financial adviser that "70 percent of all lottery winners will squander away their winnings in a few years," or this claim from a wealth counselor that "roughly one-third of lottery winners find themselves in serious financial trouble or bankrupt within five years of turning in their lucky numbers." It's not at all clear where these numbers come from.
It would be nice to have some clearer information on lottery winners, but apparently such information is not easy to come by. This post (from the now retired Google Answers feature) indicates that these kinds of data on lottery winners, or even easily accessible lists of lottery winners, are not readily available.
I would love to hear about other studies that offer a more rigorous statistical glimpse into the lives of lottery winners. If anyone is aware of any, please leave some info in the comments.