Sen. Judd Gregg won 853,000 in the Powerball. Here is the story from CNN.
I should have looked this up earlier. I knew it was a New England Senator!
Assuming this is true, this is an important and often-overlooked point.
People who are chronically poor are usually poor for a reason. The cause is often rooted in irresponsibility (including financial irresponsibility). Poor people play the lottery in disproportionate numbers. Therefore, it should be no surprise that many people who play the lottery end up squandering their winnings away.
Shagnasty: So what did your uncle blow the money on?
Nitpick.
Nope, a US Senator. He bought the ticket down in DC and almost walked out of the store without picking them up.
Also, the true cost of playing the lottery for someone who is poor is much greater than for someone wealthy. Look at the case of Sen Gregg. His wealth is “Gregg has assets between $2,697,000 and $9,430,000,” according to the CNN story. He spent $20.00 on lottery tickets. Clearly, the cost of those tickets to Sen. Gregg is much less than someone who cashes their $300.00 paycheck and buys $20.00 of lottery tickets. In fact, that cost would actually increase if that $300.00 paycheck was cashed at a check cashing place that takes 10% of the check to cash it.
Chris Rock’s riff on the difference between “rich” and “wealthy” is relevant, here. The gist was that “rich” people buy stupid things like gold rims for their toasters, while “wealthy” people buy property. You can’t get rid of “wealth”, but you can lose “rich” after one bad summer and a coke habit.
Bryan Ekers
To continue with Chris Rock’s explanation:
“Shaquille O’Neal is rich. The guy who signs his paycheck is wealthy.”
I think I must be Dutch.
:: glances around at the people on the subway ::
This would explain a few things. 
I would like to read a book describing the experiences of someone whio won the lottery big. It’s next to impossible to google for the information though; all you get is “how to win big!” scam sites.
That’s an interesting tidbit, about the Gentleman from New England (we’re out of touch when out of the country).
In any case, I’ve always considered purchasing lottery tickets, but I always end up chickening out:
[ul]
[li]I make fun of lottery players too often and would feel like a hyprocrite.[/li][li]I don’t know how to play the lottery, and don’t want to hold up the people in line behind me (I detest being in line behind the people that do know how – they slow everything down!). Slips of paper. Little, tiny pencils. Huh?[/li][li]They’re going to ring up my $100 worth of tickets, and tell me I can’t use a credit card or something stupid like that.[/li][li]In all probability, it’s just a waste of good money.[/li][/ul]
On the other hand…
[ul]
[li]Someone eventually wins.[/li][li]It’s not expensive to play at all, unless you’re poor.[/li][li]I piss away money on stupider things like replacing my laptop screen that I carelessly broke![/li][/ul]
This displays an gallingly poor (har) grasp of the underlying causes of poverty, which would be the topic for another thread entirely. Suffice it to say, nearly all people who live below the poverty line are not there because of frivolous spending; rather, they are never in a position to have money to fritter away in the first place. As if a $6/hour job leaves much room for financial irresponsibility, much less elevating oneself out of poverty or even putting food on the table.
The rule of thumb I heard is that if you’re a poor money manager prior to winning the lottery, you’re not going to do well. But if you’re reasonably sensible with money, you might do OK with a lottery windfall. Also, prior to the recent $340 million Powerball drawing, a lottery official suggested that any winner first contact a good lawyer and a good accountant prior to claiming the prize. Of course, the difficulty is finding good advisers.
While it’s a valid point about the cost of lottery tickets being greater for the poor, relatively speaking, I recently heard an interesting piece on public radio pointing out how the benefits of winning are also greater. In other words, the gains for the senator are unlikely to change his lifestyle at all, but winnings can really transform the life of a poor person who wins.
This is why the purchase of lottery tickets by the poor makes sense from an economics perspective. People buy something when they perceive the benefit as greater than the cost.
Sad, though, b/c perception in this case is often not much like reality.
I have known a lot of chronically poor people. All have engaged in irresponsible behaviors, and these behaviors are what made them poor. It is therefore my opinion that most (if not all) chronically poor people are irresponsible.
And you’re right… we shouldn’t be discussing opinions in GQ.
Oh, I’m well aware of that. I just wanted to answer Bluepitbull’s question of how to make that money last. I guess it says something that I don’t buy lottery tickets.
You’re right. You know, I even thought about how to spell it and decided “no, it has to be ‘ple’, because the guy who runs the school is your ‘pal’.”
Here is a story that appeared in the Washington Post Magazine in January about a lottery winner in West Virginia who lost more than the money. (It’s reprinted on that site without attribution or a copyright notice.) It’s a long story, but fascinating and sad. You may want to consider printing it out to read it.
The other thing people commonly don’t realize (or plan for) is that many of the expensive things we like to buy CONTINUE TO COST MONEY. Oh yeah great, you buy a phatty $5M house. Did you consider what the property tax is you’ll be paying on that EVERY YEAR? How about a couple $300,000 Ferraris or Bentleys? That’s gonna cost a lot to insure (and repair)? OK, so neither of these are really THAT expensive on their own, but they do keep costing money even after you’ve layed out the inital investment and can really add up.
There’s a local charity raffle here in town (maybe 1 in 10,000) where every year they give away a $2M house. I’ve often considered that even though I’d love to live in it, if I actually won, I’d have to flip it immediately because I couldn’t affort to pay even the 1st year’s property tax.
The thing that kills me about the lottery is how the big winners almost always decide to take the lump sum payment instead of the 20-year payoff. So they throw away some huge percentage of the cash–a third or more–so they can get it all in their grubby little hands at once. As if you couldn’t possibly live on $5 million a year for the next 20 years. No, you have to take the lump payment of $60 million now. Idiots!
You know it almost always makes more sense to take the lump sum. $60 today is worth more than $5 a year for 20 years.
What you are suggesting is not necessarilly true. If you take the lump sum you can probably find a better annuity than what the lottery commission is paying. You can also use the money to create trusts that will protect the investment from taxes. The lump sum is almost always the better deal except for the undiciplined.