With the recent huge Powerball winning balance I was talking to a client regarding the bankruptcy rate of lottery winners. She was aware of the statistics but could not understand the concept.
I had to ask her out of the twenty employees in the office, who were financially savvy? Who had a tax professional assist with their tax preparation? How many had a relationship with a financial advisor? How many contributed to the 403B? Who wasn’t living paycheck to paycheck? Now give one on them a huge fortune, what do you expect to happen?
This is the beginning of a financial disaster. Not having a relationship with certain professionals, how do you develop the necessary level of trust when you need help immediately and people are crawling out of the woodwork with their hand out?
Also, how many have the mental control not to go crazy with a spending and gifting spree? In an earlier blog entry I have my recommendations on how to deal with lottery winnings.
But without the necessary help and guidance, it would be easy for the winners to get in over their heads and lose everything.