The Powerball jackpot dream – why lottery winners often lose it all


It’s the problem everyone thinks they want to have – until they actually do.

A record-breaking $150 million Powerball jackpot for Australia will be drawn this week, with millions of adults vying to get a piece of the life-changing prize money.

If you listen quietly, you can hear people in office buildings around the country dreaming of what they’d do with the cash windfall. But for the lucky few, sometimes the reality doesn’t quite match the dream.

There are a number of cautionary tales of winners who have won the big one only to lose it all in dramatic fashion, leaving a trail of personal destruction in their wake.

Why do lottery winners go broke?

If you want to get academic about it, it’s called Sudden Wealth Syndrome and is described as the distress that afflicts individuals who suddenly come into large sums of money.

The term was coined by US psychologist Dr Stephen Goldbart and is characterised by potential anxiety, guilt and a sense of isolation that can come with a sudden influx of wealth.

According to Dr Golbart, sufferers can become overwhelmed, grow suspicious of people around them, and make poor decisions such as overspending or lending money to family and friends causing strain on relationships.

At least anecdotally, there is no shortage of cases that demonstrate the idea playing out in real life.

In 2003, British teenager Callie Rogers won the equivalent of $3.3 million at the tender age of 16. Just years later she claims the ostensibly lucky event had “ruined” her life.

Callie Rogers was the youngest lottery winner when she cleaned up. Source: PA

Adrian Bayford, 41, and wife Gillian, 40, were over the moon when they won more than $260 million in 2012. But it didn't take log before they were divorced and went on to have a number of tumultuous relationships that went bad and were widely reported on by the British press, as misery seemed to follow the couple after the massive windfall.

Garbage man Mickey Carroll’s lottery dream turned into a nightmare after he won $15 million in 2002 and spent much of it on wild parties filled with cocaine, gambling and hookers. Carroll claimed in his autobiography he was also blackmailed out of more than $200,000 by criminals who threatened his family.

And then there is the rather sensational case of Californian man James Allen Hayes who took out the top $US19 million prize in the SuperLotto jackpot in the late 1990s.

The 35-year-old security guard’s life changed dramatically but within a decade he was a bankrupt drug addict who turned to robbing banks to maintain his lavish lifestyle. He was sentenced to 33 years in jail last year after the FBI finally caught up with him.

And the list goes on, as there are many other stories of lottery winners who saw their lives unravel after the big win.

In each heist, the robber slipped a note to the teller demanding cash and threatening to shoot if they did not comply. Source: Supplied

‘It can come with a lot of anxiety’

Anne Graham is CEO and Senior Financial Advisor at Story Wealth Management and says a sudden influx of wealth can be difficult for people to handle.

“We haven’t had a lot of lotto winners but we do work with people who have inherited significant amounts of money they weren’t expecting it,” she explained.

“It can come with a lot of anxiety and a sense of it being a burden on how to manage it well and not waste it.”

The excitement of the incoming money means it’s easy for people to get carried away and ultimately make decisions they may come to regret, she told Yahoo News Australia.

“Others tend to be very generous and want to help family and friends. What they tend to do is spend it ten times over. There’s a lot of zeroes on this money but they think it can go further than it actually can,” she said.

The myths around lottery winners

While the stories about lottery winners crashing and burning are great fodder for news headlines, there’s plenty of winners who go on to live lives of quiet prosperity.

Despite the popular myth (fuelled by some real world examples) there is no real evidence to suggest that married couples who win the lottery are more likely to get divorced.

And given the fact that financial stress is often cited as a common cause of divorce, it’s more likely that a financial windfall can keep a moderately happy home together.

Adrian Bayford and wife Gillian won millions, but then it all went pear-shaped. Source: EPA

Most people think if they won the lottery, they’d march right up to their boss and quit their job but that is rarely the case.

“They’ll update things for their lifestyle like a new car, tick some things off the bucket list, or help out the kids with a home deposit,” Ms Graham said. “But they tend to only quit their job if they really hate it.

“On the whole, they don’t make massive changes to their lifestyle ... Part of that is the freedom of knowing they’ve got options.”

Earlier this year, a Sydney mother who works in healthcare won the entire $100 million Powerball jackpot and said she won’t be giving up her work.

Studies conducted in the US and Sweden found a majority of people stay in their jobs. A 2004 study found that 85.5 per cent of American winners continued to work after winning the lottery - with 63 per cent working for the same employer.

The health paradox of a sudden cash injection

There is little evidence that winning the lottery will improve your long-term happiness. After the initial excitement wears off and the new car gets a few months’ old, people’s reported levels of happiness more or less return to past levels.

But research does suggest your health could even take a hit after winning the lottery, according to Melbourne University psychologist Nick Haslam.

“There is some evidence that, at least in the short to medium term, it leads to improved subjective wellbeing,” he told Yahoo News Australia. “But these things don’t last very long.”

“When you fantasise about winning the lottery you might imagine living happily ever after but people underestimate how quickly they return to their baseline happiness.”

He pointed to a 2015 study titled: Winning big but feeling no better? The effect of lottery prizes on physical and mental health. The study found that “positive income shocks have no significant effect on self-assessed overall health.”

While lottery winners reported a boost in mental health - presumably due to the alleviation of all money-related stresses - the windfall tended to have a deleterious affect on physical health, meaning that overall health did not improve following the lottery win.

“Lottery winnings are also associated with more smoking and social drinking. General health will reflect both mental health and the effect of these behaviours and so may not improve following a positive income shock,” the study said.

British Lottery winner Michael Carroll has become somewhat of a poster child for "unlucky" lottery winners. Source: Getty

What you should do if you win the lottery

If you have bought a ticket in this week’s Powerball draw, and come Thursday night are lucky enough to come face-to-face with Sudden Wealth Syndrome, there’s probably some things worth considering.

It’s worth seeking professional advice on how best to manage the windfall.

“One reason is where to put it, in terms of the portfolio,” Ms Graham said. “And how do you manage the cashflow.”

Strategic decisions about whether to put it in a family trust, or into superannuation, or to give it away, all carry various benefits and tax implications that most ordinary citizens won’t be across.

But her main advice, is to buy the car or items you want and park the money for at least a few months and think about what you want to do with it.

What ever you do, don’t become another cautionary tale.

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