You’ve heard of lottery winners who regret it. The guy who won $23 million but later declared he was happier when he was broke. The $450 million Powerball winner who later wished he had torn his ticket up. The woman who got $9 million after splitting winnings with coworkers and said people she loved were “turning into vampires trying to suck the life out of me.”
But still, when the jackpot rolls over, we get in line for a ticket, even though we know it won’t fix our problems. We are convinced, deep down, that the money (any money) would help.
There must be a threshold where the lottery is most likely to make us happy, right? Maybe if we just buy scratchers and we skip the Powerball madness? Maybe if we only buy a ticket when it’s a particularly gigantic jackpot?
Allow us to review the literature on lottery winnings to show that it’s not all doom and gloom and vampires. In fact, if you win the right amount, you’ll even enjoy the upgrade.
Here’s why everyone says the lottery can’t make you happy
There’s a study that gets cited a lot that found no difference in happiness levels between lottery winners and non-winners. But there are a few issues with using that example today: First, the study was conducted in 1978, with only 22 “major” lottery winners among the subjects.
Also, the study pitted the lottery winners against a control group and also against a group of people who had become paralysed in accidents. It doesn’t follow any of these subjects for a length of time to determine if their happiness levels changed.
I refuse to believe money won’t make me happy, so let’s move on.
You have to win the “right” amount
A 2010 survey focused on winners of the Dutch Postcode Lottery’s weekly Street Prize, where everyone who bought a ticket in neighbourhood that’s drawn gets an award of about $20,000.
The researchers found that winning had no effect on a household’s reported happiness six months after the event, although the researchers admitted the survey period may have been too short.
This study also notes it’s possible that happiness is “simply more linked to long-run personal income than short-run fluctuations,” because winning a $20,000 lotto that gets taxed 25 per cent is not going to leave you with that much cash with which to solve your material problems.
How much do you need to actually make your life better? Robert Pagliarini, a certified financial planner specialising in sudden wealth, says the ideal lotto take-home is around $43 million after taxes.
“The $US30 ($43) million, if invested wisely, would allow you to live on $1 million a year with little risk of ever running out of money,” he wrote in a column for Forbes. You’d have the freedom to use your resources without an extended media hullabaloo.
There goes my theory that one scratch-off ticket in my Christmas stocking could change my life.
Lotto happiness is a matter of time
Studies about lottery winners are difficult to evaluate because a group of winners will so rarely have won the exact same amount under the same circumstances. But if you look at time instead of just the amount, you start to get an idea of where happiness factors in.
A 2006 British study compared the impact of medium-size lottery wins to small wins, with a medium-sized lottery win defined as being between about $2500 and $300,000. After two years, the medium prize winners still showed notably higher mental wellbeing than the rest. Winners have more stress in the first year, the study found (taxes! paperwork! long-lost cousins!), but less stress in subsequent years.
Another study, this one from 2010 concerning German lottery winners, examined 1300 winners of “substantial” prizes of up to $1 million.
The researchers found winners do enjoy their money, but it takes two years before they do. “A lottery win disrupts identity and it takes time to develop a new one,” the report notes. “In the first few years, having money is inconsistent with a person‘s normal way of living, and it takes some years to learn to be a person who has money.“
How do you keep a level head during that two years while you figure out your post-lottery self? Well, keeping the win under wraps helps.
“There is too much media interest when the lotteries get really large ($US500+ ($714) million),” Pagliarini said by email. “I think it is best to play the ‘smaller’ lotteries, so if you do win, there will be much less (if any) media interest.”
If you’re seeing news reports about a big jackpot before the drawing, there’s a good chance of a media swarm when someone wins. In many states, you can remain anonymous to collect your lottery haul. Working with an attorney to form a trust can also help keep eyes off you.
But you’ll also have to remember to keep a low profile in those early days and weeks, unless you want friends and family trying to collect on any promises you made while you were celebrating your win.
Resist the urge to splurge
If you’re going to make it past that two-year threshold to start loving your post-lotto lifestyle, you’ll have to have willpower against human psychology. Mental accounting, a concept named by behavioural economist Richard Thaler, says that when we receive money outside of our normal income, we are more likely to make irrational decisions with it.
So if you win the lottery, resist that pressing urge to spend it, because your money is likely to run out before you’ve had a chance to truly enjoy your newfound riches.
Then there’s the hedonic treadmill, or hedonic adaptation, which refers to our tendency to return to a baseline level of happiness after big positive or negative life events. So in the case of a lottery win, you have to plan ahead for how you’ll use and invest that money to make your adjustment to your newfound wealth as graceful as possible.
It will feel great, of course, to pay off your house and your car and your student loans. Maybe you’ll buy some new stuff. But once the novelty of winning wears off and you’ve grown accustomed to your new lifestyle, life with that jackpot will stop feeling good and start feeling normal, and you’ll end up wanting more.
If you win the lottery, expect to spend a bit of that cash on financial advisors and attorneys to help you navigate your new territory. As much as you may want to shun the hordes of people who come calling for handouts, you’ll need a network that can help you make smart decisions during a time when you may be too stunned to reliably do so.