There’s no fever quite like lottery fever and when the Powerball jackpot recently reached $337 million less than a year after three Greenwich residents hit those lucky numbers, there was a lot of dreaming going on.
Because while for most, winning the lottery seems like a far-fetched pipe dream, for a lucky few those dreams of winning big have become a reality. It’s a phenomenon often represented in pop culture and mass media as the pinnacle of luck and good fortune, perpetuating the idea that you now have a bottomless bank account and are therefore set for life.
However, many real life case stories highlight the pitfalls of this extraordinary luck, and the many dangers, both financial and personal, that strike lottery winners.
There are many stories of a lottery winner spending their prize money on flashy and expensive cars, houses and other luxuries, which can quickly deplete a once flush bank account. Winners who once thought they were set for life end up losing it all. The pattern of money mismanagement shown by lottery winners underscores that there could be a better way to more effectively handle that financial windfall and make it last.
Peter Chieco, a senior vice president at Morgan Stanley Smith Barney in Greenwich, is a firm believer that there is a correct, step-by-step approach to handling lottery winnings. First things first, he stresses the importance of putting together a solid team of legal, tax, and wealth experts before you even go public as the lucky winner.
“We’ve seen many sad stories about people winning the lottery, and in a few years, being completely bankrupt. It’s important to step back, not make any quick decisions and put together a good team, and not being unduly influenced by individuals requesting money,” Mr. Chieco said in an interview recently with the Post.
Mr. Chieco said the truth is that most people who hit the big jackpots are ill-prepared to manage the sizable winnings they suddenly come into because they don’t have the proper money management background or a good team of advisers.
Greenwich had its share of lottery fame last November when three Greenwich men won a $254.2-million jackpot. But stories like that are the exception since those three men are professional money managers who created the Putnam Avenue Family Trust and had that knowledge about proper management that most people do not.
So for those who are dreaming of lottery jackpots, he suggests before you even take the gamble, you should go online and read about lottery winners from years past, both the sad stories and the successes. Being better informed can prevent staying away from those common pitfalls of reckless spending and money pressure from family and friends.
Just as a patient would consult multiple doctors after receiving a serious diagnosis, a lottery winner should seek out different opinions, and proceed very slowly without rushing into any rash decisions, he said.
“The key is to try to get some perspective, get the right advice, and continue to make a positive situation positive. It’s the minority who can really look back and feel good about how they’ve handled their money,” Mr. Chieco said.
In addition to not being equipped with the adequate financial knowledge, on a very basic level, many lottery winners are simply not prepared for the life changes it can bring. With the fame come the requests from family, friends, and even strangers, and many new avenues of excessive spending.
“It does change your life, and on the surface, this can be a very euphoric thing. However, this can have incredibly negative implications,” said Mr. Chieco.
Through his work at Morgan Stanley Smith Barney, Mr. Chieco says that he and his team advise managing lottery winnings in a careful way that fully takes into account this host of issues in order to maximize long-term financial and personal well-being. Their strategy focuses on investing money so that it can create a steady income stream, spreading your assets and risks out and creating a tailored budget specific to your needs.
In other words, they advise dealing with lottery winnings just the same as any other investment. Carefully, cautiously, with a high quality and diversified profile.
“The only difference is its highly public nature, and the pressures that accompany that. On the surface it sounds like all your dreams are taken care of, but more often than not, this is far from the case,” Mr. Chieco said.
The biggest pitfall of the lottery is that on the surface, the sheer and overwhelming positives seem to outweigh the potential negative consequences. With that much money, how could you go wrong? However, there are far too many examples of lives being ruined by such seemingly good fortune, and it’s painful when imagining what a difference proper counsel and realistic expectations could have made.
With careful planning and good advice, these pitfalls can be avoided, Mr. Chieco said, and with many in Greenwich and beyond dreaming of the good life every time they see the lottery jackpot grow with those big Mega Millions and Powerball numbers, it can make all the difference in the world.