How Winning the Lottery Affects Your Personal Finances

When the lottery’s jackpot hits a billion dollars, it’s a big deal. It’s also the kind of news that can trigger a sudden rush of excitement among people who’ve never played before, and may be tempted to buy a ticket on a lark. But that kind of impulse can cost a lot of money over time, especially if the person makes it a regular habit. That’s because every lottery purchase takes away funds from a person or family that could have been used for retirement savings, college tuition or other financial goals. And over a lifetime of buying tickets, that can add up to thousands in foregone savings.

There are many ways to play the lottery, but winning is all about math and odds. And in recent years, the chances of winning have actually gotten worse. In 2015, Powerball lengthened the odds from 1 in 259 million to 1 in 302.5 million; Mega Millions followed suit two years later. This increase in odds prompted a similar rise in jackpot sizes. In addition, rising interest rates have helped boost jackpot amounts by increasing the value of a lottery winner’s annuity payout over 30 years.

As the jackpot gets bigger and bigger, fewer tickets are sold, and so the chances of winning are lower. That’s why it’s so important to use caution when purchasing lottery tickets. “It’s a risk-to-reward ratio, and it’s a really bad investment for most of us,” Kovach says. “It’s very easy to lose a lot of money.”

The most important thing to remember is that the vast majority of lottery winners are not special. “I think that a lot of people think that because you’re a lottery winner you are somehow better than the rest of the population,” says Richard Lustig, a professor of psychology at the University of Florida and author of the book The Psychology of the Lottery. “And I don’t believe that’s true.”

While there are a number of personal finance basics for new multimillionaires to follow—pay off debt, set up savings for college and retirement, diversify investments and keep up a strong emergency fund—there’s one element you can’t farm out to your crack team of helpers: mental health. Plenty of past lottery winners serve as cautionary tales about the unexpected changes that come with instant wealth. In short, if you’re not prepared to face the challenge of handling your own money, you won’t be able to handle millions of dollars worth of it.