NAIROBI, KENYA: People who win the lottery, or find themselves suddenly in possession of large sums of money rarely end up on the list of the world’s wealthiest people.
This list includes athletes who win jackpots, particularly if they’re from poor backgrounds. People who inherit large sums of money fall into in this category, too.
In fact, studies have shown that 70 per cent of these people end up bankrupt within five years, and their final situation is normally worse than what it was before the windfall. Here’s why.
1. A reliance on luck over hard work
The number one factor that brings winners of cash windfalls down is who they really are.
Betting and gambling tend to be common among low-income earners. These are people who are more likely to believe in fate and luck as the way to become wealthy, unlike their better-off counterparts who believe that luck is created through habits like having clear goals and putting in the work to make one’s dreams a reality.
Successful people tend to have certain characteristics that are responsible for their success; their mindset, skills, habits, discipline, focus, self-confidence and temperament. The nouveau riche do not get the chance to develop these winning characteristics as they did not gradually grow to become successful.
2. A poverty mindset
You’ve probably heard the saying that poverty is a mindset. And that if one doesn’t work on changing this mindset, it’s impossible to get out of poverty, no matter how much money passes through one’s hands.
A person with a poverty mindset thinks in terms of spending, not growing money. This leads them to unconsciously get rid of money because they’ve been taught it’s evil.
There are people who don’t see themselves living any other life aside from one of struggle and need, and are resigned to this fate. Even when money is in their hands, they subconsciously waste it in the belief that it wouldn’t last anyway.
People with a poverty mindset who suddenly get large sums of money are likely to not only have an unhealthy relationship with money, but to also be inexperienced in handling large sums of it.
The people in their circles do not make things any better. Everyone around them is likely to be needy and desperate for help. Compare these circles with those of the world’s wealthiest people.
Around the world, lottery winners end up giving away a lot of their money to the needy all around them, and within a few years, are back to being one of them.
Wealthy people, on the other hand, don’t just hand out cash – they demand a plan, accountability. They also rarely give out money when that’s all they have. They first focus on accumulating assets, and then give back from these assets. They know that cash runs out; assets keep earning money many times over.
Being surrounded by poor and needy people gives winners of windfalls a false feeling of importance. They tend to compare themselves to their circle, and find that they are so much better than everyone else.
Because they’re no longer in the league of struggling people, they mistakenly believe they can now afford to solve the problems of those around them.
There’s a great quote on the curse of the nouveau riche from investor and entrepreneur Jim Rohn: “If someone gives you a million dollars, you’d better become a millionaire so you can keep the money. Success doesn’t want to hang around incompetent people.”
3. A dangerous relationship with money
An individual’s relationship with money plays a major role in determining whether he or she becomes rich or not. That relationship has deep roots; it was learned by experience from a very young age. Did you observe a culture of saving and investing from the time you were little, or a culture of living from hand to mouth? The way you handle money is not learned in adulthood.
4. There’s no build-up to success
There is something that building a business or a career – failing, getting up again and continuing with the journey – does to someone’s development. There are many lessons one learns along the way that produce personal growth.
The pain of struggling to afford every small thing, as happens in the course of building a business, teaches one how important every coin is. This is the way to learn how to plan and budget long term.
By the time someone brings their problems to you, you already have the long-term picture of what you need to build and you’re not even sure that the money at your disposal will be adequate for all that needs to be done in the future. You are focused on making your money meet the needs that are waiting.
Winning the lottery can sabotage long-term success by cutting out the growth process. One becomes like an untrained child, with no experience handling different amounts of money. As a result, money that is not carefully planned for ends up going anywhere. ?
The writer is a blogger on financial independence.
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