Is lottery money a boom or curse?

There is need to strike a balance between saving some cash and paying  existing debts

By  John Kariuki

We are in the end of year lotteries’ frenzy yet again. Businesses ranging from mobile phone service providers, supermarket chains to FM radio stations are promising an early Christmas benevolence and turning some loyal clients into instant millionaires. One of the ongoing lottery churns out daily millionaires. Only God knows the cumulative amount of money that mobile phone subscribers  are devoting daily in chasing the elusive mathematical probability of winning.

 The stakes in these lotteries are high, ranging from all expenses paid trips to fabulous destinations to cash prizes of up to Sh10 million.

While the sudden affluence of winning the jackpot will ensures the winners’ needs are solved, extreme monetary caution is required lest they go on destructive ego trips.  We have seen lottery winners going on an acquisition spree of buying furniture and household goods, flashy cars and clothes.

Some even get cosy with their old buddies and pronouncements like, funga mlango na kila mtu apewe kumi (close the door and give each reveller ten beers) are common in pubs.

They also take on extra lovers; change their churches and children’s schools to more upmarket ones.

Such winnersare sought after to become members of all social committees in their neighbourhoods on account of their healthy donations.

But all these activities assure them financial disaster. So, what should people do with the sudden windfall when they win the lotteries?

Ms Gabriella Waruku, a personal banker with a leading financial institution advises people who may win cash above Sh20,000 to strike a balance between savings some of it and paying their existing debts.

 “One should begin by budgeting,” she says. “As this is a holiday season, include a normal vacation in your plan,” observes Waruku. She adds that the next step should be to factor in schools fees for next year and take the remainder of the windfall into clearing any existing debts and investing.

She warns against rationalising that the money “was not even there” in one’s plans and squandering it as many people are likely to do.

“People should treat the windfall as a business start-up and hit the New Year running,” she says.

 The banker warns lottery winners against toying with investment ideas that they have never tried before seeking expert advice. “Contrary to popular opinion, people don’t need financial advice only when they have big monies,” observes Waruku. Even a capital of only Sh10, 000 can turn around one’s life with the right financial advice, she adds. People who stumble onto sudden windfalls often go broke within a few years.

Waruku attributes such to poor planning and the unpreparedness to emotionally handle wealth. “On the other hand, people who have built wealth slowly have had time for their emotions and habits to develop to match their wealth,” she adds.

Major drain

Dan Kago, a previous winner of a lottery, says people from one’s past can be a major drain to a sudden windfall. When he made big money, relatives and friends materialise from his past requesting financial assistance.

They had all seen him in the media. When his money began dwindling, he decided to track his spending. “I realised that I had been going to the bank to withdraw the lottery money every few weeks to help my kin and friends who would claim to be in financial problems,” he says. According to Kago, this is often the first step to financial ruin.

“Friends and relatives always talk and the ease with which one is giving out money becomes common knowledge, bringing more people with far-fetched problems,” he says. Kago quickly moved to a different town, changed the phone number and invested the money. “If you win a lottery, never show off or change lifestyle too soon, Let the money “cool off” in bank account while you develop a watertight investment plan, he adds.”