I Gotta' Win the Lottery and Move to Hawaii

From the news of the extremely weird:

The Italian towns of Ficara in Messina and Anguillara in Lazio, faced with growing budget shortfalls have decided to balance their budgets, fund public projects now brought to a standstill by the economy, and lower their tax rates with winnings from the lottery. Really! Governments have become so desperate; they are not only selling lottery tickets. They are buying lottery tickets. To be fair the city fathers of these two municipalities, the sums to be invested in lottery tickets are 5 and 15 Euros a week. These sums of money are not enough to really matter, but are things really that bad in Ficara and Anguillara?

One of my go to lines after a particularly bad day is, “I’ve gotta’ win the lottery and move to Hawaii.”

I used this line recently on the owner of the local wine and beer store. He replied, “You never buy any tickets. You can’t win, if you don’t play.” I laughed. It is pretty close to the truth. I buy about two tickets a year (maybe).

When the prize gets really big, I think, “Ah, Why not?” Sadly, at local stores I see regulars playing the lottery with money they can not afford to lose. It has been my observation that most lottery tickets are sold to desperate or discouraged individuals who believe that any efforts they can make to improve their situation are pointless. Instead of taking arms against a sea of troubles and, by opposing, end them, these unhappy souls buy lottery tickets, lots of lottery tickets.

Laura Rowley recently reported on some findings by researchers a several universities. Evidently, a surprisingly large number of lottery winners (5.5%) declare bankruptcy within five years of winning. Small winners tended to go bankrupt more quickly than big winners. In this particular sample $65,000 in cash was the median big prize. Laura observes, “That would be enough, on average, to pay off all unsecured debt or boost the equity in new or existing assets. Instead, the big jackpots simply evaporated.”

Apparently there are two reasons that explain this phenomenon. First, they winners are not use to handling large sums of money and make mistakes. They are not financially literate. Hence, they do not use the money wisely. The authors of the study believe the more important reason can be termed “mental accounting.” One of the authors, Mark Hoekstra observes, "We treat 'found money' differently than money we earn. So if you find $20 on the sidewalk, you may decide to blow it on a nice dinner, whereas if you earned it you wouldn't have done that."

The authors of this study believe that their findings have policy implications for governments dealing with heavily indebted consumers and homeowners with upside down mortgages. Mark Hoekstra says, “It appears the simplest solution-giving them cash-doesn’t enhance longer term financial stability and only postpones, rather than avoids bankruptcy.”

Laura Rowley adds, “The lottery findings are consistent with a 2007 research paper that showed consumers initially used their 2001 federal rebate checks to reduce debt, but eventually debt returned to its pre-rebate level.”

Hoekstra concludes, “Our research suggests that perhaps there is something more systematic about the types of people who get themselves into financial trouble -- and the appropriate policy prescription for helping them out is going to be considerably more complex than giving them additional resources.”

Even though I don’t think Solomon would have much good to say about lottery tickets, I will probably continue to buy one or two a year and dream of retirement in Hawaii.

Here is a sample of king’s thoughts on such matters.

Proverbs 13 11

Dishonest money dwindles away, but he who gathers money little by little makes it grow.

Proverbs 28 19-20

He who works his land will have abundant food, but the one who chases fantasies will have his fill of poverty.

A faithful man will be richly blessed, but one eager to get rich will not go unpunished.