The Mega Millions lottery jackpot has reached $1.6 billion this week after the last 25 drawings have failed to yield a winner. According to Market Watch, this ties with the largest lottery grand prize the U.S. has ever seen when Powerball also reached $1.6 billion back in 2016.
Unfortunately, your odds of winning this jackpot are tiny.
In fact, you are 400 times more likely to be hit by lightning.
But, what if you beat the 1 and 303 million odds and wake up on Wednesday morning holding the single winning Mega Millions ticket.
It Might Make You Rich, But Not For Long
The first thing to keep in mind is that even if you are lucky enough to hold the winning ticket, you will not receive $1.6 billion in cash anytime soon.
If you hold the only winning ticket you will be allowed to choose either a lump sum payout of about $905 million or receive you’re entire $1.6 billion in annual payments over the next 30 years.
Oh, and the IRS will take their cut.
If you are lucky enough to live in Florida or Texas you will pay $217 million in federal taxes leaving you $688 million. Living in NYC could cost you big time adding another $115 million in state and local taxes.
So, what happens with what you have left?
Unfortunately, research shows that the average person in their 20’s or 30’s who receives a large inheritance or another unexpected windfall (like the lottery) will lose half of the money through poor spending and bad investments.
If that isn’t bad enough, additional research shows that 10 years after winning the lottery, the average winner has only saved 16 cents of every dollar won and more than half of people who win the lottery or get a big windfall actually end up bankrupt.
In fact, about 70 percent of people who win the lottery or get a big windfall actually end up broke in a few years, according to the National Endowment for Financial Education.
After taxes, blowing half of your money, and bankruptcy, in 10 years you may have nothing to show for your winnings but a good time.
It Might Make You Happy For An Instant
Well, if winning the lottery will not make you rich, will it at least make you happy?
There’s actually been quite a bit of psychological research done on lottery winners. These studies have found that winning the lottery will not make you happier.
Winners say their happiness didn’t change as a result of winning the lottery, and they are as happy (or unhappy) after winning the lottery as they were before.
A classic 1978 study on this compared 22 lottery winners with 22 people who didn’t win any money and 29 people who were paralyzed in accidents.
What they found was that winning the lottery didn’t increase long-term happiness, and being paralyzed in an accident didn’t decrease long-term happiness.
They found that the happiness of lottery winners spiked just after won, but returned to pre-winning levels within a few months.
The lottery winners were not significantly happier than the people who had not won any money, and believe it or not, the accident victims were only slightly less happy than the lottery winners.
The study showed that most people have a set level of happiness and even after life-changing events, people return to that set point.
What happens is the thrill of winning the lottery eventually wear off. As the lottery winners become used to the pleasures of their wealth, they return to the same level of happiness as before they won the lottery.
Psychologists call this hedonic adaptation, and here’s how it works.
We all have a happiness set point. You can think of your happiness set point as a thermostat. When you experience a major event like winning the lottery, your thermostat will experience a temporary upswing.
But, just winning the lottery isn’t enough to boost your long-term happiness set point.
Unless you do things to change your set point like practicing gratitude or cultivating strong relationships, your happiness will return to its original set point.
You will not be any happier than before you won.
Research shows that winning the lottery will not necessarily make you rich or happy.
If you are planning to pay, I wish you luck.
But, if you win, you will need more than luck.
You will need a good financial plan to prevent you from having nothing to show for your winnings a few years from now.
You will also need to work on being grateful for what you have been given and developing close personal relationships with people who you trust.