The lottery is a pretty simple concept. Pay a little and have a chance to win a lot.
That being said, here are 4 facts that we should all know about the lottery.
The Lottery Might Just Give You More Problems
Many studies have shown that within 3-5 years of winning a lottery, lottery winners are much more likely to go bankrupt than average Americans. On top of that, many lottery winners suffer from depression and anxiety after their windfall.
Many lottery winners have expressed how many of their family and friends come with their hands outstretched and it becomes very difficult to maintain good relationships over time. Some people debate that lottery winners more often have financial problems because they are too generous with their friends and family and not from just buying expensive things.
We Spend More On Lottery Than You Think
In 2014, Americans spent more than 70 billion dollars on lottery tickets. To put this in perspective, Americans “only” spend about 12 billion on movie tickets every year.
If we divide 70 billion by the total population of the United States (children included), this comes out to about $215 per person annually. Now I am sure there are many people that never buy a lottery ticket and those that spend much more than $215 every year.
Uncle Sam Wants His Cut
Unfortunately, winning 500 million dollars in the lottery doesn’t mean you can actually spend that amount. Lottery winnings are taxable income which means that if you win a large amount of money, nearly 40% of it will go to the IRS to cover your tax bill.
However, many lotteries allow you to take the winnings over many years to help spread out your tax bill. If you do win the lottery, I highly recommend talking with a tax professional to see how you can keep more of your winnings.
The Lottery Funds Good Things Too
Every $1 that is spent on the lottery is divided into 3 main parts. The majority of the revenue goes towards winnings, with another chunk going towards those that sold the tickets and admin expenses. The last portion goes to the state governments where the tickets are sold.
In 1980, only 14 states had lotteries. Now, more than 80% of states participate. This revenue can be used by the states for various things but many states put this revenue towards education and other public works.