I'm always hearing about lottery winners who lose it all. Sometimes I just have to explain something in words to really get a handle on it.
If an average person works from the time they're 21 until they're 65, they will have worked 44 years. If I estimate that an average salary is $50,000 per year, that means an average person will have earned $2.2 million dollars in his or her entire lifetime.
Now consider Missourian Janite Lee who won $18 million in 1993. According to published reports, eight years after winning, Lee had filed for bankruptcy with only $700 left in two bank accounts and no cash on hand.
I have no idea how she spent her money, but imagine this scenario. A lottery winner found a house for $1 million, fell in love with it, and bought it. Property taxes on this might have been $50,000 a year. In eight years, that would have been $400,000. Let's say insurance was about the same amount. Then the winner found a nice Lamborghini for $200,000. Insurance, gas, and maintenance for the car might cost $100,000 over the eight-year period. Utilities, phone, water, and cable might run $50,000 over that same time span. Groceries and related items for two people for eight years could run $80,000. Let's say the person was also extremely generous to charities and the community, donating one million each year for a total of 8 million dollars. And lets say various other costs amount to another million dollars.
Doing the math from the above scenario, the person would have spent $11,230,000. An 18 million dollar winner should still have $6,770,000 to invest. Even if the income taxes took 35% of the original money, the person should have $470,000 left. That's still more that 20% of what an average person (see example above) makes in a lifetime.
Now think about the money that celebrities earn. Oprah makes about $260 million a year. Matt Lauer makes $12 million. Judge Judy makes $30 million. Jeff Gordon makes $26 million.
And then there are teachers. In our local district first-year teachers earn $30,000. A teacher with a PhD and 26 or more years of experience makes $64,519. Next year they're expected to take a 10% cut in pay.
So, there you go. Some people don't earn enough. Some people earn way too much. And some people, given the opportunity of a lifetime, lose it all.