I dream of everything I would do if I win (I mean WHEN I win) the lottery – you must BELIEVE!!) Anyway, I do what everybody does: decide what I’m going to buy first, decide whose going to get what amount of the cut, decide what I’m going to change my name to, and where I’m going to relocate – the usual stuff.
I also wonder if anybody will know that I won, whether I tell them or not. Will I move to a big, ritzy neighborhood if the jackpot prize amount makes this possible, or do I stay in the place I’m in now, and kinda rub my wealth in my neighbors’ faces?
You may have chuckled at that last question, but based on some research I’ve done, the question may be far more serious than you might think.
Why do I say that?
Because studies suggest that the neighbors of lottery winners are more susceptible to going broke and/or declaring bankruptcy precisely because they live next door to a lottery winner.
So again, will anybody know I won the lottery? If I stay in the same neighborhood, will I show off my wealth? Do I need to consider whether or not to save my neighbors from themselves?
Although it wouldn’t be my fault (at least I don’t think you could prove it’s my fault), my neighbors could suffer very adverse effects from seeing me driving my drop-top Bentley up the street just to get a Slurpee from 7-11. This happens for two reasons: envy and competitiveness.
The “Keep Up With The Jones’s” mentality is very well documented, and it doesn’t necessarily matter what income bracket we’re talking about. If neighbors live in close enough proximity to look out their windows and see what other neighbors are doing, competition and envy can easily crop up on that neighborhood block.
For example, your neighbor gets a new car, so now you want a new car. Your neighbor adds an addition to the house, and now you’re on the phone getting price quotes for your soon-to-be Man-Cave (what is the female equivalent of a Man-cave? Whatever it is, you’re on the phone getting quotes for that too. )
And this one I’ve seen myself: one neighbor gets a complete kitchen make-over, shows off the new kitchen to his neighbor and friend, and then that neighborly friend is getting the SAME EXACT kitchen make-over (colors and everything). The makeover costs thousands of dollars.
I know this because I worked with the contractor who did the makeovers, and it was amazing to see. You could literally see a sense of competitiveness building between the neighbors, and the friend made an impulse purchase that costs at the time about $4,500. Within 2 weeks the contractor made nearly 10 thousand dollars from this competition.
Now imagine living next to someone who won a lottery. Imagine trying to compete with someone who has the spending power to just go out and buy a car that likely is the most expensive in that neighborhood, and you as his or her neighbor have to see it every day. Especially if it’s a car you, yourself have dreamed of owning one day.
A study focusing on the immediate impact of lottery winners on their neighbors showed that a $1,000 increase in lottery prize money caused a 2.4 percent rise in bankruptcies among immediate neighbors. Very visible spending by people who can afford it may cause financial problems for those who can’t afford to (but want to try to) “keep up.”
And I’ll circle back to my original question: would I live in the same neighborhood? I do not want to leave you with the perception that just because you win the lottery, your neighbors are automatically going to go broke.
This is particularly true if you leap upward multiple tax brackets with your jackpot winnings. You likely won’t stay in that same neighborhood, so your neighbors won’t see you in that Bentley (unless you decide to drive through the old neighborhood in it, which is what I plan to do). And the neighborhood you move to likely won’t be as impressed as the people you left behind.
But I have seen what trying to keep up with The Joneses’ can do. And people are winning to take it to the point where rationality is abandoned and bankruptcy becomes a real and necessary alternative. Something to think about.
I’m not going to take responsibility for my neighbors going broke when I begin showing off all of my Lottery Glitz. Between you and me, I’m just going to make sure I don’t go broke too – talk about embarrassing!!!