From Riches to Rags: Lessons We Can Learn from Lottery Winners Who Went Broke

By Rachel Puryear

Whether you like to buy lottery tickets or not, you have probably heard stories of lotto winners (and some mega celebrities) who quickly became fantastically rich, only to go broke within a few short years. Most people are puzzled as to how one could come into such ruin quickly following incredible luck that should have financially set them up for life.

There is often more to riches-to-rags stories than meets the eye. So let’s look more deeply at the biggest reasons this happens. In doing so, important financial lessons can be learned, and big financial pitfalls can be avoided, for all of us.

A screen graphic with “WINNER” shown in gold capital letters, surrounded by a red and purple light marquee and gold coins shooting out.

Reasons People Go from Riches to Rags:

(1) Moochers Come Out of the Woodwork When They Smell Money:

This is a top reason that people go broke after coming into money. Recognizing and stopping moochers is important to financial health, because moochers will impoverish others if allowed to do so.

You probably know people who would immediately rush over to you with their hands out and their biggest smiles on (or maybe regaling you with their saddest sob stories) if they knew you suddenly had plenty of cash. We all know these kind of people – they are moochers.

When I say “moochers”, I’m not talking about people who occasionally need help, and willingly reciprocate others’ generosity. A person who receives assistance from others in times of genuine need but also gives back at least as much as they get (especially when they actively seek out ways to return favors, without first being asked), is not a moocher. Most people legitimately need help from time to time. However, non-moochers eagerly want to help others, as well as receive help.

Moochers, by contrast, are human leeches who use every tactic they can think of to constantly bleed others dry. Moochers don’t reciprocate kindness and generosity, even when given clear opportunities to do so. They are remorseless takers, with no limits.

Moochers tend to waste money on unnecessary luxuries, hoping that other people will later feel sorry for them and provide for their necessities. Moochers spare no expense on themselves, but claim to be broke when it comes to paying their fair portion of shared costs. They are often also lazy, trying to get others to do as much of their work as possible.


The opposite of moochers, on the other hand, are pleasers. Pleasers hate to see someone else unhappy, even if that someone else cares little in return. Moochers take advantage of pleasers, and view them as easy targets from which to drain money and other resources.

Accordingly, it gets very dangerous financially for a pleaser when a moocher becomes aware that the pleaser has just had a windfall of good fortune. This alone is a great reason for anyone to remain private about money, and not unnecessarily publicize newfound wealth.


Allowing oneself to be mooched is a big enough financial problem in itself. However, for lottery winners who are unsophisticated about money management, casually gifting a lot of money comes with even more serious financial consequences. Giving away large enough amounts can later result in something else big and scary holding its hands out and demanding payment – the IRS.

Hands holding money out, and several other hands out demanding money.

Many people know that there is such a thing as a gift tax. Fewer, however, realize that gift taxes are payable by givers, not recipients of gifts. Gift taxes can be up to 40% of the amount gifted. (Don’t panic if you’ve never heard of gift taxes. You can give away a lot before the gift tax kicks in – see here for more about gift taxes).

Gifting huge amounts of money to others without first being aware of the tax consequences can easily make one go from newly rich to quickly broke again, and perhaps in debt with the IRS. Many people who become rich very quickly do not seek proper financial advice to learn things like this before it is too late.

Why Do People Let Moochers Bleed Them Dry?

Moochers are savvy at pushing others’ emotional buttons. Everyone has emotional buttons; and these can include proneness to guilt, indiscriminate sympathy, or a need to please or impress others. Emotional buttons can override common sense – especially when the moocher is someone that their victim loves.

Pleasers don’t necessarily lack common sense. Instead, they often lack the emotional awareness to acknowledge when someone is pushing their boundaries, and they typically lack the assertiveness to say “no”.

People who are emotionally aware, who are willing to say “no”, and who are assertive, and always have been; may take these protective skills for granted and not realize that many other people lack in these protective psychological skills. For people without such protective skills, they are constantly at risk in life.

Tips for Avoiding the Moocher Pitfall:

First, it’s important to recognize a moocher. Here’s an easy way to spot one: They become indignant if they are asked for anything in return, or if they are held accountable. Here are a couple of examples:

  • Let’s say a person (not someone you owe anything to) asks you for some money. You suggest an exchange rather than an outright gift, such as paying the person to do some needed work around your house, that the person is able to do. When presented with a chance to earn the money, a moocher walks away angrily. A moocher does not want to work for anything, they want it handed to them.
  • Or, maybe the person asks you for a loan, but before you agree to anything; you tell them you want to first discuss what repayment looks like, sign a written agreement, and ask them to put up collateral. The moocher will balk, as they never intended to repay the loan, and your actions to protect yourself against default foils their plan.

A non-moocher will understand your reservations and conditions. A moocher will instead become angry, whine, cry, guilt trip, and protest in response to being held accountable, or being asked to do something in return. Even if you have done favors for a moocher in the past, the moocher will not have any gratitude for this, and will feel that you still owe them something.


If someone truly loves you and is worth having in your life, they will respect your boundaries and reciprocate your generosity. All relationships will have times where one person needs more than the other, but the scales should balance over time.

The best thing to do is to say “no” to moochers outright. Moochers are like black holes, and they will make you poor if you do not stop them.

Do not argue, explain, make excuses, apologize, or negotiate with moochers. They are master manipulators, and if you are someone who has trouble saying no, you will not win with them that way. Just say “no”, and walk away. “No” is a complete sentence.

In addition to practicing saying “no”, cultivating emotional awareness and healthy boundaries helps to naturally increase assertiveness. This takes some work, but it is worth it because the results protect you from toxic and draining people, and are therefore life changing.

Remember – reciprocity does not necessarily have to come in the form of money, so a lack of money from one party is not an excuse for one-sidedness in a relationship. If you need time, emotional support, or other valuable resources from someone else you have given to more than you need money, that person can give something back to you in other currencies instead.

(2) When People Suddenly Have Far More Money Than They Have Ever Had, They Can View Their Bank Account as a Bottomless Pit of Cash (Even When It’s Not):

Sometimes the moochers get the windfall. When that happens, they tend to blow through the money quickly and recklessly. Then they feel sorry for themselves that it’s all gone, and expect others to also feel sorry for them, as well.

Even non-moochers, however, can have trouble wrapping their minds around such large amounts of money, when it is far more than they have ever had. They might mistakenly conflate “a lot of” money with “unlimited” money.

There’s no amount of wealth at which it’s safe to ignore math. No matter how much or how little one has, it’s always important to budget. It’s easy to overestimate how much one can spend and still balance their budget.

When someone suddenly strikes it rich, there is a euphoria of being financially set and not having to worry about money or staying at a soul-sucking job anymore. This can override logical reasoning and thought for awhile.

Ask yourself this: If you have $5 million invested in an account that averages a return of 8% per year, can you safely withdraw $100,000.00 per year? How about $200,000.00 per year? How about $500,000.00 per year? (See the answer below. *)

Money shooting out of a white barrel.

Tips for Avoiding the Newly-Richer-and-Blind-to-Math Pitfall:

Always get financial advice if you ever come into a significant amount of money, or even if your income goes up more than a small amount. Learn what does and does not work for your situation, and listen to your trusted professional. Not only will you learn things you need to know, but you will have someone to help keep you in check so you don’t lose control of yourself. Lottery winners who go broke usually do not get financial advice from a competent and trustworthy source.

* Here’s the answer to the above question, based upon common guidelines of financial planners:

If you have your investments in accounts which average a return of 8% per year, withdrawing up to 4% of the total amount per year is generally considered safe, and runs a low risk of running out of money over the long term.

Accordingly, if you have a total balance of $5 million; withdrawing $100,000.00 per year is considered safe, withdrawing $200,000.00 per year is considered safe but is the maximum amount you should withdraw as it is 4% of $5 million; and withdrawing $500,000.00 is not considered safe, and runs too high a risk of eventually running out of money.

If you invest money, and then live off of the proceeds; invest in diversified accounts with an average annual return of 8% or more (such as Vanguard), and then withdraw no more than 4% of the total balance per year.

(3) Expensive Purchases Can Keep on Purchasing:

We all know that mansions and luxury cars are expensive. Not only are such luxurious items expensive to buy, there are expensive to maintain, and everything about them just costs more.

Large homes cost more to heat, light, and maintain than smaller ones. They come with astronomical insurance and tax bills, too. Luxury cars also cost more to maintain, insure, and repair. Therefore, not only do many people with newly acquired wealth make extravagant purchases, but their purchases tend to keep on purchasing.

Brightly lit mansion with sporty luxury car in front.

Tips for Avoiding the Hidden Costs Pitfall:

When evaluating your budget for a big purchase, consider the ongoing residual costs as well as the sticker price. Even if you can afford to buy something initially, that doesn’t mean the ongoing costs won’t eventually suck you dry.

(4) Investments Come in Good, Bad, and Scams:

“Investment” sounds like a good thing, and often times it is. But not all investments are good – some are terrible, and some are also outright scams pitched as “investments”.

For lotto winners, the euphoria and sense of specialness that comes with winning can block out sound judgment and careful thinking. All kinds of people will be hitting them up to invest in various funds, and these giddy new winners might be easily sold on a terrible product with a slick sales pitch. Pouring large amounts of money into bad investments and scams without thinking too carefully has been a factor in many people going broke.

Man watching red arrow going down, holding his head in his hands.

Tips for Avoiding the Bad/Terrible Investments Pitfall:

If something sounds too good to be true, it probably is. No doubt, you’ve heard this saying before. It also bears repeating once in a while.

Be very careful about investing. Never put too many eggs into one basket – the first rule of investing is to diversify.

Be careful who you surround yourself with, and who you listen to. Con artists can be incredibly charming and smooth talking. If someone feels intoxicating to be around, distance yourself from them and get multiple, independent opinions. Never put a lot of money into something without asking for more than one trusted expert opinion, and make sure your experts are genuine and reputable.

Never, ever invest money into something that feels wrong – trust your gut feeling over the mood of the moment.

As part of diversifying your investments, include both high risk/high reward and low risk/lower reward funds. This gives you a chance at reward, but also reduces the risk of losing too much.

Feeling bad because you might have missed out is temporary, and other opportunities will present themselves. The regret of a foolish investment or buying into a scam – especially when you lose far more than you can afford – is forever.


So, hopefully this gives you some tips for avoiding major but common financial mistakes. Very few of us will ever win the lottery; but there are important lessons we can learn from those who suddenly struck gold, and then lost everything.

Here’s an afterthought: Who you are at your core before you become successful is unlikely to change after becoming successful. People who are broken when they are broke, tend to stay broken even after achieving success, even if their lives become a lot nicer. People who have character and integrity before they have anything, tend to retain their character and integrity after they achieve success. Money and success do not change people as much as many people think – instead, it highlights what was already there in a person to begin with.

Thank you, dear readers, for reading, following, and sharing. Here’s to learning from others’ mistakes, and to those willing to share their hard-earned insight and wisdom.

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Note: I am not a financial advisor. Nothing in this post is intended to be financial advice. This post is entirely for informational purposes. If you need financial advice, please consult a qualified financial advisor.

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