Skip to content

Lottery winnings: easy money that's hard to handle


Multi-state lotteries like Powerball and Mega Millions feature jackpots that can grow into the nine-figure range. (David Fusaro/CNS)


These Mega Millions tickets could be worth an estimated $91 million. The odds of winning are one in 175,711,536. (David Fusaro/CNS)


Multi-state lotteries like Powerball and Mega Millions feature jackpots that can grow into the nine-figure range. This ticket could be worth an estimated $91 million. (David Fusaro/CNS)


A lottery hopeful buys a chance at a $91 million Mega Millions jackpot. The odds of hitting the jackpot are one in 175,711,536. (David Fusaro/CNS)

With his last $5 in his pocket and a two-week wait for his next paycheck, Shefik Tallmadge received news that would change his life forever. Tallmadge, then 29 and living in Yuma, Ariz., had won more than $6 million in the Arizona lottery, a record payout at the time.

After claiming his winnings, he toured Asia and Africa for a month. When he returned, he gave in to the many pleas for money, indulged a passion for expensive cars and real estate, and invested more than $2 million in a business venture that failed. In 2006, 18 years after his windfall, he filed for bankruptcy.

Tallmadge’s story is all too common among recipients of sudden wealth, financial planners say. The belief that the money will never run out leads many people like Tallmadge to buy extravagant items, to invest in business ventures in which they have little experience and to accept too many requests for help from charities, family and friends.

The pressure to help others is one pitfall to sudden wealth. “You might as well draw a huge target on your back when you win the lottery,” said Bill Pomeroy, a certified financial planner in Baton Rouge, La., who has worked with several lottery winners. “People are going to come after you in any way possible.”

For Tallmadge, the requests started within hours. “I had a little girl calling from the local school baseball team: ‘Oh, we heard you won the lottery,’” Tallmadge said. “The girl’s crying on the phone, and you can hear the coach or the girl’s father on the phone saying, ‘Come on. Cry a little more.’”

Friends also pressured Tallmadge. His social circle narrowed dramatically. “I ended up friendless,” Tallmadge said. “I do not know anybody today as a friend that I knew in 1988 as a friend.”

Another pitfall is the desire to make life-changing decisions and purchases immediately after receiving the money. To combat this temptation, Susan Bradley, the author of “Sudden Money: Managing a Financial Windfall,” suggests a wait-and-see period she calls a “decision-free zone.”

“It’s a proactive time-out from making decisions,” Bradley said, “an agreement not to make nonessential decisions like selling the house and buying another or giving money away until you’ve gotten it organized and you know how to deal with it.”

Tallmadge took no such time-out. Immediately after winning, he bought a new Porsche 911 convertible, a tradition he continued each year for the next nine. That was followed by a beach house in Encinitas, Calif. Later, he moved with his family to Florida, buying a mansion on the water.

In Florida, Tallmadge made some poor business decisions, another major pitfall, experts say. “There’s no faster way to lose money than to start a business that’s basically a black hole,” Pomeroy said.

The black hole for Tallmadge was a $2 million investment in four gas stations. The stations struggled, and a change in the parent company’s franchise policy made it impossible for Tallmadge to climb out of debt. Having sold his California real estate, Tallmadge was forced to file for bankruptcy to save his family home.

Although Tallmadge has managed to live comfortably after his bankruptcy, he laments the poor decisions he made after winning the lottery. “They gave me just enough money to get me into trouble, but not enough money to make me rich,” Tallmadge said of the $6.7 million. “You’re in the big pond, but you’re the tiniest fish in the big pond.”

Bradley suggests assembling a team of advisers to help recipients of sudden wealth navigate the big pond. The team ought to include a lawyer, an accountant, a financial planner and a psychological counselor.

Tallmadge, however, disputes the effectiveness of professional help. “The worst advice I’ve ever got is from professionals who I have paid hundreds and hundreds of thousands of dollars to,” he said. “All they’re interested in is what they can squeeze out of you.”

Milt Laird of Paso Robles, Calif., didn’t have to worry about getting squeezed. He won a $27 million jackpot in the California lottery in 1990 and has been comfortably retired on his California vineyard ever since. Laird’s secret: He was a certified financial planner for three decades before he struck it big.

“I was driving a Ferrari when we won,” he said. He has since traded the Ferrari for a Lexus, a more comfortable car for a retiree, he says.

Laird said he was uniquely prepared for a windfall. “I managed money for people who have a lot more than that, so in my world that wasn’t a huge number,” Laird said.

Laird said the financial sharks stayed away because the publicity of his windfall usually mentioned his professional pedigree. “The flakes decided it wasn’t going to be profitable for them trying to waste my time trying to get in,” he said of the relative quiet he’s enjoyed since he won.

Laird and his wife have divided their winnings between investments and charitable donations to family, friends and church groups. The money they’ve kept for themselves has allowed them to renovate their house and travel the world.

The key to Laird’s happiness, he says, was that he had a sturdy emotional foundation before winning the lottery. “I think a lot of people are unhappy with their life for various reasons,” he said. “They attribute it to a lack of money; then they get money and they think everything is going to be perfect.”

Laird’s one minor regret is the Lexus he drives. “I liked the Ferrari better,” he said with a laugh.