Powerball, fiscal cliff and family finances

Powerball Players

Did you play?

Gallery

As you know, the odds were not in your favor. The Powerball jackpot jumped to $579.9 million by the time of the drawing on Wednesday, making the cash option $379.8 million, according to the Associated Press. The pot, won by two ticketholders, still wasn’t big enough to surpass March’s $656 million Mega Millions prize, the largest lottery jackpot in history.

Powerball tickets were selling at an average of 130,000 a minute, which equates to players buying 7.8 million tickets an hour, spending $15.6 million an hour for a chance at the huge jackpot, the AP reported.

Still you dreamed of cashing in big, didn’t you?

But if you still have hopes of changing your life by hitting the lottery, consider the pitfalls of fast riches from previous winners. The National Endowment for Financial Education estimates that as many as 70 percent of people who land sudden windfalls lose that money within several years, the AP reports.

“I know a lot of people who won the lottery and are broke today,” the AP quotes Sandra Hayes, 52. The former child services social worker split a $224 million Powerball jackpot with a dozen co-workers in 2006, collecting a lump sum that she said was more than $6 million after taxes. “If you’re not disciplined, you will go broke. I don’t care how much money you have.”

Here are a few examples: A two-time New Jersey lottery winner squandered her $5.4 million winnings, according to AP. Jack Whittaker of West Virginia, who was profiled in The Washington Post, won almost $315 million a decade ago on Christmas and later blamed the windfall for his granddaughter’s fatal drug overdose, his divorce, hundreds of lawsuits and his lack of true friends. Whittaker chose to take a onetime payout of $113,386,407.77, after taxes. Read the Post’s article about this rich man, poor man.

“Lottery agencies are keen to show off beaming prize-winners hugging oversize checks at celebratory news conferences, but the tales of big lottery winners who wind up in financial ruin, despair or both are increasingly common,” writes the AP.

Let’s Talk

Join me at noon ET for my online text chat with Kerry Hannon, author of my November Color of Money selection, “Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy…and Pays the Bills.” Here’s the link for a review of Hannon’s book.

Be sure to send your questions in early or read the archives later.

Family Financial Fights

Mix finances and family, and the results are complicated, often leaving somebody angry or feeling taken advantage of.

But I’m here to help. If you have some family financial drama going on, perhaps I can offer some advice on how to work through your issues -- or avoid them all together.

Send your Family Financial Fight stories to colorofmoney@washpost.com. Be sure to include your full name, city and state and put “Family Finance” in the subject line.

Could the Mortgage Interest Tax Break Be on the Brink?

The mortgage interest deduction that so many homeowners enjoy could be on the chopping block as lawmakers try to find a way to avoid the dreaded “fiscal cliff” -- automatic spending cuts and tax increases set to take effect Jan. 1.

“Of all the deductions woven into the sprawling U.S. tax code, few have been more fiercely guarded than the enormous tax break that lets homeowners deduct the interest they pay on their mortgages, The Washington Post’s Brady Dennis writes today.

But putting the mortgage interest deduction on the table is very appealing, given that it cost the government about $100 billion a year.

As Dennis reports, homeowners are allowed to deduct the interest paid on mortgage balances up to $1 million, including on second homes, as well as on $100,000 worth of home-equity loans. The deduction overwhelmingly benefits wealthier families, partly because they tend to have larger mortgages and pay more interest, and partly because most low- and middle-income Americans do not itemize deductions on their tax returns.

“The outcome of that debate could have profound long-term effects on homeowners across the country — and particularly those in the Washington area, who tend to benefit from the tax break more than many other Americans due to the region’s hefty home prices and high incomes,” Dennis writes.

This week’s Color of Money Question: What do you think of the possible elimination of the mortgage interest deduction? Send your responses to colorofmoney@washpost.com, and put “Mortgage Interest” in the subject line. Be sure to include your full name, city and state.

Black Thursday

Many stores got an early start on the holiday shopping season by opening their doors on Thanksgiving Day. So I wanted to know, “What did you think of the new Black Thursday?”

Here’s what some of you said:

“The focus of Thanksgiving Day should be on family and friends -- coming together in fellowship over good food, making wonderful memories and cherished traditions,” wrote Patricia Hines of Albany, N.Y. “People that put the emphasis on getting out to the sales on Black Thursday miss out on all that, and unfortunately, so do the sales staff that have to report to work that day, and the end result is: increased stress, family drama, and possibly shoppers out in public under the influence of alcohol. The sales may be there every day from now until February but will your family? That’s something to think about.”

Thea Kester of Ashville, N.Y., said Black Friday is a nightmare that she refuses to even approach.

“Moving it back into Thanksgiving Day is an obscene travesty. There is no reason that we need to extend this orgy of crazed consumption any farther than we already have. I will shop, as has become my habit, in the mornings of December, on Monday, Tuesday, or Wednesday, when the stores are not crowded, and I will make thoughtful choices without the pressure of fifty other people all grabbing for the same item. Then I will go home and bake Christmas cookies.”

“I think addictive shoppers do not buy more when businesses extend their hours; they just shop more,” wrote Lois Berkowitz of Oro Valley, Ariz.

Tia Lewis contributed to this report.

You are welcome to e-mail comments and questions to colorofmoney@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

 
Read what others are saying

    The best education your money can buy