We admittedly don't know too much about the single mom from Ohio who recently struck Lotto to the tune of a cool million bucks. But what we've been told is that she's a woman of modest means ... "modest," in this case, denotes that she's the owner of nine maxed-out credit cards and $8,500 of student loans. (Yes, I said nine maxed-out cards.)
CBS News: "Mom Finds $10, Buys $1M Lottery Ticket"
NBC News: Today Show Interview (w/video)
Here, from the video, is the woman's quote which struck me the most:
...I thought twice about buying it. I had remembered the $10 I found the day before. I said [to myself], ‘You know, that's a lot of money for a ticket, but I'm not losing anything because I found this $10.’
Those of you familiar with behavioral finance should be waving your arms right about now, ready to yell out the words "Mental accounting!" when the teacher calls on you to tell everyone what the mom's thinking indicates.
Instead of valuing the ten bucks that she found as ... well, as ten bucks (it'd buy a couple loaves of bread and maybe a gallon of milk, yes?), she immediately discounted its actual value. Since she "found" the money, whatever she decided to do with the cash would be okay: She couldn't "lose" the ten bucks if she didn't actually "earn" it, right?
Mix the human brain and money, and this is the kind of fascinating stuff you get. Ten dollars is ten dollars. It'll buy ten dollars' worth of stuff, or pay off ten dollars' worth of high-interest credit-card debt, no matter where it comes from. But our brains don't always see it that way. Ms. Schneider didn't "pay" for her mental mistake this time, but that's only because the lightning bolt of luck struck her square in her bank account. You can bet that with nine maxed-out cards to her name, this wasn't the first time she was guilty of mental accounting.
Another snippet from her:
If I'd have taken a lump sum, I'd be broke again within five years.
Yes. Good. So she realizes at least that much. That's a start. But the bigger question is, "Where does she go from here?" If there's one thing I know, it's that the leap from "realization of a problem" to "reversing the action that created the problem" to "committing to positive, lasting action" is an awfully long leap to make. Most folks won't make that leap until they've experienced significant pain. How did Ms. Schneider find her way into having all those tapped-out credit lines? Did it bother her to be in that position. Or does it even really matter?
At age 32, Ms. Schneider has a tremendous opportunity to completely change the growth pattern of her family tree. Let's hope the big ol' GET OUT OF JAIL FREE card she just drew from the pile gets used wisely.
Labels: Credit Cards, Spending
