Winning that big prize can prove costly

In these tough economic times, more and more people are trying their luck at sweepstakes, contests, lotteries and promotions.

MCCLATCHY NEWSPAPERS

ATLANTA — As night falls, last-minute shoppers scurry out of Perimeter Mall while Neva Richardson settles in for the night.

She takes a rolled-up sweater and places it behind her head. She tries to find a comfortable spot, but it is difficult to get a good night’s rest sitting behind the steering wheel of an automobile.

This was Richardson’s life for 30 days, 15 hours and 32 minutes — the amount of time she lived in a car parked in the lobby of the mall in order to win a red 2008 Mercury Milan worth $24,000.

But like many big-prize winners, Richardson, a 27-year-old married mother of two from suburban Atlanta, quickly learned that nothing is ever really free.

She ended up with an $8,000 tax bill and no means of paying it. And while she was away from work for a month, she got a voice mail message from her employer informing her that she’d been fired from her job as a health insurance agent.

“It’s OK because I got a new car,” said Richardson, who entered the radio station contest because she was in dire need of a new car and she could not afford to buy one.

“I came in mentally prepared to be here for 31 days, and I am proud of myself because I pulled it off.”

In these tough economic times, more and more people are trying their luck at sweepstakes, contests, lotteries and promotions, hoping to win financial security.

The quest to win big prizes, according to consumer experts, is fueled by popular television shows such as HGTV’s “Dream Home” giveaway, Oprah’s “Big Give,” “Extreme Makeover: Home Edition” and “Survivor” reality show that offer up to a million in cash to million-dollar mansions.

Lottery officials reported higher ticket sales in some states and radio stations have no shortage of offers from people willing to do silly things like riding a roller coaster for eight hours, eating a cockroach or gobbling up enormous amounts of food to win a prize.

“People will do all kinds of things for a car or concert tickets. We had someone volunteer to run naked down Peachtree Street, but that was illegal, so we didn’t do it,” said Mike Moshure, assistant promotions director for radio station WSTR, which sponsored the car giveaway that drew 250 entries.

“But we generally look for anything that will make people talk about us at the water fountain.”

Some promotions can be dangerous. A 28-year-old Sacramento woman died last year after drinking water continuously without going to the bathroom during an on-air radio show. The prize: a Nintendo Wii game.

“Free is the four-letter word that has always sold in marketing,” said Kit Yarrow, a consumer psychologist at Golden Gate University in San Francisco.

“More than ever people are looking for the magic fix, pennies from heaven, and they are more susceptible to free claims when money is tight than when they feel like they have an abundance.”

The problem with big winnings, according to financial experts, is that the value of houses, cars and other items has to be reported as income. So at tax time, Uncle Sam wants his share.

“When people win big prizes, it is really in some ways setting them up for financial failure,” said Lynette Khalfani-Cox, a money coach and author of “Zero Debt: The Ultimate Guide to Financial Freedom.”

“They, like nine out of 10 Americans, have not been taught how to manage money well. So when you throw a lot of money at someone or give them high-ticket items like a home, they squander it.”

Though horror stories about lottery winners are common, Khalfani-Cox said they are not alone.

About 70 percent of people who come into sudden wealth end up blowing the money.

She said that includes people who receive more common windfalls, such as insurance settlements, divorce settlements, job bonuses, inheritances and tax refunds.

For some people, winning a dream home turned into a nightmare.

Don Cruz, a suburban Chicago man, won a $2.2 million dream home in the HGTV sweepstakes in 2005, only to have to auction it off earlier this year because he could not pay the taxes.

Cruz, 43, said he used the house as collateral for a $1 million loan that he used the pay the Internal Revenue Service $680,0000 and to cover the cost of brain surgery for his 40-year-old wife, Shelly.

After selling the house for $1.3 million in January, Cruz said, he barely broke even.