Is your neighbor a lottery winner? You might go bankrupt soon

The concept of keeping up with the Joneses is a ridiculous one. The idea is that you have to also have the big televisions, new cars and a larger house because your neighbors, friends or acquaintances do, too. At the same time, you also have to put yourself into debt. What’s the point of it all?

A new report from the Federal Reserve Bank of Philadelphia released a very interesting study last month that found lottery winners have a negative financial impact on their neighbors. The researchers linked an increase in bankruptcy filings among neighbors close to lottery winners.

Study authors opine that the rise in bankruptcy comes from the idea of neighbors trying to keep up with the lifestyle of their rich neighbors. And, of course, trying to keep up with their new lifestyle means you’ll have to go into debt.

How did they come to this conclusion?

They analyzed lottery prizes and bankruptcy filings in one Canadian community for 10 years and honed in on neighborhoods with a sole lottery winner. The primary finding was that a lottery winner will raise the chances of a close neighbor filing for bankruptcy 2.4 percent for each $1,000 increase in lottery prizes. When the lottery winners expand their visible assets (homes and cars) then the neighbor will feel impecunious when comparing themselves to their neighbors.

Ultimately, those people who can’t afford to keep up with the lifestyle of a multi-millionaire will drown themselves into debt, which then leads to bankruptcy.

“Income inequality induces poorer neighbors to consume more visible (rather than invisible) commodities to signal their abilities to ‘keep up with the Joneses’ to their richer neighbors,” the study stated. “This tendency can lead to additional and unsustainable borrowing among the relatively poor to finance this additional conspicuous consumption, which can eventually result in financial distress.”

It should be noted, according to the study, that these results can be found in both low-income and high-income areas.

Of course, we should realize that the odds of living next to someone who won the lottery is very, very low. But still, if you come across a neighbor who strikes it rich then be sure to close all of your blinds and when you leave the house just stare at the ground.