According to the National Council on Problem Gambling, (1) a nonprofit that aims to minimize the economic and social costs of gambling addiction, about 2.5 million U.S. adults (1%) meet the criteria for severe gambling problems, with another 5 to 8 million experiencing mild or moderate issues.
Matt’s settlement could represent a turning point. Instead of another missed opportunity, it may become the foundation of long-term stability. But to achieve that, Matt must put some safeguards in place from day one, before the temptation to “double it” at a casino or sportsbook becomes too hard to resist. Here are some examples of ways Matt can make the most of his windfall without falling into old habits.
1. Clear existing debts
Debt payoff is typically the smartest first move to make when you receive a lump sum of money, especially for someone vulnerable to risky spending, such as Matt. High-interest credit card debt, for example, can carry rates above 20%, meaning the money evaporates quickly if left unpaid. Eliminating these balances first reduces monthly obligations, frees up cash flow and provides an immediate sense of progress.
But what happens after the debt is gone? For those with a gambling issue, leaving the rest in a checking account could be a recipe for relapse.
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2. Use accounts with withdrawal penalties
Instead, Matt can use products such as 401(k)s or traditional IRAs that come with penalties for early withdrawals. While these fees frustrate some investors, they can be a hidden benefit for someone looking to restrict access to their own funds. A 10% penalty for early withdrawal may be just enough of a deterrent to keep the money untouched until retirement.
Other vehicles, like certificates of deposit (CDs), could also offer Matt structure and discipline. With CDs, funds are locked in for a set term at a specific interest rate. Withdrawing early means paying a penalty and losing accrued interest. Even if the rates on CDs aren’t spectacular, the forced waiting period can help him prevent impulsive spending.
3. Consider long-term investments
Once his immediate debts are gone and short-term safeguards are in place, Matt can turn his attention to growth over the long term.
Low-cost target-date retirement funds or index funds tracking the S&P 500 can provide diversified exposure to the stock market, historically returning about 10% annually over the long term. While market swings are inevitable, these investments build wealth when left untouched for years.
The challenge for someone with a gambling addiction, like Matt, is resisting the urge to treat investments like bets. That’s why automation — setting up recurring contributions and minimizing account access — becomes crucial.
