Generally, we don’t tend to put personal finance into ethical contexts. Our overall goal is to make as much money, legally, as we can to achieve goals like retirement, debt-free living or an education for our children.
We might wonder if someone can make too much money or how much to donate. However, I’ve long felt some of these discussions are a little shallow since most of us won’t ever make enough money to reach the “I make too much money” point and we may be willing to donate, but probably wouldn’t put out own finances in jeopardy to do so.
Today, I have the real opportunity to test the “get your hands on as much income as you legally can” approach to personal finance with a simple question. If you won the lottery and could legally claim food stamps, would you?
States tend to have weird laws and Michigan is no exception. In fact, if you win the lottery jackpot in MI, you can be approved for food stamp assistance. That’s exactly what Amanda Clayton did when winning $1 million in the MI lottery. Despite her take-home, after-tax lump sum of $700,000, she still received and used $200/month in food stamp benefits.
Please take note, getting food stamps when you win the lottery is very much legal for our ethical debate.
Setting the Ethical Playing Field
Now, if you read the link to the news article, you are likely to be biased against giving food stamps to a lottery winner for a number of reasons:
- She exhibited an entitlement mentality and we in the middle class abhor that characteristic
- She is spending her winnings lavishly; grasshoppers get no sympathy thanks to Aesop
- A million dollars is a lot of money
- We usually like to covet earning lots of money from luck, but get bitter about other people achieving that kind of success
For our example, let’s assume a few things that might break down our natural dislike of this case. So for our discussion, here are our lottery winner’s circumstances:
- A single mom
- Lost her job in the recession back in 2008 and has not been able to find work
- After taxes, her lump-sum payout is only $100,000, but enough to pay expenses for two years while out of work
- After considering accumulated debt and the additional money she’ll spend trying to find a job, her net worth is no better off
- One of the things she hopes to buy is some health insurance, which she’s gone without for nearly 4 years.
- She does not plan on spending the money foolishly and will be saving the money until she needs it
- She really wishes she could put some money away for her children’s education so that they can climb out of poverty
In other words, winning the lottery has greatly improved her situation, but overall, she won’t improve her socioeconomic station in life.
What’s the Real Issue in this Debate?
I think this topic could go in a number of directions and I encourage it. However, I want to highlight the main issue that I want to discuss.
I created our fictional lottery winner to establish a conceivable counterweight to Amanda Clayton’s case. My hope is that you at least identify and wrestle over whether food stamp benefits might be justifiable in the case of our pretend lottery winner. If I’m successful it should lead us to an interesting moral dilemma.
- Does legal qualification of government money ethically justify receiving government money? If no, then what are the standards?
- Is it whether or not you’ve paid into the system? If Amanda Clayton pays state taxes is she not ethically justified in taking money she qualifies for based on the letter of the law?
- Is it based on need? If so, will you claim social security benefits if you have a comfortable, but not a lavish retirement? What about a doable retirement that requires some downsizing? What about college students looking for government grants that could get a full-time job, attend college and pay for school on their own?
- If the legality of claiming government money is all that is ethically necessary, does the Amanda Clayton story bother you? Would it bother you more or less if I presented a story about some uber wealthy person who claims the maximum benefit under social security? If so, what sets the uber wealthy person apart from Amanda Clayton and is that separation related to the fact they come from different classes or your own political ideology?
- Most importantly, should we rethink our loose approach to personal finance as an activity where we try and get our hands on as much income as we legally can grab?
Given the fact that the Politicos have decided to make class a central issue in this year’s elections, I’m very interested to see if and how it affects our outlook on our own personal finance perspectives.