Problem Gamblers

Problem Gamblers
and Their Finances
National Council on
Problem Gambling

This is meant to provide general financial information; it
is not meant to substitute for, or to supersede, professional or
legal advice.
The people depicted in this publication are professional models
and are included here for illustrative purposes only. They are not
connected with the subject matter or situations covered in this
publication.
Note: The content areas in this material are believed to be current
as of this printing, but, over time, legislative and regulatory
changes, as well as new developments, may date
this material.

Treatment professionals familiar with the psychological background
of problem gambling understand that it is not merely
a “financial problem.” It is a chronic, progressive behavior
disorder. Financial problems—overdue bills, badgering creditors,
and impending bankruptcy—are the usual symptom of an addiction
whose statistical odds are stacked against the gambler.
Financial difficulties also seem to be the factor that most frequently
drives the problem gambler, or a loved one of the problem gambler,
to finally seek professional treatment of the gambler’s addiction. By
helping the gambler face and cope with the financial pressures and
find long-term solutions to money problems, you, as the treatment
professional, can provide the gambler and his or her loved ones
with several major benefits:
• You allow the gambler to better concentrate on a meaningful
healing program. As long as financial issues are uppermost
in the gambler’s mind, effective treatment of the underlying
addictive behavior can be restricted, if not impossible.
• You provide the gambler with an immediate sense of hope,
especially if financial problems have reached a crisis stage,
such as impending bankruptcy.
• You offer the gambler viable financial options. Problem gamblers
fail to see other options to their gambling; many believe that the
only way out of the financial hole that gambling puts them in is
to gamble their way out.
• You can help reduce suicidal tendencies, help the gambler
relearn the true value of money, and lessen the chance of a
relapse into gambling behaviors.
Introduction
At first glance, the notion of addressing a gambling client’s
often complex and disordered financial life may strike you as an
inappropriate and overwhelming task. After all, few treatment
professionals are specially trained in matters of personal finance,
and many may personally feel uncomfortable or uninformed about
even basic money management.
Moreover, a gambler’s financial issues present unique challenges
because many traditional money management tools employed by
financial professionals don’t work well—indeed, may actually be
counterproductive—when applied to the household finances of a
problem gambler. Finally, you may have your own psychological
issues with money or struggles with personal finances. These
personal issues may impede your effective treatment of the
compulsive gambling client who confesses to betting thousands
of dollars a week, of having $50,000 or $100,000 or even more
in gambling debts!
That’s why this guide was prepared by the National Endowment
for Financial Education® (NEFE®) and the National Council on
Problem Gambling. It is designed to provide you, as the treatment
professional, with a basic understanding of the financial issues that
confront the problem gambler, and what financial strategies can
help the gambler and his or her family stabilize and improve their
financial situation.
The guide addresses such issues as financial warning signs of a
gambling problem and ways to identify sources of income and
assets that potentially can feed the gambler’s habit. It illustrates
how to establish a workable household budget, remove household
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finances and assets from the gambler’s control, and set up a
realistic repayment schedule for gambling and other debts. It also
looks at bankruptcy, financially stressful life events, taxes, and the
controversial issue of investing. You will come away with a better
understanding of basic financial terminology and concepts. A list
of financial resources is included at the end of the guide.
The material in this guide is not intended to transform the treatment
professional into an expert in personal finance, nor to act as a
substitute for financial professionals. Indeed, it often is imperative
to encourage the client to work with financial professionals such as
debt counselors, financial planners, attorneys, or CPAs. However,
it also is important that you not merely refer clients to a financial
professional and from that point on discuss nothing regarding their
financial problems.
You should work closely with financial professionals to help your
clients, and having a basic understanding of the financial issues
involved will enhance that professional relationship. Understanding
and addressing the financial issues during your therapy work with
clients also will enhance the chances for a positive outcome to this
devastating disorder.
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CAUTION:
Problem gambling experts recommend that a gambler’s
financial problems not be addressed until the gambler
recognizes that he or she has a gambling problem, has
abstained from betting for an appropriate period of time
(usually, at least 30 days), and has begun to address the
underlying psychological disorder! Otherwise, efforts to
recover financially will probably not succeed, and may
even prove harmful.
4
Ted, age 47, began playing video poker at
a bar not far from his mortgage business
shortly after his third marriage. Soon, he
was losing $200 a day. For a while, he
was able to hide his losses because he and
his wife maintained separate checking
and investment accounts. Eventually, his
wife found out. He promised he would
never gamble again. He went to
Gamblers Anonymous meetings for a
while, but eventually started gambling
again. His wife threatened divorce. Again,
he promised to quit, but didn’t. With the
help of his office staff, his wife searched
his financial records. They learned that
he’d drained the cash value in his and his
children’s life insurance policies, cleaned
out his daughter’s college tuition money,
sold off mutual funds, and raided his
business accounts. In all, he’d gambled
away $150,000 in one year. Confronted
by his wife, his children, and his
employees, he agreed to a residential
treatment program, where he turned his
life around.
Confronted by his wife,
his children, and his
employees, he agreed to
a residential treatment
program, where he
turned his life around.

Twenty-five years ago, legalized gambling was
rare, confined to the Nevada desert, Atlantic
City, a few racetracks, and two or three state
lotteries. Today, gambling has gone mainstream,
now available at your local convenience store, and
often state-run.
Some form of gambling is legal in 47 states,
according to the 1999 final report of the National
Gambling Impact Study Commission. Gambling
has become socially acceptable. A 1999 Gallup poll
found that two-thirds of American adults approve
of legalized gambling. It is a source of revenue for
states and charities, and is viewed as an economic
generator for local communities.
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New forms of gambling have mushroomed.
They include state lotteries, scratch games, casinos,
bingo, video poker, slot machines, video keno,
sports wagering, pari-mutuel betting on horses and
greyhounds, and back-room poker games. Some
problem gambling experts even consider investing
as a form of gambling.
Gambling outlets also have mushroomed.
“Convenience” gambling, such as video poker,
has sprouted up in bars, truck stops, supermarkets,
and bowling alleys. You can gamble on riverboats,
offshore ships, cruise ships, Native American
reservations, in casinos, and on international airline
flights. Problem gamblers now can bet on bingo,
casino-style games, and sporting events from the
convenience and privacy of their home PC over the
Internet—and charge it to their credit card!
Gambling Has Gone Mainstream
Rise in Problem Gambling
The 1999 National Gambling Impact Study
estimates that of the 125 million Americans who
gamble at least once a year, approximately 7.5
million have some form of gambling problem,
with another 15 million “at risk” of developing
a gambling problem. Some researchers claim
that problem gamblers pay half of the nation’s
$51 billion annual gambling losses.
Social and Personal Costs
Problem gambling creates immense costs to society,
individuals, and their families. Problem gamblers
are more likely than the general population to
commit crimes such as theft, embezzlement, writing
bad checks, or prostitution to pay for their habit.
They are more prone to personal health problems,
depression, and suicide. The rate of attempted
suicides among gamblers is the highest of all
psychological disorders. Some problem gamblers
have even committed suicide so that a life insurance
payout could help their financially struggling family.
Problem gambling often leads
to the destructive breakup
of close relationships with
partners, friends, and family.
Families with a problem gambler
are more likely to experience
divorce, domestic violence,
and child abuse. Children of
problem gamblers are more
likely to do poorly in school,
become depressed, have drug
problems, or become problem
gamblers themselves.
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The financial costs also are staggering. A study by
the National Opinion Research Center at the University
of Chicago estimates that problem gambling costs
society $5 billion in jobless benefits, increased
levels of crime and incarceration, and medical treatment.
Other experts claim that this number is low.
At a personal level, gamblers are more likely to:
• lose their jobs, be demoted, or be underemployed
• fall deeply into debt and file for bankruptcy
• lose their homes and other personal property
(one in five homeless individuals attribute
gambling as a cause)
• lose their businesses
• depend on welfare
• accumulate legal fees due to divorce or
criminal activities
• run up bills for medical and mental health
care treatment
Problem gambling often leads to the destructive breakup
of close relationships.
Diagnostic criteria for assessing problem
gambling behavior are described in the
Diagnostic and Statistical Manual of Mental
Disorders (DSM-IV), published by the American
Psychiatric Association. Ten behavior patterns
are listed, and signs of five or more of these
behaviors suggests a compulsive gambling problem.
Criteria include:
• preoccupation with gambling
• betting increasingly larger amounts to achieve
the same feeling of excitement
• repeated unsuccessful efforts to stop gambling
• lying to family members, therapists, and others
about the extent of gambling activities
• gambling to escape other emotional problems,
such as guilt or depression
“Problem,” “compulsive,” or “pathological”
gambling are terms used to describe a behavior
disorder that tends to get worse over time unless it
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is treated. Treatment experts use specific clinical
guidelines for determining whether someone has
this behavior disorder. For consistency, this book
primarily uses the term “problem gambler,” which
is meant to describe those individuals whose gambling
is causing psychological, financial, emotional,
marital, legal, or other difficulties for themselves
and the people around them. Experts typically view
problem gambling as less serious than compulsive
or pathological gambling; however, it may lead to
compulsive or even pathological gambling.
Other addictive behaviors are commonly found
with problem gamblers, and may be a contributing
factor. Problem gamblers frequently experience
problems with drinking, drug abuse, or addictive sex.
Problem gamblers fall into one of two broad
types. Action gamblers typically are men and often
start when they are teenagers. They prefer “skill”
games, such as poker, craps, horse and dog racing,
and sports. They believe they are smart enough to
win consistently. Escape gamblers tend to come to
What Is Problem Gambling?
gambling later in life, usually as a way to escape
problems, such as loneliness, depression, or a bad
marriage. They tend to be women and they prefer
“hypnotic-like” games, such as slots, bingo, lottery,
and video poker.
Causes of Problem Gambling
The origin of problem gambling remains unclear.
Recent clinical research suggests that some problem
gamblers may actually inherit their drive to gamble.
The impulse to gamble is the same genetic impulse
to “shop until you drop,” incessantly surf the Web,
or crave sex with strangers. People with histories
of depression, mood swings, and hyperactivity may
be more apt to gamble. Upbringing also may play
a role. Researchers believe an individual is more
likely to gamble if he or she has been raised in a
gambling family, or in a family that believes that
money can solve all problems. Children raised in
families with absent fathers, workaholic parents,
abusive parents, or where money is used to show
love or anger also may be more likely to become
problem gamblers. However, much research
remains to be done in these areas.
Stages of Problem Gambling
Many experts believe that problem gamblers
go through progressive stages as they fall into
the grip of compulsive gambling. Not all gamblers
go through all the stages, nor do they necessarily
progress in any particular order. They may move
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through the stages at different rates. Action
gamblers, for example, may go through the stages
over 10 to 30 years, while escape gamblers might
go through all the stages in a matter of weeks.
Below are brief descriptions of these stages. You
may already be familiar with them, but perhaps not
with their financial manifestations.
Winning Stage
In what’s called the winning stage, an individual
discovers that gambling is exciting, social, and
perhaps sees it as a way to escape the stress of
work, family, or loneliness. This excitement may be
enhanced by a few wins. At this stage, the gambler
still has money and feels in control. Following
wins, the gambler may shower family, loved ones,
and friends with gifts, take expensive vacations, or
live “high on the hog.”
Losing Stage
However, the winning stage eventually—perhaps
very quickly—turns into the losing stage. As losses
mount, the gambler becomes preoccupied with
gambling. The need to make bigger and more frequent
bets grows. The financial and emotional stakes
get higher. Often, filled with guilt and shame, the
gambler starts to “chase” the losses, hoping to make
them up by making bigger and more frequent bets.
Here is where the problem gambler begins
“maxing” out credit cards, cashing in insurance
policies, pawning or selling personal property,
dipping into investment and retirement accounts,
and borrowing heavily. The problem gambler may
start missing work and begin lying to family and
friends about his or her gambling habit. Gamblers
who are “jammed up” start looking for “bailouts”
from family and friends, sometimes blaming it on a
phony financial catastrophe, unexpected expenses,
or inadequate income.
This is commonly the stage when the gambler’s
spouse, partner, parents, children, relatives, or
friends begin to notice signs of a gambling problem.
They may directly suffer financial problems as bill
collectors and relatives owed money begin knocking
on the door. The rent or mortgage payment may be
behind, the car has been repossessed, and the power
company is threatening to shut off utilities.
More and more gamblers are calling hot lines
or seeking professional treatment at this stage.
Unfortunately, others progress to the next stage
before seeking help.
Desperation Stage
In the desperation stage, the gambler may begin
to experience health problems, such as insomnia, as
debts mount and relationships deteriorate. The
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financial problems tend to reach a crisis stage:
the problem gambler may face eviction, and all
financial resources are exhausted. The gambler
may even turn to crime. Emotionally, the problem
gambler often feels powerless, hopeless, and
depressed. Action gamblers often begin to gamble
like escape gamblers, preferring the hypnotic-like
slots or video poker to escape their misery. During
this stage, the gambler may simply run away from
family and debts. Suicide is another common
option. Or the gambler may finally reach out for
help—including financial help.
While experts commonly cite only three stages
in problem gambling, some now describe a fourth
stage, the hopeless stage. At this point, the gambler
no longer believes there is hope or help. Depression
is common and suicide is a real risk. The problem
gambler becomes more likely to commit crimes.
Again, keep in mind that the problem gambler
may not experience all of these stages, or experience
them in a distinct, progressive order. A problem
gambler may actually have started out losing money,
become desperate, then win, and start a new cycle.
Gamblers tend to go through stages of behavior…
As gamblers move from stage to stage, and
more and more into the powerful grip of
betting, their view of money begins to change.
It no longer holds its traditional value as a means of
exchange … a way to accomplish goals … a measure
of security … a source of freedom … a standard of
accomplishment. Instead, money to the gambler has
only one value: to enable the gambler to keep gambling,
to stay “in action.”
This corrupted view of the value of money is why
problem gamblers may do anything to obtain money
to keep gambling—lying, borrowing, even stealing.
Gamblers have been known to sell a new television
set or a car for a fraction of its value because they
desperately wanted the cash to gamble. This irrational
view of money is why the financial steps outlined in
this guide are so important in stopping the financial
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The Gambler’s View of Money
damage and helping the gambler relearn the value
of money.
Financial Signs of Problem Gambling
Problem gambling is sometimes called a “hidden”
disease—hidden from those around the gambler,
sometimes even hidden from the gambler himself or
herself. As a counseling professional, you probably
are already familiar with the 20 questions from
Gamblers Anonymous and Gam-Anon. (For further
reference, they are reprinted in Appendix A.)
Here are some financial warnings at home and at
work. It should be noted, however, that some of
these warning signs could indicate a problem other
than gambling. Therefore, it’s important to discover
the cause of the problem.
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Warning Signs at Home
• There are overdue or unpaid household bills, or
the suspected gambler suddenly wants to take
over paying the bills.
• The gambler’s loved one reports finding
numerous and unaccounted-for cash advances
from credit cards, or an increase in the number
of active credit cards.
• The suspected gambler is only able to afford
minimum payments on credit card bills.
• He or she is always short of money, despite
adequate income.
• The individual is secretive about money.
• There are unexplained loans, the use of payday
loans, or loans from friends or relatives.
• The gambler’s loved one finds high cell
phone/pager bills.
• The gambler has large amounts of unexplained
cash, especially if household bills are going unpaid.
• The suspected gambler’s spouse reports the
disappearance of cash (stealing from a child’s
money jar or a spouse’s wallet, for example).
• The gambler is involved in extremely high-risk
investing or frequent trading.
• Money is pulled from savings, investment, or
retirement accounts for no apparent reason.
• The bank reports frequent bouncing of checks
or postdating of checks.
• Bill collectors are calling, or property is being
repossessed.
• The suspected gambler is denied credit.
• Needed household items are being sold or
pawned for cash.
Warning Signs at Work
• The suspected gambler is missing work, coming
in late, or leaving early.
• He or she is taking long lunches and breaks.
• The suspected gambler fails to finish projects
properly or on time.
• He or she is organizing or taking an excessive
interest in office pools.
• The individual is borrowing money from
co-workers.
• The office manager notes heavy telephone
use not related to work.
• The gambler is using sick days when not sick.
• He or she is overheard making or taking
gambling calls while at work.
• The company notes use of the computer at
work to gamble.
• The gambler frequently asks for advances
in pay.
• He or she is caught stealing or embezzling
at work.
• He or she begins taking cash advances with
the company credit card.
12
13
Bill started flying periodically to Las
Vegas when he was age 21, gambling
away the savings he’d earned from
working in his father’s equipment rental
shop. He also played weekly poker games
with friends. It wasn’t until a casino
opened nearby that he began to go
through a lot of money. He borrowed
from friends, and when he couldn’t do
that, he stole from his father’s business.
At one point, he was gambling $12,000
a month. His parents persuaded him to
go to a 10-day treatment center, but that
failed. When his father discovered that his
son had stolen a check from work,
he kicked Bill out of the business.
A week later, Bill shot himself to death.
His parents
persuaded
him to go
to a 10-day
treatment center,
but that failed.
Encouraging the problem gambler to take
immediate financial steps could help the
gambler move toward a sense of personal
empowerment and hope. This guide outlines several
specific strategies the gambler can take to start to
cope with the financial pressures. As a counselor,
you are encouraged to:
1. Explain the possible financial consequences
of continuing to gamble: decreased ability
to meet personal financial goals, rising debt
problems, loss of property, potential bankruptcy,
and so on.
2. Provide an overview of the strategies discussed
in this guide that problem gamblers might take
to improve their financial situation, such as
shifting asset control and repaying debts.
Encourage hope and options.
3. Ask the gambler to list his or her creditors
and how much they are owed. He or she may
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have no idea how deep the debt load is, and
the realization may motivate the problem
gambler to stop.
4. Have the nongambler hide, cut up, or cancel
credit cards. Calling (888) 5OPT OUT can
stop most unsolicited credit card offers.
5. Have the nongambler change the personal
identification numbers on bank debit cards.
6. Store valuables in a safe-deposit box to which
the gambler has no access.
7. Recommend that someone other than the
gambler take over paying household bills.
Encourage the gambler to agree to live on
a weekly cash budget.
Strongly discourage the gambler from taking any
major financial measures, such as loan consolidations
or filing for bankruptcy, until the financial situation
has been thoroughly assessed by a financial
professional or attorney.
Possible Immediate Financial Actions
Just Say ‘No’
During the course of working with the problem
gambler, you may have an opportunity to talk with
a nongambling loved one, such as a spouse, partner,
sibling, or parent. These loved ones may have been
“bailing out” the gambler on occasion by loaning
him or her money to satisfy gambling debts. At
some point, the loved ones may come to the conclusion
that “enough is enough,” and the bailout
must end.
When the loved ones have reached this point,
they may need help verbalizing their position to the
gambler. One possible explanation they could give
is this: “I care about you very much, and I want to
help you in any way I can. But if I loan you money
to gamble again, it will just delay the day when
you must face your gambling addiction and take
steps to get help. I’m sorry, but I can’t bail you out
again. If you wish, I can help you find a counselor
or recovery support program to assist you in overcoming
your gambling addiction.”
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Loved ones frequently find it difficult to refuse
bailout requests. This is especially true if they have
already established a pattern of helping the gambler
out of his or her immediate crisis. Furthermore,
their refusal may exacerbate financial problems for
their household or for others who have lent money
to the gambler.
In some cases, a nongambling spouse, partner,
sibling, or parent may be legally responsible for
debts created by the gambler. The gambler’s
employer may be threatening to fire the gambler or
have the gambler arrested if money stolen at work
isn’t replaced. The gambler may plead that his or
her bookie is threatening physical harm if gambling
losses aren’t quickly covered.
Refusing bailouts not only slows or stops the
financial bleeding, but may force the problem gambler
to finally confront his or her addiction. As a compromise
for loved ones who are hesitant or afraid to
stop bailouts, they might agree to a bailout, but only
on the conditions that there will be no further bailouts
and that the gambler seeks out or continues with a
treatment program and/or Gambler’s Anonymous.
Refusing bailouts not only slows or stops the financial
bleeding, but may force the problem gambler to finally
confront his or her addiction.
One of the biggest challenges in working with
a problem gambler is that the gambler cannot
entirely avoid the one thing that feeds his
or her gambling habit—money. A drug addict can
physically avoid illegal drugs. An alcoholic can
physically avoid alcohol. A gambler can stay out
of casinos and stop buying lottery tickets. But a
gambler cannot easily avoid banks, cash registers,
and touching money. What can be done—and this is
where your financial knowledge learned here can
help immensely—is to minimize the gambler’s
access to money, teach the gambler (and often the
gambler’s family) how to properly manage money,
and ultimately help restore their proper sense of
value toward money.
The remainder of this guide covers a variety of
actions the gambler may take to relearn how to
manage money so he or she can regain financial
stability in life and begin working toward a sound
financial future. These may be areas you’ll talk
about directly with the gambler and perhaps with a
professional financial advisor, as well. At a
minimum, they are financial issues you should be
familiar with to help the gambler recover.
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These actions include:
• identifying income and assets the gambler can
use to feed his or her habit
• establishing a spending plan
• shifting control of the finances to the
nongambler
• setting up a repayment plan for gambling and
nongambling debts
• avoiding bankruptcy
• deciding whether to have an investment program
Be aware that some of these actions and strategies
for the actions run counter to standard money
management practices because standard practices
aren’t always appropriate for the problem gambler.
How to Work Financially
With the Problem Gambler
CAUTION:
It must be emphasized again that taking these financial
actions will not address the gambler’s addiction. Recovery can
only come from abstaining from gambling and, ideally, going
through a therapeutic program. Consequently, it is strongly
advised that you not encourage the gambler to undertake the
following recommendations until he or she has not gambled
for an appropriate period of time (at least 30 days).
Identifying Assets and Sources of Income
Money is the lifeblood for the problem gambler.
Without it, the gambler cannot continue betting. A
key to regaining and maintaining financial stability
is to limit the gambler’s access to money. To accomplish
this, the gambler must first list the sources of
income and available assets that can finance the
problem gambler’s habit.
Sources of Income
Have the gambler start with the obvious sources
of income: paychecks, Social Security and pension
benefits, unemployment income, trust income, cash
advances from credit cards. Also ask the gambler to
identify possible sources the gambler might “fudge”
on, such as tips, bonuses, or commissions.
Look into less obvious sources, such as a soonto-
arrive inheritance or a tax refund. You may want
to ask the gambler’s loved ones if any items are
17
missing from around the house. These could include
furniture, appliances, or other valuables, that could
have been sold for cash. Ask the gambler or the
nongambling loved one if the gambler is expecting
a check from an insurance company to pay for
property damage, such as to a roof or a car. (The
gambler could skip the repairs and cash the check to
pay for gambling.) The gambler also might ignore
certain financial obligations, such as quarterly
estimated tax payments.
What friends, family members, business partners,
or co-workers might lend money to the gambler?
Have the gambler or the loved ones ask this circle
of people not to loan or give money to the gambler.
What illegal sources of income could the gambler
turn to? Is the person in a position to embezzle or
steal funds at work? Is there a risk the gambler might
sell drugs or turn to prostitution? Is there a risk that
the gambler may attempt to cause a property loss
in order to collect on insurance
benefits? Is there a chance the
gambler may try to sell personal
assets through an on-line auction?
All potential sources must be
identified and then tracked on
a regular basis. The gambler’s
spouse, partner, or whoever else
is in a position to monitor the
gambler’s finances should be
alert for discrepancies between
income and expenses, which might
indicate hidden sources of income
being used to fund gambling.
Financial Assets
What financial assets can the gambler potentially
turn into cash? These might include:
• bank accounts
• certificates of deposit
• mutual fund accounts
• individual stock and bond securities
• retirement accounts
• individual retirement accounts (IRAs)
• home equity
• interests in a small business
• real estate
• cash value in life insurance policies
• trust funds
Have the gambler or a loved one document all
personal assets such as cars, a boat, jewelry,
antiques, artwork, furnishings, a stamp collection,
and appliances.
Anything is fair game to the gambler if it can
be cashed in, borrowed against, pawned, or sold.
Worse, some of these assets cannot be easily
replaced, such as family heirlooms or money pulled
out of an IRA or retirement account at work.
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The Gambler’s ‘Stash’
A “stash” is any source for cash that the problem
gambler does not disclose to a spouse, partner,
treatment professional, financial advisors, or others
attempting to help the gambler recover. It might be
cash stuffed in an unknown safe-deposit box, an
unreported credit card, pawned jewelry, unreported
pay from work, a secret bank account, or individuals
such as a loan shark. Income from a business
the gambler owns, especially a business that deals
a lot in cash, can be easy to hide.
To uncover these stashes, begin by asking the
problem gambler to tell you about them. Be firm
and blunt. “Jog” the gambler’s memory by suggesting
places he or she may have hidden money—just
in case the gambler “can’t remember.” Emphasize
that lack of cooperation and honesty will only make
the financial and psychological recovery efforts
more difficult. A loved one familiar with the
gambler’s finances also may be able to help the
gambler remember.
The gambler will probably not disclose every
stash, at least not right away. Out of habit, gamblers
usually have lied about their betting, often for years.
It’s difficult for them to “come clean.” They may
genuinely forget about some stashes. You’ll probably
need to return to this subject several times to uncover
stashes little by little.
It’s also important at this stage to encourage
the spouse or other loved one financially involved
with the gambler to disclose any stashes he or she
may have. It’s common for spouses, partners, and
other loved ones to hide money from the gambler
so they can pay the bills or just keep the money
from being gambled away. Honesty among all
parties is critical here.
Anything is fair game to the gambler if it can be cashed
in, borrowed against, pawned, or sold.
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Debbie and her husband, John, began
making the hour-long drive to the casinos
in the mountains of Colorado shortly after
the casinos opened. The novelty wore off
soon for Debbie, but not for her husband.
He continued going to the casinos several
evenings a week. Although their
combined household income was a
modest $3,000 a month, John managed to
lose $40,000 in three months. When he
wouldn’t stop, Debbie filed for divorce
after 17 years of marriage. “The husband
I divorced was not the husband I
married,” she said.
“The husband
I divorced
was not the
husband
I married.”
The Monitoring that a Loved One Might Do
You might recommend to the gambler’s spouse
ways that he or she could do some double-checking.
Suggest that the spouse start with a joint credit
report. Such reports show credit-history inquiries
and problems of missed or late payments. The
reports might reveal unknown debt obligations or
credit cards, or show a post office box the gambler
is using to hide gambling transactions. Reports can
be obtained from one of three credit bureaus:
• Equifax, (800) 685-1111
• Experian, (888) 397-3742
• Trans Union, (800) 645-1933
Depending on the state in which you live, the
report may be free (one report a year) or a small
20
fee (around $8) may be charged. Some spouses get
monthly reports to monitor for suspicious activity.
In situations where the gambler is not married, or
where the gambler may have a credit card in his or
her own name, the gambler would need to provide
a signed release for someone to see a copy of the
credit report. As the counselor, you could make this
part of the treatment process. Also insist that the
gambler bring the report to your office, unopened.
If possible, have the loved one take in all the
gambler’s mail. This keeps unsolicited loan offers
and credit cards out of the gambler’s hands, and
allows the monitoring of mail from creditors. Also,
have the loved one monitor the answering machine
for calls from bill collectors, friends, and relatives
who may be owed money.
21
Is there a computer in the house that’s hooked up
to the Internet? Web browsers—the software that
allows the user to navigate the Web—contain a record
of what Web sites were recently visited. A check of
Web browsers might reveal on-line gambling.
Encourage the gambler’s spouse or other loved
one to involve himself or herself as much as possible
in financial roles that the gambler has traditionally
undertaken in the past. A good place to start is the
household checkbook. Review current and past
household bills. They may reveal stash locations,
such as payment for a secret safe-deposit box. Be
alert for checks to relatives or friends who may be
temporarily holding on to gambling money. Or the
“friend” may, in fact, be a bookie.
Advise the gambler’s spouse or other loved one to
review bank and brokerage statements for assets or
more funds than the gambler has revealed.
The loved one also should review recent tax returns.
They may reveal W-2 forms, which show wages, or
1099s, which show investment income or freelance
income, that the gambler may not have revealed.
The returns also may show undisclosed tax refunds
or refunds for an amount that was different than
what the nongambler was told.
The nongambler should be especially alert for
tax information related to a business the gambler
owns. The return may reflect more income than the
gambler has let on about (though gamblers also are
known to underreport income to the IRS).
A check of Web browsers might reveal on-line gambling.
Creating a Realistic Spending Plan
To get the gambler’s financial life under control,
he or she will need a “spending plan”—commonly
called a budget. A spending plan directs money
to where it is most needed. It also helps prevent
adding to current debt problems by spending more
than is earned.
Equally important, a spending plan establishes
savings goals. These goals can provide the gambler
something positive to work toward instead of
merely digging out of debt. This positive reinforcement
encourages the gambler to stick with recovery
efforts. The welfare of the family, not debts, should
come first in a spending plan.
Here’s how to guide the gambler to set up a
spending plan.
• Write out the plan, either on paper or on a
computer program. A sample plan is provided in
this guide.
• List monthly sources of income. List only
income that can be counted on each month, such
as paychecks, child support, interest, and Social
Security benefits. Income that varies, such as
sales commissions, tips, or freelance income,
should be averaged on a monthly basis.
• Extra sources of income, such as a year-end
bonus at work or an income-tax refund,
generally should be put only toward savings or
investing goals, or to pay for special needs, such
as a new car or vacation. (As noted later in this
guide, they should not be used to pay off debts.)
• List basic monthly household expenses, such as
rent or house payments, groceries, utilities, car,
child care, and loan payments. If the gambler
has agreed to live on a set cash amount, make
sure to include that allowance.
Notice that savings is included as a basic expense.
Savings should always be treated as a priority, even
if debts are high. Treat savings as a basic expense,
similar to the mortgage payment or utility bill.
22
The spending plan should be calculated first without
including the debts. Once basic living expenses
are covered, any remaining funds can go toward
debt repayment. The section, “Repaying Gambling
Debts,” on page 34, provides a better idea of how
much the gambler needs to repay each month.
The gambler may need to recalculate the spending
plan and debt payments a couple of times to come
up with a realistic plan.
The spending habits of the spouse, partner, or
loved one who shares the household budget with the
gambler should be carefully reviewed. Sometimes
people living with a gambler spend recklessly out
of anger or because they fear that money they don’t
spend will be gambled away.
23
Identify Income Sources Each Month
Wages after taxes (gambler) $
Wages after taxes (others in household) $
Tips/commissions (average each month) $
Investment income (dividends, interest, etc.) $
Pension/retirement plan benefits $
Social Security $
Unemployment benefits $
Welfare payments $
Food stamps $
Child support/alimony payments $
Trust fund $
Other $
Total Income $
Spending Plan
Step 1
24
List Expenses Each Month
Rent/mortgage payment $
Groceries (average) $
Utilities (average) $
Telephone $
Home maintenance/repair (average) $
Savings $
Clothing (average) $
Car payment $
Car insurance/gas/repairs (average) $
Other transportation $
Life/medical insurance premiums (average) $
Homeowners/renters insurance $
Medical bills (average) $
Child care $
Gambler’s allowance $
Loans/credit card payments $
Taxes $
Entertainment (average) $
Cable TV $
Meals out (average) $
Sports activities/events (average) $
Charitable contributions $
Gifts (average) $
Cigarettes/alcohol (average) $
Long distance telephone (average) $
Travel/vacations (average) $
Gambling debts (this guide will explain
later why this should be a low priority) $
Other $
Total Expenses $
Step 2
25
Compare Income and Expenses
Total Income (from Step 1) $
Total Expenses (from Step 2) $
Subtract Expenses from Income $
Make Adjustments
If there is not enough income to cover expenses,
you have three choices:
• Earn additional income, such as through a
second job or a better-paying job.
• Reduce expenses.
• Reduce expenses and boost income.
Income and expenses change over time. Review the spending plan
every few months and make adjustments if necessary.
Step 3
Step 4
26
Tips on Cutting Expenses
The average American household loses 20 percent
to 30 percent of its money through poor spending
habits. That’s money the gambler could put toward
savings or paying off debts. Magazine articles,
books, and suggestions from the gambler’s friends
can provide tips for reducing expenses. Sample
ideas include:
• sticking to a shopping list
• shopping for bargains and sales
• comparing prices
• using coupons
• eating out less often
Additional tips are offered in Appendix B.
Additional Budgeting Tips
If the household’s income varies each month,
have the gambler calculate the minimum or average
income available to spend each month. In the
months the household earns above that amount,
bank the extra money. Use the extra income for the
months during which income falls below average.
Recommend breaking large periodic bills, such
as auto insurance, into smaller monthly amounts.
A nongambling spouse or other loved one should
put that amount each month into a savings account,
or at least as cash in an envelope. If an envelope is
used, it should be hidden from the gambler. When
the bill arrives, enough money will have been set
aside to pay for it.
Advise the gambler to use a small notebook for a
month or two to track miscellaneous cash expenses
such as coffee or movie tickets. Incorporate this
information into the spending plan. It can be shocking
to individuals to see just how much they spend in
“miscellaneous” cash.
Have the gambler mark on a calendar when bills
are due. Bills paid on time improve an individual’s
credit rating and eliminate the expense of latepayment
charges.
Budgeting Monies for Gambling Treatment
The treatment of a gambling addiction can be
difficult, time-consuming, and costly. However,
most medical insurance policies and managed care
providers don’t pay for treatment, according to the
1999 National Gambling Impact Study Commission.
Some health plan carriers pay for treatment only if
the patient suffers from an additional, and often
related, disorder such as alcoholism, drug addiction,
or depression. Consequently, the gambler may need
to pay for treatment out of pocket, and this must be
factored into the budget.
If you are a professional therapist charging for
your services, gambling clients may ask you to
reduce your fees because of their financial problems.
Problem gambling experts commonly recommend
that therapists don’t reduce their fees, as this is seen
as another form of bailout.
27
When Alan and Sarah’s widowed father
was seriously hurt in a car accident, they
took over his finances. To their dismay,
they discovered that although he had
been a successful dentist for many years,
he had minimal medical insurance and
almost nothing in savings. That’s when
they learned he had gambled away most
of his earnings. To help him keep his home
and to help pay for a home health aide,
they had to dig into their own pockets.
They both struggled financially for 10
years, during a time they could have
been building their own assets, until
their father died. To this day, they remain
angry at their father.
… they learned
he had gambled
away most of
his earnings.
Limiting the Gambler’s Access to Money
Experts commonly recommend that the problem
gambler’s access and handling of the household’s
finances and assets be restricted or cut off entirely.
This protects the household and benefits the
gambler. The spouse, partner, parent, trusted friend
or relative, or a third party all can serve as a
“roadblock” to the one thing that fuels a gambler’s
habit—money. The roadblock can be as simple as
putting the problem gambler on an allowance, or as
extensive as transferring legal control of all assets—
bank accounts, investment accounts, even the home
and car—into the sole name of the spouse, partner,
loved one, or perhaps a trust. However, before taking
drastic financial steps, encourage the family to seek
professional financial, tax, and/or legal advice.
Establish Controls for Paying Household Bills
One of the first and easiest steps is for a nongambler,
such as a spouse or parent, to assume
management of the daily household finances. This
includes the payment of all bills. The gambler may
assist in the process, such as signing the checks,
but only under supervision.
Encourage the nongambling loved one to pay as
many bills as possible automatically through a bank
or credit union, as well as payments into savings
and investment accounts. Paychecks, Social Security,
pension payments, and other income should be
automatically deposited whenever possible. For
income checks that cannot be deposited automatically,
the gambler should be encouraged to hand over the
checks to a trusted nongambler to deposit into the
appropriate accounts.
28
CAUTION:
A spouse, partner, or close loved one should NEVER restrict
or cut off the gambler’s access to a household’s financial
resources if there is any fear that the gambler will become
physically or emotionally abusive in an effort to obtain
money. Desperate gamblers have assaulted spouses, partners,
or other loved ones. Some have committed murder. Gamblers
sometimes threaten suicide if they don’t get the money, or
use the children as ransom.
The problem gambler should be encouraged to
close the accounts for all credit cards on which the
gambler signs. This includes jointly owned cards
and cards used for work. Advise the gambler or
loved one to obtain written confirmation of all
closures. If a credit card is necessary, the nongambling
individual may want to open a new account in his or
her name only. However, since gambling households
commonly are experiencing financial difficulties,
the nongambling spouse may want to delay obtaining
a new credit card until the household finances have
sufficiently stabilized.
Suggest to the problem gambler that he or she
agree to live on a set cash amount each week. The
nongambler would administer this amount. The
cash sum should be sufficient for items such as
coffee, snacks, or other common out-of-pocket
needs. The gambler should track even these small
29
expenses and account for the money to the loved
one before the next week’s cash is paid.
Legal Transfer of Assets
Experts often recommend that the gambler transfer
legal ownership of some, or even all, of his or her
assets to a nongambler. This can raise problems in
the event of divorce, separation, physical or mental
incapacity, death, or if the nongambler is not a
spouse, but it may be a necessary action.
The following are suggestions for ways to transfer
ownership or otherwise restrict the gambler’s access
to the household’s financial resources. Just which
strategies should be implemented depends on the
individual gambler, his or her unique financial
situation, and family obligations. Encourage the
gambler to talk over these possible strategies with
a lawyer or financial planner before taking action.
Make the gambler aware that he or she could
transfer ownership of assets by taking the following
actions:
• Close all joint checking, savings, and investment
accounts and reopen them in the sole name of
the nongambler spouse, partner, or relative. This
should be done even with accounts that currently
require dual signatures. (Some gamblers will
forge signatures.)
• All paychecks, pension payments, and other
income should be automatically deposited in
these accounts whenever possible. However,
Social Security payments cannot be automatically
deposited in accounts that don’t contain
the name of the recipient.
Just which strategies should be implemented depends on
the individual gambler, his or her unique financial situation,
and family obligations.
• It may be appropriate to transfer ownership
of a home, cars, vacation property, and other
valuable personal property so that the gambler
can’t convert these assets to cash. However,
some treatment professionals feel the transfer of
property such as the home is too severe for most
problem gamblers, and may be emotionally
counterproductive.
• Transfers of ownership are treated as gifts under
tax law and may be subject to tax. Generally,
gifts between spouses are not taxable. However,
property that exceeds a certain value ($10,000 in
2000) may be subject to tax if transferred to
nonspouses such as children, a partner, relative,
or friend. This problem can be eliminated by the
proper use of a trust.
30
• Ownership of the gambler’s retirement accounts
and IRAs cannot be transferred to another
person. The gambler can withdraw the money
from IRAs and similar accounts under certain
circumstances and put it into the name of
another individual or trust. However, the funds
would no longer grow tax-free and they also
would probably be subject to taxation and
perhaps penalties (see “Tax Issues” on page 37).
This is a drastic action, and potentially expensive,
but if there is danger the gambler will blow
the money gambling anyway, it may be a step
to consider.
• If both spouses or partners are gamblers, they
should consider turning control of their assets
over to a relative, such as an adult child.
31
The Use of Trusts
Trusts are legal entities for controlling property.
For example, a gambler might put assets, such as
stock or cash, into an irrevocable trust, which means
the gambler permanently gives up control of the
assets. A spouse, partner, trusted friend, or relative
might serve as trustee. The trustee would manage
the assets for the benefit of the trust’s beneficiary
(the gambler’s family, for example). A family with
a problem-gambling son, for example, might put
assets into a trust when they die. The trustee would
parcel money out to the son so he couldn’t gamble
away his inheritance all at once.
Gamblers who have pushed away family, friends,
and loved ones could use a third-party trustee,
such as a bank trust department, attorney, or
financial planner.
Trusts can be complicated and they cost money.
However, for some situations, particularly if significant
assets are involved, a trust may be appropriate.
Problems and Risks of Shifting Ownership
Transferring ownership and control of financial
accounts and other property entails a variety of
financial problems and risks for both parties. For
example, what happens if the gambler’s spouse dies
or divorces? What claims, if any, does the gambler
have to the property put into the spouse’s name?
What’s to prevent a partner or relative from simply
spending money and assets the gambler has legally
transferred to them?
That’s why it’s important to strongly encourage
the gambler to discuss any transfers with everyone
involved, especially legal counsel, before taking
action. A knowledgeable lawyer will understand
these risks and may be able to recommend
strategies for limiting the risks.
The gambler and his or her loved ones also
need to become familiar with the state’s property
ownership laws. The gambler also should check
with his or her bank, brokerage firm, mortgage
company, insurance company, and other financial
institutions regarding their policies toward
ownership transfers, power of attorney, and similar
strategies.
Large Sums of Money
“Winning” a large amount of money is often very
bad for a problem gambler. These large sums of
money are seen as a quick way to pay off gambling
debts or to feed additional gambling.
Winning doesn’t always happen at the casino,
racetrack, or the lottery. A gambler can “win big”
by wiping out his or her retirement nest egg or a
college education fund, siphoning off the cash value
accounts of life insurance policies, raiding business
accounts, taking out a home-equity loan, or
squandering an inheritance.
The following paragraphs list several potential
sources of large sums of money that could be
tapped for gambling. The financial consequences
32
of using these sources are explained, and in some
cases suggestions are made for minimizing the
gambler’s access to the funds.
Retirement Accounts
The gambler who raids retirement accounts for
gambling funds subjects those withdrawals to
income and penalty taxes. In addition, the money
taken out can no longer grow tax deferred. Over a
long time, these lost earnings could run into the
thousands … tens of thousands … even hundreds of
thousands of dollars. Thus, the gambler may have
to face the possibility that he or she can never
afford to retire.
Mortgage Refinancing or Home Equity Loans
If the gambler fails to repay the loan, he or she
could lose the family’s home. One way to reduce
this risk is for the gambler to transfer ownership
of the home so he or she doesn’t have access to
loan monies.
A gambler can “win big” by wiping
out his or her retirement nest egg or a
college education fund.
Traditional Pension Plan
When leaving a job or retiring, workers with a
traditional company-paid pension plan may have the
choice of taking the money in a single lump sum, in
annuitized monthly payments, or rolling it over into
another pension plan or an IRA. For households
with a problem gambler, monthly annuity payments
usually are the better option if the individual is
retiring. That way, only one monthly payment at
a time is put at risk, not an entire lump sum.
Inheritances
Several options are available, and the gambler
should consult a lawyer. The inheritance could be
put into a trust managed by a trustee. Someone else
could be named as beneficiary instead of the gam-
33
bler. Or the gambler could “disclaim” an inheritance.
The money would then go to another heir, such as
the gambler’s children.
Investment Accounts (Nonretirement)
If the gambler’s name appears on an account or as
a joint owner of the account, or even as a custodian
of an account, he or she can access the funds in that
account. For example, the gambler may have set up
a Uniform Gift to Minors Act (UGMA) account for
a child. But if the gambler is named as the custodian,
the gambler could still raid the funds in the account
and harm the child’s financial future.
Gambling Winnings
The problem gambler should no longer be “in
action,” so there should be no large gambling
winnings. However, if money is still left from previous
gambling, it should not be used to pay off
debts. It should be put toward household bills, or
perhaps into an irrevocable trust managed by a
loved one.
Lottery Winnings
Lottery winners can “sell” their annuity payments
for a discounted lump sum. Gamblers should avoid
this, unless the proceeds are to be placed in a trust.
A trustee can then control the use of the funds for
the needs of the gambler or the gambler’s family.
Civil Settlements
Lawsuit judgments for such things as injuries or
death in a car accident, workman’s compensation,
or product claims may be paid out in a lump sum
or in periodic payments known as a structured
settlement. Structured settlements generally should
be preferred for problem gamblers, unless a trust
will be used.
Repaying Gambling Debts
The problem gambler is likely to have accumulated
gambling and other debts. These debts would
commonly be considered “excessive” if more than
15 percent to 20 percent of monthly take-home pay
goes toward nonmortgage debt, such as credit cards,
car loans, and of course, gambling debts.
The debts may be a major cause of friction and
worry in the household. Creditors may be knocking
at the door. Mounting debts may be what prompted
the gambler to “face the music” and seek a gambling
recovery program and financial relief. Relieving the
debt burden can help reduce the problem gambler’s
anxiety and guilt, and help in the gambler’s
recovery efforts.
But, debt repayment must be done in a way that
is different from how a nongambling household
normally would reduce debt. Otherwise, the debt
problems might actually become worse. Here are
some guidelines.
34
Determine Amount of Debt and List Creditors
Have the gambler write down and total all current
nongambling debts, such as:
• car loans
• credit cards
• home-equity loans or second mortgages
• furniture loans
• department stores
• payday loans
• bank loans
• medical bills
• utility bills
• back taxes
• child support
• education loans
Also have the gambler list and total all gambling
debts. The gambler should list who is owed and how
much. Besides bookies and gambling establishments,
this might include friends, family members, relatives,
employers, co-workers, and business partners.
The gambler may have raided household funds,
such as savings accounts or a vacation fund. These
funds are “owed” and should be repaid.
The gambler may be reluctant to acknowledge all
the debts, or may even have forgotten some. Try to
work with the nongambler loved one to verify all
debts as accurately as possible.
Clarify what debts the gambler alone owes, and
what debts are owned jointly with a spouse or other
party. This will depend on the state’s debtor laws.
Generally, if someone has co-signed a loan or
contract with the gambler, he or she is equally liable
for the debt. In other words, joint names on an
account equal joint responsibility to pay the debts
on the account—no matter which person ran up the
bill. (You may want to remind the nongambler of
this point since the nongambler may opt to take his
or her name off the account.)
If only one name is on an account, then only that
person is responsible for the debt. In the case of
joint tax returns, both parties usually are liable for
35
back taxes (see “Tax Issues”
on page 37). The nongambling
spouse is liable for all debts
incurred as a couple. Separation
or divorce does not remove any
jointly owned debts, but debts
incurred by the gambler after
divorce are solely the gambler’s
responsibility.
Establish a Debt Repayment Plan
Start first with the monthly
household budget created earlier.
Part of that budget should have
tentatively set aside money to repay gambling and
nongambling debts, though the amount may need
to be readjusted after creating a repayment plan.
Next, work with the gambler (and possibly his or
her loved ones) to determine how much the gambler
can afford to pay each creditor. Consider involving
a financial advisor or credit counselor in this
process. The way to do this is to divide the total
amount of money that can be put toward debts each
month by the total amount of the debt. For example,
the gambler can afford to pay $600 each month
toward debts and debts total $12,000. The gambler
can thus pay off 5 percent of the debt each month
($600/$12,000).
Apply this 5 percent toward each individual
creditor. Say $3,000 is owed on a particular credit
card. The gambler would then pay $150 each month
to that credit card (interest charges would continue
to accumulate, making the final total more than
$3,000). Calculate this for each creditor (including
debts owed to the household).
The gambler may be reluctant to acknowledge
all the debts, or may even have forgotten some.
The gambler should then go to each creditor to
explain that there is a debt problem, that he or she
intends to fully repay the debts, but that he or she
will need to make reduced payments. Creditors
usually will be agreeable to this since they’d rather
get their money back slowly than to not get it back
at all.
The problem gambler should be the person in the
household to directly contact the creditors. This is a
way for the gambler to take personal responsibility
for his or her actions. The exception to this is if they
work through a debt counseling service. Typically,
debt-counseling services negotiate with creditors for
lower interest rates, waived late fees, and a repayment
schedule. The gambler makes single monthly payments
to the service, which in turn distributes the
money to the creditors.
Here are some other points to remind the gambler
about when he or she is creating a repayment plan:
• Avoid quick repayment of debts, especially
gambling debts. Although this means higher
total interest payments, slower, lengthy repayment
reminds the gambler of the nightmare his or her
addiction has created. You don’t want the “monkey
off their back” too quickly.
• Avoid loan consolidations or refinancing a
home. They may only embolden the gambler to
return to betting and pile new debt on top of old.
• Some debts may require a higher priority than
others. Some creditors may not accept reduced
payments. Creditors with secured loans, such as
a car loan, may threaten to repossess the property.
The gambler would not want to lose the car that
gets him or her to work.
Gamblers and their loved ones often differ over
the priorities for paying off debts. The gambler
might worry about the loan shark, while the spouse
36
is worried about the utility bill. A third party, such
as a debt counseling service, financial advisor, or
treatment professional can provide a neutral perspective.
However, a debt counseling service may
not understand all of the issues that accompany
problem gambling. For example, many gambling
experts feel that if debts must be prioritized,
gambling debts should be given a low priority.
Debt counseling services don’t always agree with
this approach.
Advise the problem gambler to revisit his or her
budget every few months or so to see if more money
can be freed up for debt repayment. Another option
may be for the gambler to take a second job specifically
to pay off gambling debts. Again, this strategy
must be weighed along with the gambler’s family
obligations, if there are any.
It’s important to remind a spouse, partner, or other
loved one that he or she should never put money
toward the gambler’s debts! The gambler must take
full responsibility. Also, as you monitor the gambler’s
progress toward debt repayment, be alert to a possible
return to gambling.
Tax Issues
Problem gambling can create a number of tax
headaches. A tax specialist, financial planner, or
other professionals can provide a definitive picture
of your client’s potential obligations, but here are
some general points to keep in mind.
• Gamblers often owe back income taxes, resulting
in additional penalties and interest charges. As a
general rule, income taxes are not forgiven by
filing for bankruptcy.
• Gamblers often underreport their income. If the
IRS catches them, it will assess back taxes, penalties,
and interest. The spouse filing jointly with
the gambler may not be liable for these charges
37
if the spouse had no knowledge and had no
reason to have knowledge of the underreporting.
• Although the gambler ideally should have
stopped gambling at this point, taxes may be
owed on previous winnings. Gamblers can
deduct losses up to the amount of their winnings
if they itemize their tax returns and if they keep
acceptable records of their losses (diary, losing
tickets, receipts). However, problem gamblers
often don’t keep good records because they
usually try to hide their gambling habit. Unless
the gambler has carefully documented losses, he
or she won’t be able to write off losses against
any wins. The result is a higher than necessary
tax bill.
• Money pulled out of tax-deferred retirement
accounts to pay for gambling or gambling debts
is subject to regular income taxes. Gamblers
younger than age 591/2 probably will have
to pay an additional 10 percent early withdrawal
penalty.
Gamblers often underreport their income. If the IRS catches them,
it will assess back taxes, penalties, and interest.
38
Sixty-year-old Mary started gambling
frequently at riverboat casinos in Kansas
City within a year after her husband died.
Despite winning several jackpots, she lost
more than she won. Within a short time,
she gambled away her husband’s life
insurance payout, his $50,000 annual
pension, and her Social Security
payments. In addition, she racked up
$85,000 in debt on 14 credit cards. She
was forced to file for bankruptcy.
Within a short time,
she gambled away
her husband’s life
insurance payout,
his $50,000 annual
pension, and her Social
Security payments.
Declaring Bankruptcy
is a Last Resort
A gambler’s odds of declaring
bankruptcy are significantly higher
than households without a gambling
problem. Some estimates
say one in five problem gamblers
eventually file for bankruptcy.
Problem gamblers typically
view bankruptcy as an easy
way to bail out of their debts.
However, as was emphasized
earlier in this guide, all debts
should be repaid—and repaid slowly—as a way
to remind the gambler of the financial nightmare
he or she has created.
Also, despite the common public view to the
contrary, bankruptcy stains a person’s financial
records for years, making financial recovery that
much more difficult. In addition, studies have
shown that four out of five people who file for
personal bankruptcy fall back into financial trouble
within a few years.
A sensible debt repayment plan should resolve
debt issues in most cases. However, sometimes the
only realistic way out of debt is to declare personal
bankruptcy. Advise the gambler that he or she
should not take this route until all other options to
pay off debts have been explored and the gambler
has talked to an experienced bankruptcy lawyer and
other financial advisors.
For your own knowledge, it may be helpful to
know that personal bankruptcy comes in two basic
forms: Chapter 13 and Chapter 7. Both are filed for
and carried out under the direction of a bankruptcy
court. Here is a brief description of the two forms
of personal bankruptcy.
39
• Chapter 13. This is often called the “workout
plan.” It allows you to repay creditors over time
while preventing creditors from seizing your
property. Experts feel that Chapter 13 works
best for people who have regular income and
substantial assets. This form of bankruptcy stays
on your credit record for seven years.
• Chapter 7. This is the more serious form of
bankruptcy. It allows you to wipe out most of
your debts and start over. Debts it doesn’t erase
include back federal taxes, child support, alimony,
and most student educational loans. Also, in the
future, there may be more types of debts that
won’t be erased by a Chapter 7 bankruptcy. Under
Chapter 7, you must sell off much of your personal
property. What property you can keep
varies from state to state, but typically includes
clothing, a car, furnishings, life insurance (but
not necessarily the cash value in a policy), retirement
funds, and tools of your trade. Usually your
home is protected, but not always. Chapter 7 bankruptcy
stays on your credit record for 10 years.
Being Alert to Life Events
Watch out for changing, stressful events in the
gambler’s life. These stresses can cause the recovering
gambler to return to gambling. Below are
what some experts consider the top 10 most stressful
events in the average person’s life. Note that some
of these events even are “positive” situations.
1. death of a spouse
2. divorce
3. marital separation
4. jail term
5. death of a close family member
6. personal injury or illness
7. marriage
8. fired from work
9. marital reconciliation
10. retirement
Source: T.H. Homes and R.H. Rahe, “Social
Readjustment Rating Scale,” Journal of
Psychosomatic Research, 1967, pp. 213-218.
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Working with Family Members
The success of a financial recovery plan will likely
depend in part on the cooperation of family members
and loved ones, especially a spouse. However, the
psychological dynamics of those around problem
gamblers can be as destructive as the gambler’s,
and may sabotage financial recovery efforts.
A few key points to keep in mind:
• Surprisingly, families and relatives often are
in the dark about the gambler’s problem until
finances are out of control.
• Family members aware of a gambler’s problems
frequently think they can control the gambler’s
problem, or they may actually enable the
gambler to continue his or her addiction.
• Family members may have developed their own
bad money management habits in response to
the problem gambler.
• Confidentiality must be respected. The
gambler’s reckless behavior may be financially
harmful to other family members, relatives,
friends, business partners, or employees.
However, you, as the counselor, are ethically
obligated not to disclose client information to
others without the client’s written consent.
Wall Street as Riverboat Gambling?
Not all problem gamblers today play video poker,
the lottery, or slot machines. Some “play” the stock
market and, unfortunately, approach the financial
market with the mentality of a gambler.
All forms of investing involve risk—some forms
more than others—and the problem gambler
(mainly “action” gamblers) can find this risk as
addictive as a game of high-stakes poker. For one
thing, it has become easier today to gamble with
stocks, bonds, commodities, and other securities
than with traditional sources of family wealth—the
home and real estate.
On-line access also has made market gambling
easier, faster, and cheaper. Day trading is the prime
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example, say experts. Day trading is when investors
buy and sell stocks dozens, even hundreds, of times
a day, often knowing nothing about what they are
trading—glued to their computer screens much like
a gambler glued to a video poker machine. The vast
majority of day traders lose money—in some cases
losing their homes and all their financial assets.
Even gamblers who don’t “gamble” on the stock
market, but who have investments, are vulnerable.
In a desperate need for gambling cash, they may
sell investments during a down market, much as
they would sell a car for a fraction of its value just
to get the cash. This means a double loss—the
investment loss and the loss of the money they
gamble away.
It has become easier today to gamble with
stocks, bonds, commodities, and other securities
Warning Signs of an Investment Gambling Problem
Paul Good, a clinical psychologist in San Francisco
who has been studying gambling and investing, has
developed 11 warnings signs, based on DSM-IV
criteria for problem gambling, that may reveal
whether an investor is actually a gambler in disguise.
Manifesting five or more of these signs may
indicate a gambling problem.
1. high volume trading in which the “action” has
become more compelling than the objective of
the trade
2. preoccupation with one’s investments (for
example, excessive studying of investment
newspapers or guides, thoughts about the
market that intrude on consciousness, constant
calls to one’s broker)
3. needing to increase the amount of money
in the market or the “leverage” of one’s
investments (for example, using options or
futures contracts, borrowing on margin) to
feel excited
4. repeated unsuccessful efforts to stop or to
control one’s market activity (for example,
drawing on accounts previously declared “offlimits,”
contradicting or changing limit orders
on losses or gains)
5. restlessness or irritability when attempting to
cut down or stop market activity, or when
cash is accruing in one’s account
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6. involvement in market activity to escape
problems, relieve depression, or distract
oneself from painful emotions
7. after taking losses in the market, continuing to
take positions or increasing one’s position as a
way of getting even—that is, chasing one’s
losses
8. lying to family members and friends to
conceal the extent of involvement in the
market
9. committing illegal acts, such as forgery,
fraud, theft, or embezzlement, to finance
market activity
10. jeopardizing significant relationships, job, or
educational or career opportunities because of
excessive involvement in the market
11. relying on others to provide money (bailout)
to relieve a desperate financial situation
caused by gambling in the markets
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Pros and Cons of the Gambler as ‘Investor’
Because of the financial risk, the addictive nature,
and the easy access to markets these days, some
experts believe problem gamblers should never
invest. They view the stock market as a breeding
ground for problem gambling and the New York
Stock Exchange and the NASDAQ as the largest
casinos in the world.
Other gambling experts, and most financial
advisors, disagree. They argue that investing, like
saving for a vacation or a car, gives gamblers a
positive focus for their money. It teaches them to
once again “value” money. Perhaps more important,
they argue, investing has become a financial
necessity for most households today—gambling
households included. Achieving such goals as a
comfortable retirement, sending children to college,
starting a business, or meeting other major financial
goals usually can be accomplished realistically only
through a sound investment program.
A person doesn’t stop eating just because they
have an eating disorder, and gamblers shouldn’t
stop investing just because they are addicted to risk.
Most problem gamblers who have abstained from
gambling for a while, and who ideally are in recovery
programs, should be able to invest as long as the
investing program is reasonable, argue proponents.
Because of the financial risk, the addictive
nature, and the easy access to markets these
days, some experts believe problem gamblers
should never invest.
While you can provide valuable assistance to
the problem gambler in his or her efforts to
recover financially, it may be beneficial or
necessary for the gambler to consult with appropriate
financial professionals. These professionals might
include financial planners, debt counselors, and
lawyers who have experience in credit as well as
financial transactions and legal issues. Establish a
referral list by identifying appropriate financial
professionals who are familiar with the dynamics of
problem gambling and its unique financial challenges.
You can further enhance this list and strengthen the
referral process by developing professional relationships
with these financial experts in advance.
You may or may not be familiar with the roles
that various financial professionals play. It’s often
confusing, in fact, because the roles are frequently
closely related or they may cross over. Here’s a
brief guide to some of the more likely financial
professionals you might work with.
Tax Accountants. The accountant can help the
gambler with some of the tax issues created by gambling.
Some accountants offer additional financial
services, such investment advice and other financial
planning concerns.
44
Estate Lawyers. The gambler may need to consult
a lawyer regarding the advisability and the logistics
of shifting of ownership of assets to nongamblers. A
lawyer also would be needed to prepare any legal
documents required to implement ownership changes
and set up trusts.
Debt Counselors. These professionals not only
can help the gambler construct a realistic debt
repayment program, but can help the gambler
design a workable budget necessary to free up
money to pay off debts.
Financial Planners. Qualified financial planners
examine a household’s overall financial situation—
not just one aspect of it—and recommend strategies
for improving the situation. The planner might help
the gambler set an effective budget, design a debt
repayment program, create strategies for protecting
assets from the gambler, and help set clear, achievable
goals—especially important in a household recovering
from a gambling problem. Planners also can
provide advice on taxes, insurance needs, investing,
and estate planning. A planner will work with other
financial professionals to ensure that the gambler’s
financial recovery goes as smoothly as possible.
Financial Resources
Gambling and Financial Resources
Gamblers Anonymous. Programs in most cities.
The International Service Office is at P.O. Box 17173,
Los Angeles, CA 90017, or call (213) 386-8789.
Their Web site is www.gamblersanonymous.org.
Gam-Anon. This organization is for the husbands,
wives, partners, relatives, or close friends of the
problem gambler. Local groups exist in most cities
and local hot lines are available. You can reach the
international office at P.O. Box 157, Whitestone,
NY 11357 or call (718) 352-1671. Their Web site
is www.gam-anon.org.
National Council on Problem Gambling. A
nonprofit health agency that provides information
on problem gambling and promotes the development
of services for the disorder. Their address is
208 G St. NE, Washington, DC 20002, and their
help line is (800) 522-4700. Their Web site is
www.ncpgambling.org.
State and local problem gambling organizations
and hot lines. Check the Yellow Pages. The
National Council on Problem Gambling also
provides a list of state councils and affiliates.
45
Nonprofit Debt Counseling Services. Usually
their services are free for the debtor. They include
the National Foundation for Credit Counseling
(www.nfcc.org or (800) 388-2227), Myvesta.org
(800) 680-3328 (formerly Debt Counselors of
America) and Debt Relief Clearinghouse
(www.debt-relief.org or (877) 433-2843).
Financial Planning Association. To locate a
Certified Financial Planner professional in your
area who can help you with your finances, go to
www.fpanet.org and click on the FPA’s Consumer
Service & Planner Search logo or call
(800) 282-PLAN (7526).
Society of Financial Service Professionals.
Society members include credentialed financial
service professionals. Go to www.financialpro.org
or call (800) 392-6900.
National Association of Personal Financial
Advisors. To locate a fee-only planner in your area
go to www.napfa.org or call (888) 333-6659.
Certified Financial Planner Board of Standards,
Inc. This board regulates Certified Financial
Planner licensees. To locate a CFP practitioner
in your area, call (888) 237-6275 or go to
www.cfp-board.org.
National Endowment for Financial Education.
Visit their Web site, www.nefe.org, for information
about improving one’s financial situation.
Problem Gamblers and Their Finances: A Guide
for Treatment Professionals was written and
prepared as a public service by the Denver-based
National Endowment for Financial Education® or
NEFE®; William L. Anthes, Ph.D., President;
Brent A. Neiser, CFP, Director of Collaborative
Programs; and Jeannette Herreria, Project Manager.
NEFE is an independent nonprofit organization
committed to educating Americans about personal
finance and empowering them to make positive
and sound decisions to reach financial goals. The
National Endowment for Financial Education,
NEFE, and the NEFE logo are federally registered
service marks of the National Endowment for
Financial Education. For more information about
the National Endowment for Financial Education,
visit www.nefe.org.
46
The National Council on Problem Gambling, Inc.,
is a nonprofit health agency whose mission is to
increase public awareness of pathological gambling,
to ensure the widespread availability of treatment
for problem gamblers and their families, and to
encourage research and programs for prevention
and education. To learn more about the National
Council on Problem Gambling, visit the NCPG
Web site at www.ncpgambling.org.
The following individuals from the National
Council on Problem Gambling provided their
technical expertise to this project.
Chris Anderson
James Carroll
Dana Forman
Nancy Lantz
Tony Milillo
David Novak
Carol O’Hare
Richard J. Rosenthal, M.D.
Kathleen M. Scanlan
Marvin Steinberg, Ph.D.
Keith S. Whyte
Acknowledgments
National Council on
Problem Gambling
20 Questions from Gamblers Anonymous
Most problem gamblers will answer yes to at least seven of these questions.
1. Did you ever lose time from work or school due to gambling?
2. Has gambling ever made your home life unhappy?
3. Did gambling affect your reputation?
4. Have you ever felt remorse after gambling?
5. Did you ever gamble to get money with which to pay debts or otherwise solve financial difficulties?
6. Did gambling cause a decrease in your ambition or efficiency?
7. After losing, did you feel you must return as soon as possible and win back your losses?
8. After a win, did you have a strong urge to return and win more?
9. Did you often gamble until your last dollar was gone?
10. Did you ever borrow to finance your gambling?
11. Have you ever sold anything to finance gambling?
12. Were you reluctant to use “gambling money” for normal expenditures?
13. Did gambling make you careless of the welfare of yourself or your family?
14. Did you ever gamble longer than you had planned?
15. Have you ever gambled to escape worry or trouble?
16. Have you ever committed, or considered committing, an illegal act to finance gambling?
17. Did gambling cause you to have difficulty in sleeping?
18. Do arguments, disappointments, or frustrations create within you an urge to gamble?
19. Did you ever have an urge to celebrate any good fortune by a few hours of gambling?
20. Have you ever considered self destruction or suicide as a result of your gambling?
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Appendix A
Are You a Problem Gambler or Living with a Problem Gambler?
20 Questions from Gam-Anon
People who answer “yes” to at least six of the following questions may be living with a problem gambler.
1. Do you find yourself constantly bothered by bill collectors?
2. Is the person in question often away from home for long, unexplained periods of time?
3. Does this person ever lose time from work due to gambling?
4. Do you feel this person cannot be trusted with money?
5. Does the person in question faithfully promise that they will stop gambling: beg, plead for another
chance, yet gamble again and again?
6. Does this person ever gamble longer than they intended to until the last dollar is gone?
7. Does this person immediately return to gambling to try to recover losses, or win more?
8. Does this person ever gamble to get money to solve financial difficulties, or have unrealistic
expectations that gambling will bring the family material comfort and wealth?
9. Does this person borrow money to gamble with or pay gambling debts?
10. Has this person’s reputation ever suffered due to gambling, even to the extent of committing illegal
acts to finance gambling?
11. Have you come to the point of hiding money needed for living expenses, knowing that you and the
rest of the family may go without food or clothing if you do not?
12. Do you search this person’s clothing or go through his or her wallet when the opportunity presents
itself, or otherwise check on activities?
13. Do you hide their money?
14. Have you noticed a personality change in the gambler as the gambling progresses?
15. Does the person consistently lie to cover up their gambling activities?
16. Does this person use guilt induction as a method of shifting responsibilities for their gambling
upon you?
17. Do you attempt to anticipate this person’s mood? Or try to control his or her life?
18. Does this person ever suffer from remorse or depression due to gambling? Sometimes to the point
of self destruction?
19. Has the gambling ever brought you to the point of threatening to break up the family unit?
20. Do you feel that your life together is a nightmare?
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Below are sample tips for keeping down your
expenses. Magazine articles, books, and suggestions
from friends can provide additional ideas.
• Stick to a shopping list. Don’t buy impulse
items. Shop for bargains and sales.
Compare prices.
• Look for off-season bargains. Buy an air
conditioner in January, a winter coat in June.
• Use coupons (they can equal earning up to
$20 an hour). But still comparison shop.
• Shop at grocery stores or food warehouses, not
convenience stores. Buy generic or store brands
at the supermarket.
• Eat out less, eat home more.
• Buy used clothes or trade clothes with friends.
• Trade baby sitting with neighbors or friends.
• Buy, don’t rent, furniture, televisions, or audio
equipment.
• Share driving or use public transportation.
• Go to bargain-priced movies instead of first-run.
Take your own candy. Rent videos or DVDs.
• Give home-made gifts.
• Compare car insurance prices.
• Use a flexible spending account at work to pay
for child care or medical expenses.
• Save, don’t borrow, to buy something.