The Enticement of the Lottery

At some point in your life, you have probably purchased a lottery ticket. The allure of that big jackpot… you plan out your dream vacation, you think through all the things you’ll do with the money. Your excitement builds. The drawing happens. Aaaand,  you don’t win.


On one of our Trevi planning days, Sarah and I, bought lottery tickets. We had it all planned out what we’d do with the winnings – a little extra capital to inject into the business, some cash for each of our families for some things on our priority lists, including vacations, some into savings.


We’ve all been through this. In fact, you might have decided to spend more than a few dollars on one of the big drawings over this last weekend. I stopped by the store to buy one ticket each for the Powerball and Mega Millions jackpot (and neither ticket proved to be a winner). The next person in line bought $20 worth of tickets for each game. $40 in total for lottery tickets! It was a bit of a shock to hear that much being spent on lottery tickets.


The reality is very few people will ever win a big lottery jackpot – the odds – i.e. your chances to win - are very slim. Buying a whole bunch of them doesn’t significantly improve your odds.


Instead of spending $40 on tickets-  you could use that money to pay down a little credit card debt or put away some extra cash in your savings account. Or you could invest the money.


There is nothing wrong with buying an occasional lottery ticket – just be aware that you are generally just paying an extra tax to your state government.


Yes, necessary programs are supported by buying lottery tickets. You may even win a few dollars here or there. And these are not “bad” things – rather it’s simply the reality of any chance or luck-based games – most people don’t win, and the games exist to make money for the sponsors.


Every time you choose to do something with your money, make it an active choice. So often, we make a decision like buying a lottery ticket – and with that really big jackpot, we think “let’s buy a bunch of them.” But is that the best use of a bunch of cash?


It’s fun to dream – we encourage you to dream about what you could do with that big jackpot.


But more importantly, we encourage you to make sure you think through the trade-offs when you spend $20 or $40 on something like lottery tickets.


Chances are you won’t win the big jackpot – so what other priorities do you have? Will that money be better used for those other priorities? If you regularly spend large sums of money buying lottery tickets, hoping that you are going to change your life, we hope you will step back and remember that you could set that money aside in a savings account – or even better in a mutual fund or an exchange traded fund and let it grow over time.


Winning the lottery is not a form of retirement planning. If you spend a bunch of money on lottery tickets, realize you’d be better off saving most of that money for retirement.


Every time you have that urge to drop $40 on tickets, drop it in your mutual fund instead. Over time, that balance will grow into something truly meaningful that will help you towards your goals on retirement or other things you might have out there


If you invested $40 a month every month for 20 years with a 7% rate of return, you would end up with nearly $21,000. If you invested $40 a month every month for 30 years with that same 7% return, you would end up with nearly $49,000.


Obviously, the rate of return you earn on these funds will impact what you end up with – and there are no guarantees when it comes to investing.  But, with a little research and planning, making active decisions today with your money can have a significant long-term benefit to your personal finances.


Trevi TIp: Don’t make passive spending decisions with your money. Make well thought-out, active, intentional decisions that are grounded in your goals, dreams, and budget.


If you really feel like donating $40 – think about your favorite charities. We bet there is a good chance they would be very happy to put that $40 to work helping people in your community or doing important research to cure a disease.


When it comes to your money – Carpe Diem!


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