A Lottery Life
Posted by Gail | Filed under Money Management
I’m amazed at the number of people who, week in and week out, buy a lottery ticket or five. I’ll have to confess to buying a couple of tickets in my life (I once won 100 tickets on a radio call-in show.) Whenever I do, I spend the week fantasizing about what I’d do if I won, and when I don’t win I move on. Cheap entertainment if $1 gives you a week of dreaming. But if dreaming is all you’re doing and the lottery is your big plan for “financial freedom” you need to give your head a shake.
Do you understand the odds involved in winning a lottery? Lets take the 6/49 lottery that operates all over North America as an example. To win top dollar, you must have chosen the six numbers drawn. Your first number has a one in 49 chance of being right. The second number has a one in 48 chance – ooh the odds are getting better – since there is one less number (the one drawn) in the pool of potential numbers available. But wait a minute. To get both these numbers, the odds go down to one in 2352 (49 times 48 = 2352). Oops. You have a one in 110,544 chance to get three correct numbers (49 x 48 x 47 = 110,544), a one in 5,085,024 chance of getting four correct, a one in 228,826,080 chance of getting five correct, and a one in 10,068,347,520 chance of getting all six correct. That’s right, you have a one in 10 billion chance of winning the 6/49.
The lottery has been called “a tax on stupidity” for a good reason. With odds like one in ten billion, a half-wit knows better than to throw good money away on something less likely than getting hit by lightening… since the odds of being struck by lightening are only 1 in 56,439!
So why do we do it? If we are three times more likely to die in a car accident on the way to buying a lottery ticket, than to win the lottery, why do we routinely plunk down our dollars for the blue-moon opportunity to hit it big?
Even if we are aware that our chances are slim to non-existent, when we think about winning the lottery, a warm feeling of optimism surges through us. All the problems would go away. All that money would mean freedom from stress and worry. And hell, a vacation or twelve, maybe some new shoes, goshdangit, we could pay off the house!
There’s big money is selling the dream. According to the Stats Man almost sixty percent of the profits earned by government-owned business enterprise (called GBEs for short), came from lottery, gaming and liquor enterprises. In 2005, that added up to $10.7 billion. Holey Moley!
Naturally, as economic pessimism grabs us and ties us in knots, the need for optimistic relief only escalates. In February of this year, in just one week, $79.5 million worth of lottery tickets were sold across the country. OMG! That’s a whopping amount of optimism, don’t you think? Perhaps lottery as entertainment has morphed into lottery as last resort. Sad.
David Just, an associate professor of economics at Cornell University has been studying lottery sales in the U.S. over the last decade. He and his team found a strong correlation between poverty rates and lottery ticket sales. It seems lower-income earners buy almost twice as many tickets. And as people feel less in control of their own destinies, we are more willing to throw over good old fashion common sense in favour of luck and chance.
Lottery sellers and casino operators say they are in the business of “entertainment.” But the cost of this “entertainment” far exceeds most people’s budgets. And if every one of those $79.5 million worth of tickets sold in one week last February was money that could be spared, I’d say, hey, it’s your money, dream on. But with record debt, savings lower than a snake’s belly, and unemployment on the rise, I warrant that some of that money came from people who could ill afford it.
I’m getting off my soap box now. I will leave you with this thought:
Spend $20 a week on lottery tickets from age 25 until you retire, and you’ll have blown $41,600 of money that could have been invested.
Put that money in an RRSP, earn just a 5% return on average, and you’ll have a total of $132,744.76.
So, do you want to dream away $41,600, or would you rather have more than three times that when the time comes to hang up your spurs?