Photo credit: vvvracer
Think about many times have you heard (or said) the phrase, “When I win the lottery….”
Now think about the number of times that you’ve actually won.
I bet they don’t match up. Most of us realize that our odds of winning a major lottery like MegaMillions or Powerball are slim to none. But that doesn’t stop millions of us from being hopeful every week.
It is that hopefulness that costs us money we don’t need to spend. As financial guru Dave Ramsey quips: “The lottery is a tax on people who can’t do math.”
If you’re not into the realities laid out by the simple math, check out the Mega Millions Simulator sent to me by a reader. The Mega Millions Simulator lets you pick your “winning” lottery numbers and play up to 1,000 times. Then it calculates how often you would have won and how much you would win based on the actual odds of the game.
When I used the simulator, I won a whopping $129 after playing 1,000 times! That means that I spent nearly 10 years playing the same numbers for every single Mega Millions drawing and didn’t even win enough to buy a Nintendo Wii.
Pretty scary considering that the Mega Millions website actually suggests that winning the lottery can help you fund your retirement.
Now imagine if I had taken that $1,000 “investment” in the lottery and actually invested it in a mutual fund and let it sit there for 10 years. If that investment earns an average return of 6%, I would have $1,819.
That’s quite a big difference from $129 in lottery winnings.
Now some of you may argue that putting a buck or two into the lottery every now and then is fun and it doesn’t cause any harm. Everyone spends their money differently and what’s wrong with having a little fun now and then, right?
And to a point, I agree. If that’s your philosophy to playing the lottery, that’s fine. Just don’t tell me what you’re going to do when you win, because you’re probably not going to. Plan for a future you can count on, not an imaginary one.
The lottery is not a financial plan. If you want to gamble with your money, put it in the stock market. You’ll find that your odds of winning are much better.