Have you ever dreamed of becoming rich? What would you desire to buy if you had millions of dollars? What if you could get millions of dollars by spending a couple of dollars? That is the beauty of the lottery.
At the most basic level, the lottery involves the payment of a small amount of money. For example, to buy a lottery ticket you may spend just a couple of dollars and end up winning a large amount of money.
Photo by Krissia Cruz
The lottery does not require skills. Since the lotteries are determined purely by chance, all you need to do is to play and be lucky when you check your results. That requires minimum effort.
There are several different types of lotteries: from simple “50/50” raffles at local events (the winner receives 50% of the proceeds from ticket sales) to multiple lotteries with multi-million dollar jackpots.
Therefore, what are your chances of winning the jackpot? As it turned out, they are not very good. Although the exact odds depend on many factors, let’s look at it closer.
Who Plays The Lottery?
The chances to win the lottery is minimal, but it does not prevent people from playing. In general, about half of the U.S. adult population together will spend up to $1,000 per month in hopes of getting rich.
When the lottery was introduced in the state, the local number of adults who engage in gambling (which is technically the lottery) increased by 40%. In some states, most of the income from the lottery comes from a small percentage of players.
For example, a Minnesota study found that 20% of its players account for 71% of lottery revenue. According to the current statistics from the North American Association of State and Provincial Lotteries (NASPL), 29% of players account for 79% of the revenue in Pennsylvania.
According to statistics, the vast majority of lottery participants seem to live in lower economic classes. The Gallup study breaks down some statistics, noting that ordinary lottery participants earn approximately $36,000 to $89,999. Not surprisingly, consumer finance gurus say that the lottery is an additional tax for the poor.
Someone has to win, and the only way to win is to be in it, as they say in the advertising. However, what is the best way to be in the lottery?
The rules of probability dictate that you do not increase the lottery’s chances, playing often. Therefore, every time you play a lottery, there is an independent probability. It includes the draw of coins, where each draw, regardless of the number of draws, has one of two chances of landing on heads. The possibilities are the same – in the lottery and the coin draw – regardless of play frequency.
However, you can increase your odds by buying more tickets for the same lottery draw. Remember, however, that two tickets can increase your odds from one by 14 million to two by 14 million, which is not statistically significant.
Someone will have to buy a lot of tickets to increase their chances of winning significantly. However, even if a person could afford it, they would not be able to buy enough lottery tickets to guarantee their winnings if they were not the only person who bought the tickets. As more and more tickets are sold collectively, the chances of winning are reduced inversely.
What Are The Odds?
It is highly probable that at some point, you played with the idea of winning the lottery. In the end, think of all the financial problems you might have had if you had won, for the small price of a lottery ticket.
Unfortunately, the answer “yes” is so depressing that your chances of winning a 6-numbered jackpot in the National Lottery are 1 in about 45 million.
It’s also frustrating that you will probably not win the lottery with consecutive numbers such as 8, 9, 10, 11, 12, and 13, as well as the fact that you may not win with a colorful combination of your favorite “happy” numbers.
Is It Worth Playing?
Technically speaking, if you play the lottery regularly throughout your life, the money you “invest” is not worth it because making a profit is so small.
Of course, you could argue that spending some money on the lottery every week is worth the fleeting excitement to think that you might win big, and imagine what you could do with your winnings.
In strictly financial terms, you don’t do yourself any favors by playing the lottery regularly. However, doing it for fun from time to time won’t do you harm and can possibly bring in some money.
The lottery participation fee is not an investment in real terms, as you are unlikely to get something in return for what you have spent, besides the obvious entertainment value.
And entertainment could be worth spending just a couple of dollars, right?
Gambling Vs. Investing
A curious headline was posted on the Mega Millions website’s main page on March 25, 2011, the day when the chances of winning increased to 1 in 175 million. The headline read: “Save for retirement.”
Anti-gambling groups shouted of a dishonest attempt to promote the lottery to finance post-working years of man. Lottery officials quickly spread the word that they are running a campaign to encourage people to dream about using their winnings, rather than offering a financial strategy.
Is there a more beneficial way to invest or spend your money that you would otherwise dedicate to the lottery? Let’s take a look at the numbers. If a person spends 5 dollars a week on lottery tickets, this adds up to 260 dollars a year.
If you invest 260 dollars in shares per year, earning about 7% per year (based on the historical performance of shares), in 20 years, the yield will be 11,015 dollars. However, if you just spent money on lottery tickets and presumably did not win anything, then in 20 years you would get 5,200 dollars.
Of course, the stock market is never sure. Shares can be depreciated just as much as they are valued. Therefore, let’s try a more careful valuation if you consider a person without a college degree who has spent an average of 250 dollars a year to buy lottery tickets.
If the same person had opened an individual retirement account (IRA) or other retirement accounts, which earned an average of 4% of annual income and deposited $250 per year for 30 years, then upon reaching retirement age, he would have $15,392. If they had done the same for 40 years, that number would have jumped to over $25,000.
Although some claim that there is no guarantee that money will earn 4% in today’s economy, there isn’t a guarantee that it will gain more than 4%. However, if you don’t take all that into account, the chances of earning $15,000 in 30 years are mostly in people’s favor.
Should You Stop Playing?
If you play the lottery every week in the hope that one day you will get the right numbers, but find that the money spent on the tickets is better spent on such essentials as food and bills, it may be worth thinking about giving up the game and using the money where it is needed.
There’s nothing wrong with playing the lottery from time to time just for fun and momentary excitement, presenting your new millionaire lifestyle. However, you should make sure you don’t take it as an “investment” or as a real way to get rich quickly, as you’ll only be disappointed.
To Sum Up
Many Americans spend a few bucks here and there on lottery tickets, the vast majority of which turn out to be useless, and do not suffer from harmful consequences because of their casual game habit.
The lottery is not some great evil that should be avoided at any cost. It would be best if you treated the lottery as a hobby or a fleeting entertainment bought for small amounts of money that you can afford to lose – you’ll probably be fine.
However, playing the lottery in anticipation that you will win, or as a literal ticket to a quick fortune, can be considered a silly task. The chances that you’ll never win a lottery prize so big that it will significantly change your financial situation are possible.
You can buy several lottery tickets every day for the rest of your life and have nothing to show except a small balance in your savings account.
Often, the threshold between more or less harmless gambling and a problematic gambling habit is only evident in retrospect.
So, to play or not to play? There is a slight chance that the winner might be you, even though the odds are low.