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How to Win the Lottery

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Lottery Money PiggybankThe only time I’ve ever played the lottery is when the Powerball pot gets to be astronomical and my co-workers pool together some money to buy a few tickets together (this was several years ago). Outside of a few scratch off tickets for grins and giggles, I avoid lotteries unless they’re for local charities.

That being said, a lot of people still play, knowing full well they’ll probably never win. The pots don’t get to be that big unless they’re being fed by the daily tickets of so many players. Some of the savvier players turn to the internet for advice on how to win the lottery and today I will offer up the best advice anyone can give:

Don’t play the lottery.

I bet you saw that one coming right? Well, I’m going to back up that bit of advice with proof, beyond the obvious, of why the lottery is bad and what you should be doing instead.

The Odds Are Horrible

Everyone knows the odds of winning the lottery as astronomical. You are more likely to get struck by a lightening bolt while sitting in your car parked in the back of a jumbo-jet than you are to win the lottery. If you were to go to a casino, the worst games you could play give the house an edge of around 25% (Keno, Big Wheel). It’s not unheard of for a state lottery to have an edge of more than 50%… and you don’t get free drinks!

What if you don’t care about the odds? Well, the reality is that winning the lottery is actually awful for you.

Lottery Winners End Up Losing

Check out these poor souls who won the lottery:

  • William “Bud” Post won $16.2M in the Pennsylvania lottery in 1988 and now lives on Social Security. His former girlfriend sued for a part of the prize, his brother hired a hit man to try to kill him, and he was duped into investing in several businesses that failed. Post was also jailed for shooting at a bill collector. Within a year of winning, he was a million dollars in debt.
  • Suzanne Mullins won $4.2M in the Virginia lottery in 1993, now she’s in debt to a company that lent her money on the winnings. She’s now insolvent.
  • Ken Proxmire won $1M in the Michigan lottery, immediately moved to California and into the car business with his brother and was bankrupt in five years.
  • Willie Hurt won $3.1M in 1989 and was broke two years later and charged with murder, having spent all the money on a divorce and crack cocaine.
  • Charles Riddle won $1M in 1975, he then got divorced, was sued, and indicted for selling cocaine.
  • Janite Lee won $18M in 1993 in the Missouri lottery, did a lot more good with her many than anyone else on this list, but was bankrupt eight years later.

Hopefully these stories have scared you away from the lottery… because even if you win, you lose.

Save Your Money Instead

Instead of spending your hard earned money on the lottery and your precious time figuring out how to “win,” devote your time to figuring out how to make the most of what you already have and how to earn more income.

Let’s say you spend $5 a day, or $1825 a year, on lottery tickets. If you were to put that in the stock market, earning a conservative 5% a year (let’s ignore this last year), you would have $60,345 after twenty years. $121,250 after thirty years. And a whopping $220,459 after forty years. Even if you were to stick it in an online savings account at only 2% (and if it were to stay at 2%), you would still have $110,233 after forty years. That’s $110,233 without risk, guaranteed, you don’t have to do anything different except not buy lottery tickets.

So skip the lottery, go to the bank. :)

(Photo: sphistechate)

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71 Responses to “How to Win the Lottery”

  1. Ray says:

    here is some stats on the 6/49: You are over 1000 times more likely to die, if you bought one ticket a week, on average you would win the jackpot less than once every 250,000 years.

    People just don’t realize the odds against them

    • jake says:

      alright ive been playing scratch offs for like 2 months now and im up about 1000 dollars. last night i bought a 30 dollar ticket and won 500 dollars off of it so i am definatly up

  2. Caitlin says:

    See, I’ve never understood stories like that. Obviously, only the “bad” stories are going to be passed on, but it never ceases to amaze me just how many people that manage to beat the odds and win the lottery suck at handling money. They obviously have no clue how to handle money at all, let alone how to handle large sums of money.

    I’ve always had a “plan” for what I’d do if I won the lottery (I’ll not get into the fact that this plan is essentially useless as I don’t even play the lottery so there’s no way I could win it). None of it involves running out and buying all the most expensive crap I can find. It involves seeing a financial planner, paying off current debt/mortgage, locking the majority away for retirement, and having a set budget for what I’m allowed to buy as a “treat”. Yes, I understand how a sudden influx of money can cause people to behave irrationally, but I can’t understand how all these people seem to run out an spend it all on (the equivalent of) hookers and blow. o_0

    • prufock says:

      These are just eight cases, and while I’m sure there are probably more of varying degrees of poor outcomes, keep in mind that within North America, there’s probably a lottery jackpot winner every week. I’m willing to bet the vast majority either do very well with it or at least don’t destroy their lives over it. These sort of case stories read like scare tactics.

      • Caitlin says:

        Oh, definitely. It’s just that the scare stories that get perpetuated are so over the top, and hardly anyone blinks an eye at them except to say “that’s why I don’t play the lottery”. No one questions what these people do, for some reason. o_0

  3. ian says:

    Someone help me with my logic here…. I get the odds of winning the Mega Millions to be 1 in 175,711,536 OR 0.00000000569114597006 (from http://www.durangobill.com/MegaMillionsOdds.html ). The payout this week is about 250 Million (huge). Multiplying the chance of winning by the payout, the ‘value’ of an opportunity to play is about $1.42. Considering that the ticket costs $1, doesn’t this show that you should buy 1 (one) ticket?

    Working backwards, as long as the potential payout is greater than $175,711,536, you should buy a ticket. As soon as the payout is about $351 million, you should buy two tickets.

    • You don’t actually win 250M. You win an annuity that pays 250M over the course of many years. Probably a net present value of around 130M … so to value is less than $1 per play. And that assumes there is only one winner. The odds of have A winning ticket is 1 in 175M – the odds of having the SOLE winning ticket is worse – the more ticket sold, the worse the odds of having a sole winner.

  4. prufock says:

    I generally enjoy the blog, but this is a terrible article. First of all, eight cases of people who have won and suffered negatively either because of it or tangentially to it are not convincing that “winning the lottery is actually awful for you.” Ridiculous and illogical. It’s like saying 8 people have died by choking on carrots, therefore carrots are bad for your health.

    Additionally, some pretty easy math will reveal that there are times when playing the lottery can actually pay off – granted, that’s not most of the time. For example, the odds of winning 6/49 are just under 1 in 14 million, and the cost of that ticket is $2. For the cost-benefit ratio to break even, you need a jackpot of approximately $28M. It’s actually a bit more subtle than that, because for the sake of simplicity I’m not taking into account winnings under the jackpot or the probability of multiple winners.

    Of course, all the rest of the time, it’s better to put money into savings.

    • Dustin says:

      I just read this article in my feed reader and came over to post the same thing as prufock.

      Terrible article. It would’ve been much better if you would have left out the “Lottery Winners End Up Losing” section for the reasons he mentioned.

    • StephaniePTY says:

      It would be better if he’d included some statistics. I will try to track down the source, but I seem to remember it being something like this:

      One third of lottery winners end up bankrupt or in debt, or in some other way in worse financial shape than before they won.
      One third lose all of their winnings in some way and end up pretty much exactly back where they were before they won.
      One third manage the money okay or well, and have more money because of their winnings.

      So in other words, even if you do manage to win the lottery, you only have a 33% chance of it improving your life. Of course, that 33% is something you have some control over, as opposed to whether you win the lottery or now, which you have no control over.

    • The Other Schmitty says:

      According to the Financial Planner Board of Standards one third of all lottery winners enter bankruptcy within five years of winning the lottery. I don’t know how reliable that statistic is, but it makes a lot of sense. If the winners were good with money they would never have bought the lottery tickets. Someone who reads this blog would probably do well with their winnings.

  5. On a tangent, I broke down the Powerball odds on my blog a while ago (for those of you who are familiar with the odds, it won’t be anything new).

    http://www.observingcasually.com/odds-of-winning-the-lottery/

    Prufock – you’d actually need a jackpot of $50M+ in your scenario. The jackpot in the total amount of the annuity, and not the net present value, which is typically MUCH lower. If you take the cash option, you typically get about half that amount. The tax bite would be minimal on such a jackpot, though, since you can deduct gambling losses to the extent of your winnings (but not anything above that), essentially creating a wash. (There might be a cap on that deduction, but I’m too lazy to check)

    Of course, this assumes that there is only one winner (which you mention), which is increasingly unlikely as the jackpot rises (because of more tickets being sold)

    I buy a few tickets every now and then (maybe $20 a year). If I win, you’ll never hear my name again. I’d live a quiet life of travel, reading, and baseball games.

    btw, if you’re spending $5/day on tickets, you might have a problem.

  6. Dot Com Note says:

    Let me give you another angle to the story.

    If you are spending $5 a day on lottery ticket, you really don’t have any control over your money. It is also utterly irresponsible to spend $5 a day on lottery ticket.

    How about if you are spending $6 a week? That is $11,000 in 20 years. If you are not able to risk $11,000 for millions, then you should not play lottery at all.

    People who squander their money after winning lottery, they will keep on squandering no matter what. So, forget about them.

    In lottery, you don’t take into account the odds of winning. It is the fact that somebody is going to win eventually. So why not that person be me.

    Let me explain it using a reverse analogy of odds. We know definitely that people will die in car accidents. I will still take the risk and buy a car and drive it because I take the risk and assume that the person is not going to be me. In case of lottery, it is the opposite. I am assuming that that person is going to be me.

  7. Adam J. says:

    Nice one-sided article…lol. You can do better than this.

    I know two lottery winners in Florida. They both won the Florida lottery (the big one)-one in the 80s, the other in the 90s. There was an article on it because the odds were astronomical that a father-in-law/son-in-law would ever independently win.

    Anyway they were profitable in real estate investment before they won. They wisely invested the winnings and built a forture and successfully started several businesses, including the largest flea-market in Florida :-)

    Most people know they won’t win. They buy tickets so they can have a dream of winning.

  8. Wabbit says:

    I thought your article was brilliant. I’m always running into people who say they’ve “won” money playing the lottery or gambling but conveniently, they never calculate how much they spent to win.
    I play every now and then (only for the big, big, bucks) but I know that the buck or so is flushed away.

  9. The Other Schmitty says:

    I once got into a big argument with a friend trying to convince him that last weeks winning numbers are just as likely to win this week as any other random combination of numbers. He just wouldn’t believe me. Most people have almost no understanding of statistics.

    • My Journey says:

      Thats really funny….Try to convince him that the numbers coming up on the roulette wheel are always random despite if they are up on the flashing board

    • If you really want to start an argument, toss this one out there:

      You flip a coin and it comes up heads 50 times in a row. What are the odds that it comes up heads the next time?

      Answer: Pretty good. It’s probably a two headed coin :)

      • Ranger says:

        as long as we are on the oddity of statistics; in physics according to millions of mathematical equasions, if you were to throw a tennis ball at a brick wall 100 times – three of those 100 times the tennis ball would pass directly through the brick wall instead of bouncing back. furthermore on statistics, you are 99.9% more likely to win the lottery if you playthan if you don’t. (.000000000000000….01% being you don’t play but you find an unsigned winning ticket.)

  10. freeby50 says:

    Winning the lottery doesn’t make you go bankrupt. Winning the lottery jackpot makes you rich.

    If a lottery winner is poor at handling money then they may end up bankrupt. Like the population in general, a sizable minority of lottery winners are poor at handling money. So a sizable minority of lottery winers end up bankrupt.

  11. Susan G says:

    Janite Lee actually won the Illinois Lottery (not the Missouri Lottery.) At the time, she lived in Missouri.

  12. David Duran says:

    One of my teachers in high school always said, “The lottery is a tax for those who can’t do math.”

  13. eric says:

    Yeah the probabilities are horrendous.

  14. Dan says:

    I put 20% into my 401k and 30% of my net into a Roth IRA. I buy about two MegaMillions tickets per week. I spend a little over $100 per year. I never expect to win and all the profit go to schools. I don’t think that is a waste or stupid. You have to play to win. But somebody living paycheck to paycheck spending $5 per day is stupid or have a gambling problem. Caitlin is right. People who read personal finance blogs should be ok with the winning.

  15. Ryan says:

    I can’t do math.
    I’m poor.
    I have nothing but two-headed coins.
    I have no concept about how much money I have spent on the lottery, but IF I win, I’m going to rub it in all your faces. HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAH

  16. Mark Gavagan says:

    While not at all a wise “investment,” spending a dollar or two on a lottery ticket when the jackpot is a hundred million or more is (for me) well worth the entertainment value of enjoying conversations of what I’d do with all that money.

  17. Safeway Sage says:

    Jim,

    I think this weblog has opened my eyes to a lot of financial themes. I, for one, am grateful for the articles you post and used this article as food for thought. Just like I use all your articles! :D

    Keep up the good work!

    SS

  18. Magnum says:

    To quote the computer (Joshua) from the movie “War games”, “The only way to win is not to play”.

    Magnum

  19. Matt says:

    People play the lottery because of the psychological benefit (the thrill) associated with the possibility of winning. Mathematics has the chance at winning as infinitesimally small, but this non-zero change is enough to provide the thrill. I argue that this is what people are *actually* paying for (whether consciously or not), not the actual prize.

    It’s like that scene in Dumb and Dumber where Jim Carrey asks Lauren Holly to go out with him. She says, (significantly paraphrasing), “Never in a million years.” Carrey responds, “So there *is* a chance!”

  20. RJ says:

    So I have read everyones comments and all have a valid point on some level, but the QUESTION is…

    Who are we to judge anyone?

    We all have our own reasons for justifying what we do.
    Some spend the money hoping and praying for a dream to come true.
    AT LEAST THEY DARED TO DREAM.
    Others are playing the odds some have gambling problems, a few bucks a day…so what.

    I was a smoker for more than 20 years at 2 packs a day. Granted the cost of ciggs has gone up over the years but at $7 a pack.

    Now that I have quit I buy $5 worth of tickets per day instead of $14 in ciggs.

    To me…far better odds that I will survive the lottery over cancer. And Im still saving myself $9 a day.

    Just food for thought

    • Jim says:

      Please don’t misunderstand me, I’m not judging anyone. I play the lottery from time to time for entertainment. I think anyone who goes down the route of judging is making a mistake, I’m merely arguing against playing the lottery and passing no judgment on the people who do (which includes me from time to time).

  21. jim says:

    a few dollars a week on lotto, I at least have a chance to win something, I as well as most of you spend a lot more than that on interest on our credit cards and don’t think a thing about it and don’t even have a chance to win. how much do you spend on golf, movies, fancy cars, eating out…

  22. Anonymous says:

    ok everbody knows everything.. why dont you just live your lives and let others live theirs..

  23. Anonymous says:

    i am buying a ticket tomorrow….325mil is worth a couple of dollars…

  24. Joe_Public says:

    Who cares? Give me a shot to become one of those “failed in life” Lottery millionaires!!!


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