Lottery Numbers Higher Even In Down Economy

Seems strange to report that results from lottery sales were higher in 2008 than in year’s past. You would think people would be buying fewer lottery tickets while struggling to fill their gas tanks over the summer, and dealing with a recession that really took hold this fall and winter. Then again, isn’t that the American way? Don’t we all dream of striking it rich? Not me.

The Colorado Lottery saw record sales in 2008 of $499.4 million. The Florida Lottery recently joined the multi-state Powerball game in an effort to suck in even more players. What’s behind the success of these lottery programs in our society’s obsession with the rich and famous (thank you Robin Leach).

The Lottery Is A Tax On People That Can’t Do Math

For purposes of this discussion I am excluding people who play the lottery as a hobby, and can afford to do so. I’m referring to the guy with a wife and three kids at home with no money for groceries who is spending $20 a week on scratch off tickets. If that same guy would simply put the $80 per month in a good growth stock mutual fund for 30 years he’d “win” $100,000! That’s a pretty good payout, wouldn’t you say?

But you could never convince him. When advised to save $80 a month, his response would probably be, “We can’t invest $80 a month! We’re living paycheck to paycheck.” Frustrating, I know. That’s because most people can’t see beyond the next paycheck when planning their financial futures. They squander every single penny they have now and just keep hoping they next paycheck will last them another two weeks.

But What If I Win?

It should come as no surprise that people who win the lottery often wind up broke. People with poor money-management habits don’t suddenly get smarter if a whole bunch of money is given to them. About the best thing you could hope for is that they have the sense to hire someone to manage it for them. Even then, they often know so little about money that they can’t adequately over-see their financial guy, who proceeds to rip them off behind the scenes.

Winning the lottery is not all roses. Imagine the people in your past that would be looking up your number if they saw you on the cover of People magazine as the country’s latest $100 million Powerball winner. No thanks. While I would love to have $100 million, I prefer to accumulate it the right way by building wealth. If by some miracle I won the lottery (and it would really take a miracle since I don’t play it), I would give away the majority of the money, minus enough to pay off my debts and those of close loved ones. As the saying goes, “more money, more problems.” And I sure don’t need 100 million new ones!

Comments

  1. I’ve mentally spent my lottery winnings many times over, but like you, I don’t actually play. I might buy scratch-off tickets every once in awhile if I’ve got a couple extra dollars though. With the winnings, my plan would look a lot like yours– pay off my bills, buy a house, pay off my family’s bills, but rather than giving the rest of the money away, I’d probably use it to start an animal rescue. That’s what I’d like to do with that kind of windfall, anyway.

  2. I was sitting around over the weekend listening to people talk about how things would be so much better if only they won the lottery. I just about had to leave the room.

    I’ve always called the lottery a tax on people who can’t do math as well. I did some research for a blog post I wrote a couple of years ago, and I was unable to turn up a single lottery success story. Every report I turned up had to do with people worse off after they blew their lottery winnings, plus wrecked marriages and destroyed families.

    As Dave Ramsey says, if the lottery were such an effective wealth-building tool, then why are the majority of lottery tickets sold in the poorest zip codes?

  3. I onced stopped at a gas station and saw a fat, elderly couple drop $100 on lottery tickets. They sat down and just when scratching away. It was so sad.

    I refer to the lotto as “Wal-Mart Retirement Services.”

    My mom is a teacher and hates that some of their funding comes from the pockets of the poorest families.

  4. The sheer odds of winning should deter any rational person from seriously playing the lottery. You have a better chance of being attacked by a shark AND struck by lightening THE SAME DAY than of winning the lottery.

    Unfortunately, people hold out the pipe dream of a lottery win. You’re right; if they just saved that money, and money spent on vices like alochol and cigarettes there would be a nice little nest egg waiting for them at retirement instead of a Wal Mart Greeter’s job.

  5. I only occasionally play the lottery and only purchase a ticket or two when I do. It’s nothing big with me, just one of those things that I like to do every now and then.

    Of course, if one is to call a lotto ticket a tax on the poor, then what are beer and cigarettes when you are living paycheck to paycheck? Necessary? I don’t think so. I think we’ve all heard the stories of the little old lady who saved thousands per year by cutting out her two-pack-a-day habit. But that is the last thing people will cut from the budget when things get tight. Food? Bah, gimme a cigarette, they’ll say!

    There are lottery success stories out there, but the fallen winners are more publicized as they make those of us who don’t have it feel better about ourselves. “We can do better than them if we win it.” It’s the same reason why the Jerry Springer show was so popular. Not because he had hard-hitting topics that really made us think but because we KNEW we could watch the show and think “My life might not be good, but at least it ain’t THAT bad!” Unfortunately, many reasons for those sorts of people being poor in the first place is because they are not very smart anyway. Everyone would like to think that the unfortunates can do what we can, but many people just cannot. Not everyone is even of average intelligence. Some people HAVE to be below it, thus the term “average intelligence”. This is not to speak down to those who have hit hard times, but I just get irritated at those who assume that everyone out there in the great big country is just like them (regarding intelligence and opportunity).

    I would love to come into a few million dollars at some point. I would basically pay off the car and other outstanding debts and draw the interest from the money as an additional paycheck to the one I already get. It would more than double what I make in a year and allow me to do what I want when I want to — no more being tied down to a job if I don’t feel like doing it. No publicity thanks, but I will take the cash.

  6. I usually never buy lottery tickets.
    People ask me why – simple: financial freedom isn’t about hoping and gambling.
    It’s about educating yourself and doing something about it.

  7. Are there any “lottery success” stories?

    The big lotteries (e.g. Powerball) all require you to publicly disclose your identity to claim the cash, and they heavily publicize your name & locale.

    The only chance you have of something approaching a normal life once you win Powerball is to leave everything you knew behind and start life over under a new name far away from your previous life.

  8. A lot of people are hoping for that quick money making success story. If the lotto gives them that little bit of chance, why not. I agree though that most of the people playing the lotto really could use that extra money and put it towards better purposes like groceries. They are the ones who need to be educated about it. But a dream is still a dream.

  9. Just to put a little spin on it, when you save really really hard for 40-50 years in investments and savings accounts, you are taking a chance that the country or world won’t end before that time or that there won’t be a complete economic depression, wiping out the worth of the US dollar. (This current recession isn’t even close to a real depression.) The odds are about the same as playing the lottery so you take your chances either way.

    I’m not saying it’s bad to save, just something to think about.

  10. Great post.

    I buy a scratch off about once a year, if that. It’s scary to me to see how much of an addiction it is to some folks. One of my coworkers buys multiple tickets each day! That’s the kind of ‘gambling’ that’s not appealing to me.

  11. I once saw a woman at the grocery store try and swipe her food stamps card to pay for her groceries. I guess there wasn’t any money on there because she ended up leaving empty handed. But she did head over to the scratchers machine and pick up a few. No doubt hoping that she’d win enough money to pay for her groceries. It’s so foreign to me because if for whatever reason I couldn’t pay for my groceries, I’d never think to use what money I did have for a lottery ticket.

  12. I call it my entertainment budget… and about $25 a year is not going to break me. Just an occassional thing about twice a month, $1 each time. As I have no debt, and have my emergency funds all in place, I’m ok with spending that amount on ‘entertainment’ :)

    My tax man would be the first number I’d call if I were ever to be so lucky :)

  13. “People seldom profit by having money unless they earn it.” -Napoleon Hill

    I’m reading Napoleon Hill’s Keys to Success.

  14. I dream of winning the lottery, but since I don’t buy tickets, I’m not holding my breath. If I won the lottery, after taxes I would put a good amount in a trust fund, so that my children, grandchildren, great grandchildren, etc. would have college funds. I’d start a trust fund to help people be foster parents. We’ve done some foster care, but not the way I would like to, as I’ve always had to work outside the home. I’d also set up a trust fund for scholarships for foster children. Then when, my husband’s siblings who usually have nothing to do with us came calling, we could just say, sorry, it’s all in trust funds and we can’t get at the money.
    For myself, I’d splurge a little. I’d pay off my house, buy a really great pair of boots, pay off my children’s student loans and buy my husband the Toyota Tundra he’s been drooling over.

  15. I don’t know how other state’s Lotteries handle it, but in Louisiana they absolutely recommend that you 1) Hire an estate/tax lawyer to consult you in handling the money 2) Preferably hire a security service (bodyguard) to keep people away and 3) move. They do state this in interviews with Lotto officials and on their website under “How to Claim Your Winnings”. Of course, they don’t suggest anything on how to manage your money because, ultimately, that is up to you. Many people just can’t manage it at all and would be the type to come back to you asking for more money if you gave them enough to pay off their house or car. The human animal is quite greedy at heart.

  16. We call the lottery ‘The stupid tax’ here in my office. Every now and then we will all chip in a few bucks a piece for a large jackpot. Other then that most of us prefer to invest our money in our 401ks and other savings plans.

  17. Well, I hate to say that I’m one of those stupid people who play on a regular basis… but its more of a requirement here.

    Our office has a lotto pool, with about 20 or 25 people in it. IF on the 1 in 75,000,000 million chance this pool hits it, I’d hate to be the sucker who wasnt in on the pool.

    Therefore I consider it required play.

    (Let me postface this by saying that I really dont think I’m stupid – I fund two defined contribution plans (almost to the limit) as well as a defined benefits plan – this is just an ‘early out’ if it ever does come around)

    And lets be honest – when is it not fun to dream about sudden millions and how you’re going to spend them?

  18. I completely agree. I also don`t bother with lottery or scratch tickets. I am the most unluckiest person when it comes to those things!

  19. Amen. Long ago I had a co-worker who actually won a relatively significant amount in PA’s various lotteries two times. (Think $100K and $200K, not the big calzone.)

    To accomplish this goal, for the past 30 years he spent about $200.00 per week of the money he earns doing backbreaking manual labor. Do the math and try not to cry.

    When interviewed by the local paper on “what it takes to win,” I just about died when I read his response:

    “You have to understand math.”

    AAAAAAAAAAHHHHHHHHHHHHHHHHHHHH@!!!!!!!!!!!!!!!!!!

  20. I think a lot of people who play the lottery realize that the chances of them winning are incredibly low. But they do it because from the time you buy the ticket until they announce the numbers you can dream about what you would do with all that money. So at least for a couple days, you have the hope of striking it rich. Getting rich over 30 years doesn’t sound near as appealing. By the way I rarely play the lottery, maybe once a year. I’m sticking to the long term plan.

  21. “I would give away the majority of the money, minus enough to pay off my debts and those of close loved ones. As the saying goes, “more money, more problems.” And I sure don’t need 100 million new ones!”

    Be careful with this attitude. This is a poverty mentality and will not help you get rich. Money comes from ideas, which come from thoughts…and those thoughts won’t help you get a $100M idea.

    -Erica

  22. Wow when I read this story I thought how LAME can someone be ( the person writing the story ) I mean sure not everyone is smart with there money that’s why there’s so many poor people out there.And if there is that person spending $80 bucks a week with a wife & kids living paycheck to paycheck he needs help, but what happens when he puts the money into stocks and it goes down or someone steals it from him like the guy in new york, what’s he to do then??? Not everyone will have YOUR best interest at heart that’s why YOU as a WINNER need the say NO,NO,NO

    For those people who say MONEY can’t or doesn’t buy you happyness are 1.) either HAD money and made bad choices or 2.) does not know how to handle money and are afraid of money itself. If / when you hit a lottery or any BIG amount of money ( and for me a big amount is more then $5 million ) the FIRST thing you have to KNOW and say it alot to family, friends and yes even CHARITIES!!!!

    Sure helping family & friends is great but you have to know that it’s a ONE TIME THING and when they come back ( trust me they will ) say NO, NO, NO, NO and even NO again if they are true friends they won’t even ask you for anything after you help them the first time.

    I play the lottery all the time and no I don’t have the money and yes for now I live paycheck to paycheck but I always keep the right mind set ” I WILL WIN ” and I know when I do win there will be TAXES taken out ( good thing I live in FL no state income tax ) and I will help family & friends ( good thing I don’t have alot of friends ) the biggest thing is even with out having alot of money I know how to handle it, how you might ask I know how to say NO, NO I’m not going to be like the person who “I would give away the majority of the money, minus enough to pay off my debts and those of close loved ones. As the saying goes, “more money, more problems.” And I sure don’t need 100 million new ones!” please if you had it you wouldn’t do it,

    Another thing I have always said ” it onlt take ONE ticket to win & I only have to WIN once ” You have to know if you win $1 million dollars it doesn’t mean your a millionair it means you have about $4ook to $570k because there are taxes to be paid…

  23. I think it’s funny how so many people call lottery “the stupid tax.”

    Do some research.

    SOMEONE is winning lottery money every day. The last Powerball draw had TWO jackpot winners, and TWO $200,000 winners.

    You can find HUNDREDS of stories all over the web about people who have won the jackpot, or some other lare sum. There are usualy several 2nd place winners with each Powerball or Mega Millions drawing.

    SOMEONE is winning those jackpots.

    Tell them it’s a pipe dream or a stupid tax.

  24. I hit four numbers and powerball a few years ago. Ten K was the prize, 6400 after taxes. For me it was simple, pay off my winter heat bill, a semester of college for my daughter and a few toys for myself, an electric guitar and camcorder.
    I have often imagined what if, multiplied by 1000 or 100, I would have had at most $5oo,ooo to work with….as a former daytrader, college graduate and seasoned “boomer”, I will not have a problem with $100,000 or $100,000,000. Bonds, Real Estate, unlisted phone number and most important withhold from the public your good fortune as long as possible….also private security for you kids and maybe a new Pickup truck for yours truly and last, a wee bit bigger rock for my Wifey’s finger….Yes, I still buy Powerball and Megabucks, the amount varies, it is tax deductible. If you don’t play you cannot play the game. j

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