Why Playing the Lottery Is a Bad Investment
Instead of Buying Lottery Tickets, What You Should Do with the Money
According to Webmath.com you have a better chance of getting into a car accident, plane crash, or struck by lightning than you do of winning the lottery. Still, millions play the game every day in hopes of realizing their financial dreams. Here’s a reality check: Say you spend only $5 a week playing Powerball, that’s $20 a month. If you put that money in a savings account paying only 4% interest, after 20 years you’ll have $7,958.48. After 30 years you’ll have accumulated $14,777.22. What will have you have if you continue to spend $5 on lottery tickets every week? Most likely, nothing.
What You Should Do with the Money You Would Have Spent on Lottery Tickets:
- Pay off your credit card debt. You can get an 18% return on your money instantly if you pay off your credit cards. In fact, many credit card companies are charging more than 20% interest if your credit isn’t good. So pay off those high interest loans as fast as you can. It doesn’t mean you have to cut up your cards. As soon as you pay off your balance, find a card that pays you back in the form of cash or gift cards. Some even offer rebates on gas. Then pay off your entire balance every month. You’ll end up making money from your credit card.
- Pay down your mortgage. The sooner you pay off your principle, the sooner you’ll own your home free and clear. Whether you make more payments during the year or write a check each month for a higher amount, it doesn’t matter. Just pay off your home as fast as you can. The sooner you do that the sooner you can start saving for retirement.
- Open a short term certificate of deposit. You’ll get a better interest rate than a regular savings account. But you don’t want to invest in a long term CD right now, with interest rates as low as they are. After you have accumulated enough, consider investing in a mutual fund.
- Contribute more to your 401K or Roth IRA. In fact, contribute the maximum amount possible to your 401k. You’ll be happy you did later on, when you realize just how much it costs to retire.
Finally, say you beat the odds and win the lottery. Does wealth really bring happiness? Statistically speaking, no. Often lottery winners end up broke and unhappy. Because if they had managed their money well instead of playing the lottery, they would know how to handle their winnings.
