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Your Funds: You lost the lottery. Find a financial win from that

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You already know this, but you didn’t win the $2 billion Powerball lottery this week.

I’m sure you would have dealt gracefully with the many curses that come with a lottery win — the money grubbers, the enormous tax bite, the stunningly large impact of inflation on purchasing power and more — but failing to beat the odds doesn’t mean you’re doomed to a life of deprivation. You just have to follow a more conventional path to financial freedom.

You can still be a winner for playing this week’s giant jackpot — or any time the payoffs grow massive and Powerball or Mega Millions becomes news fodder again — by doing one thing most people don’t do when they play the lottery.

Instead of taking the standard approach — tearing up your losing tickets and forgetting the whole thing until the next time — take a moment with those losing chances and consider, “What if …?”

Before helping you squeeze that win out of your lottery losings, I should note that I’m no fan of lotteries. I’ve never purchased so much as a scratch-off ticket.

(With the odds of buying the winning Powerball ticket at 1-in-292.2 million, I figure my chances of finding the lucky ticket are about as good as your odds of buying it, so I keep my money in my wallet and my eyes open for ticket stubs.)

Last year, Americans spent more than $105 billion on lottery tickets, with about two-thirds going to scratch tickets and the rest pursuing daily, semi-weekly and weekly numbers. That’s roughly $320 per person per year.

(I live in Massachusetts, however, which has the highest lottery ticket sales per capita in the United States, closer to $800 per year.)

Since lottery players are habitual spenders — even those who only play for big jackpots say things like “I only buy lottery tickets when …” are defining a habit — it’s important to consider what happens if ticket-buying is curtailed.

Set aside $50 a month for the next 30 years and assume the stock market’s historic rate of return over the past 90 years: you’ll come away with a prize of more than $125,000.

It won’t feel like a gift from heaven, but it’s a pretty good alternative to consistently buying losing tickets for their purported “entertainment value.”

It’s hard to imagine the money you are frittering away giving you the kind of entertainment you could have with $125,000 after three decades.

That get-rich-slow thinking is the answer to the question millions of people were ignoring ahead of this week’s drawing, “What if I never win the lottery?”

Losing the lottery this week can help you answer that bigger, more-realistic question, because while a nine-digit jackpot is not in your future, there’s plenty of potential for you to someday come into a big chunk of money.

It could be an inheritance, a lump-sum distribution, an annual bonus, a lucrative stretch of overtime, a retirement “incentive” from your employer, a surprise chance to pick up extra pay or some other windfall. The source is unimportant; what matters is the potential for it to be life-changing, even if those upgrades are small.

So before tossing your lottery losers, check them for smaller winning amounts and consider what you would do with those prizes.

Winning $1 million for matching five numbers (but not the Powerball) would not be as life changing as the $2 billion first prize, but it’s going to leave a mark on your life, particularly if spent on your priorities.

Experts who study the psychology of investing suggest finishing the following statement with as many answers as apply.

“If I came into a big sum of money tomorrow, I would . . .”

Your answers might include quitting your job, paying off credit cards, eliminating other debts, securing college tuition for the kids, paying off the mortgage, securing your retirement, making donations to your favorite charities, helping your family, buying a dream house or car or taking that fantasy vacation, starting your own business or buying a franchise and more.

Add ideas to your list until it includes everything you would have considered doing had you won the giant jackpot.

Now adjust to the second-prize jackpot of $1 million and decide which items come first, and which are more secondary.

Then consider Powerball’s third prize of $50,000 (for matching four numbers plus the Powerball).

The smaller the windfall, the more you focus on real priorities; kicking out the things that you’d achieve with ridiculous money but drilling down to how you would spend achievable amounts of money.

You’re building a financial wish list with your dreams and desires ranked in priority, which is useful, even without a jackpot to fund it.

If zeroing debt would be your first move after collecting lottery winnings, it likely should be the first move in your everyday financial planning. If you therefore earn some extra income and can reduce debt and eliminate some of the stress it adds to your life, that’s likely where you should put most of the money you get from any personal windfall.

Work it all the way down to the lowest of windfalls. Powerball prizes below the $50,000 level run from $4 to $100. Those aren’t life-changing amounts, but they can be life-improving, whether they pay for a small splurge or saved and strung together with other side income, windfalls, and more to become a do-it-yourself jackpot.

The big lottery winner can afford to be a bit thoughtless with some of their winnings — though they must eventually get serious to make sure they avoid the well-publicized problem of blowing the money — but the rest of us really can’t afford frivolity with the few windfalls we get in a lifetime.

We get proof of that every time we complain about how rampant inflation has changed our shopping and spending habits; it’s only a few dollars here and there, but we quickly see it add up.

Add those feelings to your status as a lottery loser and it’s a reminder all of us can profit from: Money represents opportunity; don’t blow it.

Chuck Jaffe is a nationally syndicated financial columnist and the host of “Money Life with Chuck Jaffe.” You can reach him at itschuckjaffe@gmail.com and tune in at moneylifeshow.com.

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