# The Lottery – A Fool's Game

Check this out… The average person who plays the lottery spends $32 a month. If they were to invest that $32 a month from age 18 to 65 they would accumulate $734,000 in savings. Now that’s hitting the jackpot.

Explanation: Now I posted this yesterday and it created a little bit of a firestorm so I figured I would re-post and add some details on this figure.

I know this is a long post, but there is good information in here that you should know!

I know this hits a nerve for those who put false hope into the lottery and basically throw their money away. They want to argue the math in this and not the real point, which is opportunity costs.

Opportunity cost is simple, what can I give up so that I can gain?

In this example we are giving up playing the silly lottery and we are going to invest into our future that has proven to win.

If you want some further reading on the lottery, which by the way check this out, “People spent more money playing the lottery last year (2014 ) than on books, video games, and tickets for movies and sporting events combined.” CRAAAAZZZZY!!!! You can read more HERE.

Alright let me get back on track…

When you are investing you can only control a few things:

- 1. What you are investing in and who you work with.
- 2. Time when do you start and for how long.
- 3. How much you are going to invest, which is by far going to have the biggest impact on your future savings.

You can’t control the return because we can’t predict the future. However, we do have historical data.

“Your math is wrong, that’s only $18,048.” This is TRUE ($32 x 564 months), the total amount of money you put in would be $18,048. So where does the rest come from? Compound interest!

This figure is estimating a 12% return on your investment over the next 47 years. IMPOSSIBLE! Maybe, but if you look at the historical performance of the S&P 500 since 1926 it floats right around 12%. This again is also figuring you are not touching that investment, only adding to it over the next 47 years.

Now many will argue that looking at data over the last 80 years is silly. Especially when that data represents when America became America right? The economy has changed, the financial world has changed. This is a valid argument. Basically they are arguing that it won’t happen twice so figuring a 12% return is foolish.

Fair enough… remember the point of this post is to expose the opportunity cost people are missing by throwing away money on the lottery. This is not a debate on what your returns will be.

People turn it into that debate to avoid the truth of this post and that is if you do stupid stuff with your money like throwing it away on the lottery expect to have stupid results. PERIOD! If you don’t believe me refer to the article above.

So for argument sake let’s use a bunch of return estimates and you can pick which one you would like to shoot for. Remember, you can only control a few things when investing and the amount of money you save is by far going to have the largest impact on your future savings. You can't control the return. So don’t focus so much on the return as to how much you can start to save.

Also for fun, I am going to throw another figure in here as well.

On average American’s that are in debt spend $555 a month on interest for that debt. (nerdwallet.com) Yes, you read that right, $555 a month. So along with the lottery we are going to add this in at the end to show the true power of long term saving, investing, and compound interest along with being DEBT FREE!

Lottery Example – % of Returns Age 18 – 65 47 Years

$32 / month for 47 years with a 12% return over the life of the investment = $733,666.36

$32 / month for 47 years with a 10% return over the life of the investment = $368,322.36, still not bad!

$32 / month for 47 years with a 9% return over the life of the investment = $262,379.39. Pretty nice!

$32 / month for 47 years with a 8% return over the life of the investment = $187,826.87. Still 10 times the amount you put in!

$32 / month for 47 years with a 7% return over the life of the investment = $135,271.90. Still 7.5 times the amount you put in!

Again, the amount you save is going to play a huge impact on the results. So instead of 47 years let’s go with 35 years in this next example to be reasonable. So figure you start doing this at age 30 to 65. You are now debt-free GOOD FOR YOU! You can now take that $555 / month that was being spent on interest and combine that with what you used to spend on the lottery. Wow, do I see some behavior changes?

Let’s see what happens.

Lottery Example $32 PLUS $555 in average monthly interest – % of Returns Age 30-65 35 Years

$587 / month for 35 years with a 12% return over the life of the investment = $3,405,513.87 – Millionaire!

$587 / month for 35 years with a 10% return over the life of the investment = $2,100,005.23 – Still a Millionaire!

$587 / month for 35 years with a 9% return over the life of the investment = $1,656,218.58 – Yup, still a Millionaire!

$587 / month for 35 years with an 8% return over the life of the investment = $1,310,903.49 – Holding Strong! Millionaire!

$587 / month for 35 years with a 7% return over the life of the investment = $1,041,902.35 – Millionaire even at a very SAFE 7%!

Moral of the story. Don’t waste your money on a false hope, which is the lottery. Get out of debt, begin to pay yourself first and invest in you and in your family and you WILL WIN!