I was waiting for a bus a few days ago. I was the only one there, save for another guy, maybe 40’s or 50’s looking, a bit haggard, but dressed well. He was smoking and attacking a scratch card with a quarter.
I don’t know if he won or not, but I suspect I can guess.
The days of miracle and scratch cards
I remember taking roadtrips in my 20’s, and whenever we stopped in a new state, we’d go into some off-ramp convenience store and buy a scratch card. I’m not actually sure how this trend started, and why a scratch card is really all that different in Nebraska versus Kansas. Then again, roadtrips don’t need to make sense; the frissons of excitement that come with passing into a new place defy explanation.
Anyway, we’d play a scratch card, and maybe lose, or maybe we’d win $1-2 and play our winnings, and then lose. Happy enough, we’d return to the car and drive on.
It does good things (no really)
Unfortunately, there are some for whom these scratch cards aren’t a fun and pointless diversion. They are an investment strategy.
This is problematic. This is because you are incredibly unlikely to win in this game over the long term. How do I know this? The same reason why casinos are incredibly lavish and opulent. If you were likely to win against a casino, the casino wouldn’t look like that!
Likewise, you’re paying for the lottery. And the lottery people know this, which is why they are quick to tout the direct benefits on the community from the proceeds.
Here’s the page on the Oregon Lottery page titled “It Does Good Things.” (Interesting that they need to proclaim this.) And yes, I am a big fan of preserving our natural areas and waterways, of course. The problem is that I don’t want the working poor to be funding these things. And those who play the lottery are disproportionately economically disadvantaged.
“Those in the lowest fifth in terms of socioeconomic status (SES) had the ‘highest rate of lottery gambling (61%) and the highest mean level of days gambled in the past year (26.1 days).'”
Now you could easily argue that those who are in that lower-fifth perhaps need the help from the lottery more than those in the higher tier. Maybe, but the flip side of that is that a dollar spent on the lottery disproportionately affects the lower-fifth than the upper-fifth. (With fewer dollars, each one means more.)
Then there is the opportunity cost. How much money would people have if instead of spending money on the lottery, they invested in something with a reasonable rate of return? Here’s the rough answer: More.
An old friend of mine used to have a saying that I’m thoroughly appropriating here:
“You have about as much chance of winning if you play as if you don’t play.“
Now those are some odds I can go for.
Mo money mo problems
Now, let’s assume that through some crazy twist of fate, you win the jackpot. Congrats! Welcome to your own personal hell.
Here’s a terrifying list of what happened to 17 lottery winners.
But you can of course cherry-pick any statistics. Here’s a study done by the University of Pittsburgh that states that:
“[W]inning the lottery only postpones bankruptcy rather than reduces it despite the fact that the median large winner received enough money to pay off all her unsecured debts.“
If you have a ton of money all of a sudden, it’s like being given the lead role in a Broadway play after having only done community theater. You’re not ready for it, and you probably won’t do very well.
So what do you need to be able to handle being wealthy? You need practice. You need training.
How about this: learn to manage your money making what you make now. Ditch the scratch cards. Then, over time, gradually increase your income and decrease your bills and expenses (though not likely through raises alone). After all, making a moderate amount of money and being able to make ends meet is vastly preferable to making a lot of money and losing it all. Then give money to an organization that is helping preserve natural areas. Then you’ll be ready for the big time. And what’s better, you still won’t need scratch cards. Break a leg.
Latest posts by Mike Pumphrey (see all)
- Here are some other style boxes I missed - December 14, 2017
- What does that 3×3 investing square mean? - December 11, 2017
- The HSA “testing period”: The Sophie’s Choice of health care costs - December 7, 2017