This article may contain affiliate links, which means we may receive a small commission for your click. We only recommend products that we trust. Read more here.
We’ve all had the idea that the lottery is a golden ticket to riches and unimaginable wealth. As a result, many hang their hopes on the lottery, believing that it’s the answer to all their problems. While it may seem harmless, do not let the numbers fool you. In 2016, half the U.S. population played state lotteries, and very few got to see a jackpot.
The lottery is a trap designed to keep you playing and coming back for more. When you look at it objectively, there are many better ways to use your money.
In this article, we'll discuss why you shouldn't play the lottery and what better alternatives exist.
- Is It Worth it to Play the Lottery?
- Playing the Lottery is Like Gambling
- You Have Terrible Odds
- You’ll Still Pay Taxes
- 70% of Lottery Winners Go Bankrupt
- The Lottery Preys on the Poor
- Better Alternatives than the Lottery
- Wrapping it Up
Is It Worth it to Play the Lottery?
The short answer is no. While it may seem like a lottery ticket is cheap compared to the prize it can give, the money spent adds up. In time, many end up paying more on lottery tickets than they realize and never win anything back. Other financial strategies far outweigh buying lottery tickets.
Playing the Lottery is Like Gambling
Lotteries have smaller prize brackets to entice you to keep playing. The way they draw numbers also triggers impulses in our brain, similar to how a slot machine lines up. They want to keep you invested by giving a brief high. A small fleeting moment of happiness you know begins associating with the entire act of playing the lottery.
Gambling can be very addictive and destructive. It can lead you to start losing money quickly. Once it starts affecting your lifestyle, it will eat your time and resources. Those with a tendency to get into gambling addiction should avoid the lottery.
Yet, you don’t hear the organizers of these big pools of money stopping you. Why? It’s because the lottery’s design is for gamblers. They want you to keep spending money.
For a lottery to function, they have to earn more than they give away. Five years ago, lottery tickets amounted to sales of over $70 billion. The money invested in trying to get rich quickly has only grown.
You Have Terrible Odds
At the highest echelons of the lottery, the six-digit jackpot prizes are the coveted ones. However, no one stops to tell you what your odds are for winning such a prize. In truth, there is a one in a 292 million chance to win. For you to win essentially requires a miracle. Here are some things that have better odds of happening to you compared to winning a lottery, according to the Las Vegas Review Journal:
- Being crushed by a meteorite (1 in 700,000)
- Dying in a plane crash (1 in 11,000,000)
- Becoming the U.S. president (1 in 10,000,000)
- Becoming an astronaut (1 in 12,100,000)
- Winning a gold medal in the Olympics (1 in 662,000)
Even becoming a billionaire through investments has a higher likelihood of happening than trying to put your future into a ticket. Financial accessibility and literacy improving around the world have had a positive effect.
You’ll Still Pay Taxes
When you win the lottery, you won’t get the magic number you see on the board. It doesn’t make sense for the government to tell you the truth straight up and reduce the enticing wealth you see in front of you. What you see beside the jackpot are pre-tax dollars. Yes, the government first takes its share of the prize pool through taxes, and you get the rest.
The government taxes lotteries at the highest income bracket, which is at around 37%. That means if you win $100,000,000, the government will take $37,000,000 from it first. Then you get the remaining $63,000,000.
70% of Lottery Winners Go Bankrupt
Here’s something a lot of people don’t tell you. Why is it that most of us don’t hear about lottery winners anymore? We don’t hear about people who won two years ago, five years ago, or even longer. Well, there is a good chance that the lottery winner has already gone back to a poor state of living.
Wealth is a mindset and a lifestyle. It takes a different kind of education to maintain and eventually grow money. It’s easy to think about what you can spend when you have hundreds of millions, but then the reality sets in.
Not only that, the money can go by quickly. People often get so caught up in high spending that they apply it to every part of their lives. As a result, after one purchase, they end up spending a significant amount of money on things they do not need. It’s what’s referred to as the Diderot effect.
Also, once people close in your life figure out that you’re a lottery winner, you may become objectified. People in your life may see you as a walking bank account that they can ask for money. You may feel tempted to give away money since you feel like you have so much of it.
The Lottery Preys on the Poor
Again, the lottery by design is to keep poor people spending money. Lottery advertisements are found in small neighborhoods, corner shops, or pawn shops.
Many of the shops that sell these tickets exist in low-income neighborhoods because lower-income people are generally more susceptible to what appears to be a solution to their financial issues. If 10,000 people buy a $5 ticket, then the lottery just made $50,000 in cash.
Advertisers know this, so they intentionally don’t tell the people about the odds and the risk.
Better Alternatives than the Lottery
What’s the first step to building a mindset for wealth? Stop using your money to buy tickets. The math alone means that it’s never worth it to try. Instead, look for strategies that are more proven to build wealth. It may not be instantaneous, but you’ll be surprised at how much these things can help you. Here are some alternatives:
Creating an Emergency Fund
One of the first things you need to establish to create financial security is an emergency fund. It is liquid cash you always have access to that you’ll only use during emergencies. Many recommend having at least six months of salary ready in a savings account that you use for your emergency fund. That way, when you lose your job, you have six months of comfort as you make your next move.
You can place it in a high-yield online savings account such as at CIT Bank, where you’ll earn a competitive interest rate on your money and have easy access for when something unexpected comes up.
Investing in the Stock Market
The stock market is the go-to place for many new investors. Index funds are a great place to start as you can use a small amount of money to buy hundreds of companies via an ETF.
Investing is a long game, and smart investing is the key to building wealth at any age. One can learn to invest on their own or hire a company to manage their money. Additionally, Robo advisors use algorithms to invest your money for you. This can be a low-cost alternative to hiring an advisor, and many investors use Robo advisors to allocate their money in the stock market for them. We recommend M1 Finance for investing if Robo advisors interest you.
Funding a Side Hustle
A side hustle will take extra work, but it will lead you to make more money. If you have a good business idea, a hobby, or an interest in exploring hustles, it can be a path for you. Most side hustles don’t need a lot of money to begin. It all depends on what type of business you want to engage in.
For example, starting a side hustle where you make money online may not be as expensive because you’ll likely use things you already have, such as your computer, existing internet connection, your phone, and software you use for personal use.
Buying Real Estate
Real estate is an investment that can make you rich. However, the adage, “it takes money to make money,” applies heavily. You can make a lot of money, but you have to put a lot of money in.
Nowadays, some services allow you to invest in real estate for a fraction of the cost. They use the concept of crowdfunding to help give people accessibility to investments. One of the most popular platforms for this is Fundrise. It’s the perfect place to start if you’re looking to put money into properties.
Open an account with Fundrise for as little as $10 and start investing in real estate today. Use our link and get your first 90 days of management fees waived.
Peer to Peer Lending
Many online platforms today offer peer-to-peer (P2P) lending services. It connects investors and borrowers directly. As a lender, you gain money through interest rates every time someone pays off part of their debt.
P2P lending can become a consistent form of income, but the challenge is finding the right platform. One of the websites we recommend is Prosper. The terms are very friendly to lenders, and it’s highly rated across many different platforms.
Wrapping it Up
With so many options that practically guarantee wealth-building, it’s time to let go of the false dream that is the lottery. From preying on the poor to fueling impulsive decisions, a $5 lottery ticket here and there will ultimately end up costing you far more. Instead, take the money you’d use for lottery tickets and put it into something long-term and profitable.