Has someone ever told you that buying a lottery ticket is a waste of money? I’ve been told that by a lot of people. Although I do think most gambling is a waste of money, I do not think buying lottery tickets has to fall into this category.
Let’s go over how buying scratchers and other forms of gambling are a waste of money.
The odds are in the house’s favor. Which means on average you will end up losing more than you win in the long run. Now if you’re gambling for recreation and are having fun, then you can argue that it is not a waste. But financially, it is a waste.
Let’s take the best case scenario with a typical “big” win . Let’s make it $10,000 to simplify things. I’m pretty sure most people would be thrilled to win 10 grand on a scratcher or at the black jack tables. However, this big win is not life changing in any way. Sure you might be able to go on a nice vacation, or pay off some bills. But your life will change very little. In fact, you will slowly lose that money back to the house if you continue to gamble.
Now let’s look at the big time lottery games and why they are not a waste of money.
If you win one of these you will win millions if not tens of millions of dollars. Yes, the odds are astronomical. For example, your odds to win the Mega Millions jackpot are 1 in 176 million. Not very good odds in anyone’s book.
Yes, you are likely throwing away a dollar each time you play the game. But, it’s not as simple as that. You have to look at the utility that that dollar would give you if you spent it one something else or invested it.
You could buy yourself a big chocolate chip cookie. It would taste amazing for the couple minutes you are eating it, but the pleasure doesn’t last long. You could invest that dollar and turn it into $17 in 30 years. I hate to tell you, but $17 isn’t going to go very far in 30 years. So you’re not going to get much enjoyment out of that one either.
Or you could spend it on a shot in the dark and possibly win the lottery, which would drastically change your life. Being able to quit your job, buy a dream home, and travel the world are life changing. I don’t think that anyone will challenge that.
When you look at the utility that $1 can bring to you, it is apparent that a lotto ticket is not such a bad buy. Of course there is a limit to this reasoning. If you are buying $100 worth of lottery tickets a month or more, then you are wasting your money.
This is because $100 a month properly invested can turn into tens of thousands of dollars, which can affect your standard of living when you retire.
However, we are not talking about buying $100 of dollars of lottery tickets a month. We are talking about buying a ticket a few times a month or less. And when you look at the utility of those dollars, 1 in 176 million doesn’t seem too bad after all. Remember, someone has to win that jackpot.