Lottery Vs Investment – Which is better? Yes, a question which many people think about. There is nothing wrong with occasionally purchasing a lottery ticket with a few dollars. Who doesn’t want to become a wealthy person one day? Don’t confuse reality with imagination, though. One in 292 million is likely to win the Powerball jackpot.
Your hard-earned money can be used in more wise ways. Consider increasing your lottery spending from $2 per month to $20 per week. In a year, that comes to $1,040. Spend the $1,000 in one of these five ways rather than spending the cash on your lotto obsession. You will almost certainly be successful.
Do you feel lucky? If you play the lottery, you had best be. Whatever game you choose to play, your chances are pretty less. For instance, the odds of winning the prize or jackpot in a Powerball drawing are 1 in 292.2 million.
Important Things To Know About Lottery
You must put things in perspective:
- Each year, there is a 1 in 1,222,000 probability of dying or being hurt by lightning.
- You have a 1 in 57,825 risks of passing away from a wasp, hornet, or bee sting in your lifetime.
- A catastrophic storm has a 1 in the 35,074-lifetime probability of killing you.
- Many people concur that they will experience any of these calamities is relatively low.
There are other best ways to put your money to work for you than buying lottery tickets every time you get paid!
Bob used to be a huge lottery ticket buyer, but after learning about investing, he began to consider how much money he was spending on tickets and what he was getting in return. And after buying all those lottery tickets, do you know what he had at the time? Nothing!
What Is The Difference Between A Lottery And An Investment?
Although it tends more toward gambling, a lottery is a form of investment.
People who purchase lottery tickets hope one day they will purchase a ticket, hit the jackpot, and become billionaires!
It’s simple to understand the attractiveness of this. You can go from having nothing to having money that changes your life, depending on your level of financial literacy, but I’ll get to that later.
Some people spend most of their lives doing this, believing they would one day become wealthy, purchasing lottery tickets every other week.
However, the vast majority of lottery players won’t win, and all of the money you spend on tickets won’t be reimbursed.
The primary distinction between investing and gambling is this.
All About Lottery
You have a very less probability of winning the lotto. Playing the lottery more often does not boost your chances of winning.
The total of annuity payments winners get over decades makes up the advertised lottery jackpots; alternative lump-sum payouts are substantially smaller.
Lottery tickets are a lousy investment since prizes make up 50 and 60 percent of lottery receipts.
Lottery operators have gradually lowered the odds of winning jackpots to ensure that they increase in size following several drawings with no grand prize winner.
Investment: A Better Option
It’s not necessary to be wealthy to invest!
When we discuss investment, one thing we frequently hear from people is that they lack the necessary funds. You could open an investment account with the few dollars you would have spent on the lottery ticket.
Make sure to research before investing because there are many different opportunities. You will notice that the money you used to buy lottery tickets has grown into a respectable-sized account in just a year or two.
After that, you are free to decide what to do with the money. Just be sure to find a strategy to make your money work for you! The road to financial freedom begins there! Read the following Investment quote
Ways To Investment
Fund a taxable account with money
The cash could purchase mutual fund shares or equities outside your retirement account. With an investment of $86.67 a month for 20 years and a 7% annual return, you might have over $42,000. If you purchase lottery tickets for that amount each month for 20 years, you will have spent $20,800.
Activate a Roth IRA
Contribute to a Roth IRA if your workplace retirement plan is already at its maximum. In 30 years, if you put $86.67 per month into a fund with a 7% annual return, you’ll have about $106,000.
And if you reach the age of 59 12, you can withdraw your earnings tax-free. If your modified adjusted gross income for 2017 is less than $118,000 for single filers and $186,000 for married couples filing jointly, you are eligible to make a Roth contribution.
Increase your 401(k) savings
Put your additional $1,040 to work for you in your retirement account if you have it available. If your company matches your contributions, you’ll benefit. It costs $20,801 to invest an additional $86.67 a month (or $1,040 over 12 months) in a 401(k) over 20 years but assuming an 8% annual return and a 25% tax rate and the account balance will be $49,632 at the end of the period. And that doesn’t include company matches.
The investment was made using pretax funds, so after accounting for the 25% tax savings, your actual cost is only $15,601. So, in 20 years, you will effectively triple your wealth.
Boost monthly mortgage payments
The extra effort goes a long way. A $200,000 mortgage at 4% over 30 years equates to around $955 in monthly payments (excluding real-estate taxes and insurance). You will spend roughly $144,000 just on interest. However, by contributing an additional $86.67 a month to the same mortgage, you’ll avoid paying nearly $24,000 in interest and pay off the debt four and a half years earlier.
Wrapping Up: Lottery Vs. Investment
In 2011, a puzzling headline was displayed on the Mega Millions lottery game’s homepage. It said, “Save for Retirement.” Lottery officials claimed the promotional campaign was encouraging players to fantasise about how they would utilize their winnings—not providing a financial strategy—in response to complaints from anti-gambling groups over this alleged attempt to portray playing the lottery as a retirement plan.
Is there a more practical or money-making application for lottery winnings? Let’s examine the figures. $5 every week invested in lottery tickets equates to $260 annually. The total amount spent on lottery tickets over 20 years (the standard long-term investment horizon for equities and bonds) would be $5,200.
If you invested $260 in stocks for 20 years, you would have $11,015 (assuming 7% annual returns based on the historical performance of equities). However, if you simply spent the money on lottery tickets, all that would be left would be the (presumably little) prizes you had won.
Of course, nothing in the US stock market is ever certain. The value of stocks can rise as well as fall. So let’s attempt a more circumspect estimation. Think of someone who put $250 each year into an IRA instead of buying lottery tickets with that sum.
The account would be worth $15,392 after 30 years, assuming a conservative average annual return of 4%; by 40 years, that amount would increase to more than $25,000. And that doesn’t even consider the tax advantages of making tax-deductible IRA contributions.
FAQs
What is the best investment if you win the lottery?
- 1 – Repay any debts.
- 2 – Invest in real estate.
- 3 – Stocks, bonds, and savings.
- 4 – Contribute to your pension.
- 5 – Put money into tangible assets.
- 5 – Donate to a good cause.
Is playing the lottery a good thing?
You have a very slim probability of winning the lotto.
What are the disadvantages of the lottery?
However, addiction is the sole drawback to playing the lottery.
Who owns the lottery in the USA?
The Multi-State Lottery Association (MUSL) is a non-profit, government-benefit organisation in the United States owned and run by the 34 lotteries that make up its membership.
Can I give my family the money if I win the lottery?
A lottery winner may donate a portion of their earnings. This is permitted without incurring gift tax obligations up to the annual exclusion amount.
What are the pros and cons of investing in stocks?
Pro: Promotes regular investing.
Cons: You might not reach your retirement goals with it.
What are some alternatives to investing in the stock market?
- Real estate. For many years, real estate has been a reliable investment.
- Your residence Given the current position of monetary policy, the housing market is thriving and should continue to do so.
- Loaning between individuals.
- Commodities like gold, silver, and others.
- Cryptocurrency.
- Art, antiques, and unique collectibles.
- Athletic Cards.
- Invest in a privately held company.
Is it better to win the lottery or invest in stocks?
Even though there is no assurance in the stock market, your odds of making a profit are far higher than winning the lottery. Lottery winners can choose to receive their money in annuities or as a lump payment, depending on their preference.
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Riya Gote is the Founder of Scriberlee. A digital marketing firm features in Forbes 2020 for providing quality content to global clients. She is an enthusiastic writer who helps firms attract visitors with her writing style and marketing strategies. Having 4+ years in SEO-based content writing, Riya has worked with different content platforms for 18+ industry sectors. She was featured in more than 70+ global newspapers. She has expertise in academic writing as well. She is emerging motivational speaker and a tarot card reader.