Tuesday, August 26, 2008

The $30,000 Lottery Loser

Wow, I can't believe I forgot to add this story to the posts about what I'd been reading recently: From the New York Times, Aug. 22, a story about a guy who spends $30,000 a year on lottery tickets.

What makes this even worse is that A) he only makes about $40,000 a year; and B) he thinks that because he himself spends $500-700 a week on lottery tickets, he should have won the $5 million jackpot that was claimed by his neighbor, who only spends about $30 a week.

Ok, the fact that he spends 3/4 of his income on lottery tickets is a bit mitigated by the fact that he gets a free apartment as part of his job, but still, he has a wife and kids to take care of! And here's his attitude:

But working is for poor uneducated men — a sucker’s game, he said, where one must run increasingly fast to keep one’s place in line. “You’re making money on the one side and spending it on the other,” he said. “If all you’re doing is working, you’re never going to win.”
I can sympathize with the feeling of running just to stay in place, but someone should have told this guy that blowing all your money on the lottery will make you have to run even harder. I find it incredibly sad that people actually think this way!

25 comments:

Anonymous said...

Perfect example of why the lottery is banned in many states.

Ask yourself, who is the majority who plays lottery? I'm not talking the mega millions, I'm talking your everyday lotto player.

My answer: The lower class

The lower class is the prime target for lottery. As more affluent citizens would not dispose the majority of their income on such bad odds of becoming wealthier.

sandyVoice said...

A government poll in Australia in 2006 found that 8% of people were counting on winning the lottery to achieve financial security. Here's an article about it:

http://www.theage.com.au/news/national/financial-plan-win-lottery/2006/07/27/1153816292130.html

Middle Class Hick said...

I feel sorry for this person but at the end of the day, he is alone responsible for his actions. Why did his wife not stand up and say "hey - quit it!!" No matter what you do - there will always be people who think they can "make it" by winning the lottery. The point, is to play a little bit of a game, and not to have it be your financial blanket. Yes I play, $2 a week. I make a thousand times that in a year, so this is a pittance for me to play and I spend more than that amount yearly at a good concert or night out at a bar.
What the problem is people don't have 1) financial education and 2) people follow the law of entropy. If schools would have a course in finance (basic accounting, how to manage a check book, etc.) for a quarter to graduate, then you would be better prepared to live life. It is not that hard to do and really could be taught by anyone with some common sense. Secondly, the law of entropy states that unless acted upon by an outside force, an object will use as little energy as possible. Greed is an outside force, and people don't want to work to get their fortune, so they say "instead of dinner - I will buy lottery tickets, I have to win one day".
Do I think that we need to get rid of the lottery? Nope. Again - people and their families are responsible for those around them. It is unfortunately sad, but again, it is just a game.

Bucolic Bushwick said...

I was waiting for someone to blog about this!

frugal zeitgeist said...

That's why they call the lottery a tax on people who don't understand statistics.

Uncommonadvice said...

The lottery is a tax on the stupid.

Middle Class Hick said...

By that logic the following also apply:


Gasoline is a tax on those that don't live near their work.


Gasoline is a tax on those that don't live downtown near public transit.


Food at a grocery store is a tax on those that are not farmers.


Electricity is a tax on those that don't know how to use wax and know how to cut wood for heat.


CDs are a tax on those that don't like to go to concerts.


Computers are taxes on those that don't like to use snail mail and telephones.


The list can go on. For those that believe in personalized manifest destiny (he who owns the most stuff wins), each person should be responsible for their own wake. It is their bed.

pkzcass said...

Even if the jackass did win the lottery, he'd be bankrupt in a year. Idiot.

Gord said...

What the guy doesn't get is that working is winning. Contributing to society is what makes you valuable; not money. I can't help but be a little suspicious of this story though. It would not surprise me if the guy doesn't actually exist. Who could be so lacking in intelligence and judgement?

Anonymous said...

To middle class hick:

You're comparing suplements to what you perceive as the main source. Your logic if applied to the lottery is that the lottery is another form of income and method to becoming wealthy.

You listed rather practical alternatives, yet to the act of getting rich your list a raffle that has extremely poor odds of winning.

sorry - You need another angle at playing devils advocate.

Anonymous said...

This guy must have read too much Casey Serin, with all his "wage slave" rhetoric.

Bitty said...

One word: addict.

Why doesn't the wife say stop it????? She probably does. And it also probably has as much effect as telling the wind to stop blowing.

My stepfather was addicted to alcohol and to gambling (horse racing and later lottery). He spent most of his income on one or the other. When he died and my mother was going to be receiving a percentage of his city retirement, she muttered something about finding a way to make it work. I asked her if she was going to continue his practice of spending $50 on the lottery every night. Horrified, she said no.

She's now financially way ahead of where she used to be.

Middle Class Hick said...

@anonymous @ 5:01pm

I am utterly confused at what you are saying. I was never listed the lottery as another revenue stream. I also was not trying to position myself as a devil's advocate. I was merely saying that I like to play the lottery myself as it is a 1:152,586:843 chance that I will become a millionaire. I know that, but I can afford it. I also don't "PLAN" on that being my primary way to get to retirement. I am doing very well with my job, and doing extremely well in the stock market the last decade and will be able to retire by about 45.


I guess can you make your point a little clearer.

Anonymous said...

Middle class hick:

I was only analyzing your post on going by the warped logic people were pointing out about this fellow, you mentioned various alternatives to the norm as a tax on people who did not use the 'norms'.

You mentioned going by the logic we critsied this fellow, as gas being a tax on people who didn't take the bus.

food at a grocery store as a tax on farmers.

You went on describing various taxes, therefore maybe you can explain "your logic" as to who lottery is taxing?

My logics is clear that the lottery taxes the lower class, what is yours.

Playing the lottery as you do is very different that the fellow in the article.

Consider an alternative argument of selling alcohol in a gas station. In NY it is legal, otehr states it is not. The reason it is illegal is some states claim it promotes an easy access for alcohol to be consumeed while driving. A resonsible person like yourself who can control his lottery playing to a few dollars, would be responsible enough to buy a beer at a gas station but drink it at home or not whole driving. An alcoholic would most likely purchase and drink on the ride.
Back to the lottery, it is giving access to lower class the notion that they can have a shot at millions by playing. If I'm already a millionare, the lottery is not so much appealing other than for fun to waste a few bucks on crapy odds.

Anonymous said...

can you imagine how much money he would have if he had put all of that into investments or savings for all these years?

Anonymous said...

I wish people would stop repeating the saying that the lottery is a stupidity tax. It actually makes a great deal of sense to buy a single lottery ticket. Yes, there is an extremely high risk that you will lose your dollar, but there is a commensurate reward - more money than you can shake a stick at. Let look at the alternatives: 1) I play the lottery, one ticket a week for ten years. Total outlay $520. 2) I save that dollar instead at 3% interest. Only the interest gets taxed and inflation runs around 5% currently. So I actually lose 2% of my buying power every year. Total saved = $466. So I end up with $466 bucks or a 1/2,000,000 chance of winning a life changing amount of money. I'm picking the tiny chance of winning over the certainty of accumulating a tiny amount of money. Especially as I have not even counted the "service" charges that bank would demand for keeping such a small account open. If I keep my money under the bed, my buying power is even further eroded.

Of course, buying a *second* lottery ticket doesn't really make any sense. Since the odds of winning are so low, the second dollar you spend on a ticket does not appreciably increase your odds of winning. Going from 0 chance to 1/2,000,000 with the first ticket is a huge increase in your chances. Going to 2 1/2,000,000 chances is extremely small. So, its really only the 2nd and subsequent dollars that are stupid.

Any mathmaticians have an issue with my analysis?

Miss Thrifty said...

Oh dear! Think of all the other things he could be spending that money on. I guess he's in too deep and has spent so money that at this point, he can't bring himself to admit defeat.

Rebecca said...

Anonymous/Middle Class Hick (I assume the last anonymous post came from you...sorry if I assume incorrectly)--

Yes, I do have a problem with your analysis. The expected value of your winnings through the lottery is (odds of winning jackpot*jackpot amount*512). The odds of a jackpot in Powerball are less than one in 146 million (source: www.lotterybuddy.com/powerball/powerodd.htm). If the average jackpot is about $39 million (same source), then you're looking at an expected value from your outlay of $512 is only $136. If you do the math, it's clear that the lottery is NOT an effective spend of your dollar. Even if you take the average payout for all prizes (same source) of $18, and the cumulative odds of winning ANY amount of 1 in 36, you still only have an expected value of $256.

You're free to play the lottery if you enjoy it and it makes you happy. But don't try to argue that you have a better likelihood of making money in the lottery than in investing that same amount. The math just doesn't support it.

Rebecca said...

Sorry to respond to myself. I wanted to provide one other citation, with a far more rigorous analysis than mine (too bad they didn't show their work on the portfolio analysis bit)--

http://www.emory.edu/ACAD_EXCHANGE/2008/febmar/garibaldiabrams.html

(Sorry about the weird URL formatting--short URL here: http://tinyurl.com/6kxtqt.) A combination of mathematical and portfolio analysis indicate that, even in situations where the expected rate of return is positive, the level of risk inherent in the activity outweighs the probability of winning.

jackandjillsmoneyblog.com said...

Unfortunately the majority of those that play the lotto are of lower socioeconomic status. Additionally, for many, its their only hope for prosperity. While spending a small percentage of your income for a long shot dream seems understandable, the gentleman referenced clearly needs help. Given that his housing was taken care of, he could have been well on his way to building wealth....

movingeast said...

In response to Rebecca - how about only buying a ticket in the Powerball when the prizemoney gets above $146M

(so the expected value is then > $1 per ticket)?

Middle Class Hick said...

@Rebecca - I don't post anonymously so that was not my post. No worries - we were making the same point from different angles ;)


I think it is all on how you look at it. I am ahead on the lottery right now. I.e. I have made more money than I have spent between casinos, poker night with friends, and the lottery. I look at it as a past time, entertainment. Yes, I can go to a bar and get a $5 beer. However that thrill is not the same when I look up the lottery numbers the following morning online to see if I won anything.


If I don't win anything, eh, it was fun to try. If I do? Bonus. I am elated and feel emotions. I spend more than $1 in gas to get to the grocery store and home. The lottery is just something I enjoy, and I can afford it and I am not spending 75% of my income on it as the guy in the provided example (please note I said it was sad in my first post). I am spending 0.1% of it.


Now for everyone that is saying about the analysis being shows it is not a good investment. I agree. However, again - quit looking at it as an investment !! It is ENTERTAINMENT. That morning Starbucks, that is ENTERTAINMENT. It cannot qualify as food as the true definition of food is sustenance (unmodified fruits and berries, uncooked meat, etc.) You are paying for PREPARED FOOD which thus provides entertainment for you. The entertainment value is how the food tastes which provides enjoyment to you. You have to have entertainment in your lives, it lets us know we are alive, and that we have meaning to everything. It drives us have feelings. Feelings are essential to happiness. The more positive feelings we have, the better we feel (net versus bad feelings) and then you have an "ENRICHED" life.


Of course I am just a hick from the sticks who tells people how to save/spend their money as their secondary career.

Savings Toolbox said...

of course the choice to gamble is a personal one and obviously not always a smart decision to make...especially if you are financially unable to afford it.

Personal opinions about gambling aside, I couldn't let this post pass without commenting that it only takes one ticket and one set of numbers to win so why spend the majority of your income...

Gambling can be a harmless pastime but can also be a very serious addiction that affects people of all classes - not just the lower ones.

middle class hick - LOVE your additions to the logic!!

jeflin said...

If the guy will just save up his money for ten years, it is a whopping $300,000.

That will be worth a lottery win. But it is not limited to US only.

http://jeflin.net/2008/06/13/more-singaporeans-turn-to-gambling-as-investments/

nobrainerdeals said...

30k that is crazy!! I don't even think he can write that off.