If you are reading this, there’s a good chance that you – like millions of your fellow Americans – lost out last week on one of the largest lottery jackpots in history.
For all of the buzz that the jackpot generated in your office, home, barber shop or gym, on talk radio and every place where the magnitude of the prize captured the imagination, the real time when most people truly lose in the lottery occurs when they mindlessly throw away their losing tickets and forget about the whole thing.
Truthfully, most people don’t expect to win the lottery, they simply hope to get lucky. Where they can make themselves a winner is by using the lottery to help prioritize their finances even when there is no prize on the line.
While the most common description for last week’s jackpot was “life changing,” the truth is that most people’s lives could be changed for dramatically less. Give someone enough money to erase their nagging debts, make a down payment on a home, pay for a college education, or fund a retirement and their lives have been changed forever.
You don’t have to win a lottery to come into a significant chunk of money, whether that pile of sudden dough comes from an inheritance, a lump-sum distribution, an annual bonus, a lucrative stretch of overtime, or some other windfall that creates the potential to upgrade your monetary life.
If you aren’t holding the winning tickets but want to take a “win” out of this lottery experience, hang on to the thoughts you had about how the money would change your life.
The real benefit of the lottery – particularly when a jackpot of this size lures people who don’t normally play it out into the pool of bettors – is that it is a great way to play “What if?”
Consider the following exercise, recommended by experts who study the psychology of investing: Finish the following statement with as many answers as apply: If I had won a big chunk of money – not necessarily the jackpot, but enough to change my life – in the lottery, I would have ...
Now list all the things that stand out in your head, whether they seem important or frivolous: Pay off the mortgage/buy a house, help out my family, quit my job and live off my investments, take the dream vacation, get liposuction, pay off the credit cards, or other debts, pay/save for college tuition, give more to charity, throw the world’s biggest Christmas party, buy a new car/boat/vacation home, start my own business, you name it.
Make your list of everything you would do if, tomorrow, you had unlimited resources to do it, but then put that list in order of each item’s importance to you, so that if securing your retirement is more important than, say, throwing the holiday party, it comes first.
Had you won the Powerball jackpot, that list would have come in handy.
It’s your financial wish list, with your dreams and desires ranked in priority order.
If you never win the lottery but you someday get a windfall, this is how you make sure that the amount – however big or small – has the ability to be “life changing.”
If zeroing debt would be the first step taken after collecting your lottery winnings, it probably should be the first move in your everyday financial planning, thereby eliminating much of the stress from your financial life.
If your priorities are debt-reduction, then saving for college and retirement, those are the goals you should be working towards every day, and if you came into a chunk of change tomorrow, it would help you determine how to use it, rather than waste it.
Your financial goals are the same with or without the lottery, except that the jackpot could ensure that you reached everything you could remotely put onto your list of financial priorities. In fact, every time you play some giant lottery jackpot, it gives you a chance, and a reason, to review your financial priorities as they change over time.
Statistics show that there are more than a dozen states where lottery players average $260 in tickets per year – and a half-dozen states where the annual average per person is north of $700.
If those players, instead, set aside $50 a month for the next 30 years and get the stock market’s historic rate of return – admittedly a high target, seeing as how most experts forecast something less for the next few decades than we saw from the last 90 years – they would end the exercise with $125,000-plus. That’s a windfall too, even if it doesn’t feel that way.
Don’t be so determined to get rich quick that you make yourself poor, bit by bit.
Meanwhile, don’t think of your losing lottery ticket as something that killed your dreams, think of it as something that got you dreaming, and then set yourself on the path to achieve the most important of those dreams without ever needing a lottery miracle.
Chuck Jaffe is senior columnist for MarketWatch. He can be reached at cjaffe@marketwatch.com or at P.O. Box 70, Cohasset, MA 02025-0070.
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