So you missed out on the $865 million Mega Millions jackpot on Tuesday. I know, because you’re here reading this.
You’re not beating the 1-in-292 million odds and winning the $730-plus million Powerball jackpot being drawn Wednesday, either.
Some things don’t change in the middle of a global pandemic, like your lottery luck or the likelihood that you’ll claim the big prize.
But the life changes many of us experienced during the pandemic have raised the emotional value of playing the lottery.
That doesn’t involve buying a ticket, but rather is about the mind game of imagining what you’d do with the big prize or some share of it.
Dreaming of a lottery win can help you prioritize wants, needs and desires, all of which may have been changed by the pandemic; that’s why the enormous current jackpots are particularly timely.
I should note here that I’m not a fan of lotteries, having never purchased so much as a scratch ticket.
While I think of lottery tickets as a waste of money, there’s a case for taking a chance now, beyond simply breaking up pandemic boredom.
Typically, with an average-sized jackpot, the “expected value” of a Mega Millions ticket is about a quarter; it’s 32 cents for Powerball.
Expected value is a financial concept that projects what something is worth based on the probability of certain predictable outcomes. It’s what financial advisers calculate — tapping historical return data — to see if a specific savings rate or investment strategy can properly fund retirement.
Powerball and Mega Millions both publish prize amounts and the specific odds for all winning outcomes. That’s all Charles Rotblut of the American Association of Individual Investors needed to determine that current tickets have an expected value exceeding their $2 cost.
“The lottery is not a good investment just because the expected value of a ticket is greater than the cost, and it doesn’t improve your odds of winning,” explains Rotblut. “But you can say at that point that the jackpot at a certain point is large enough to justify gambling with a ticket or two.”
By Rotblut’s calculations, when Powerball jackpots exceed $491 million and Mega Millions tops $530 million, the expected value of tickets tops $2.
Taxes, taking a lump sum versus a series of payments and other conditions can make the math fuzzy, so assume that the expected value of a ticket doesn’t exceed the price you’re paying until jackpots are north of $550 million.
Rotblut notes that he matches his lottery spending — typically one ticket each for himself and his wife whenever jackpots near $600 mil — by setting the same amount of money into savings.
“Expected value being high or not, I’m really blowing the lottery money,” he says, “so I save the same amount and that way I always get something positive out of buying tickets.”
For big lottery spenders, that practice might get them to reconsider their habits. “If buying $50 in lottery tickets means taking $100 out of your budget to put the same amount in savings, you might feel the pinch and decide to spend a little less,” Rotblut says.
Americans reportedly spend about $75 billion on lottery tickets each year, with about two-thirds of the money going to scratch tickets and the rest pursuing daily, semiweekly and weekly numbers.
If everyone took up Rotblut’s system – saving an equal amount to what they spend – the results would be dramatic.
That’s not happening, however, so the way most people can win from the lottery is by playing “What if?”
Unless you win the big jackpot, the one thing you know about any type of “sudden money” — whether it comes from an inheritance, a lump-sum distribution, an annual bonus, a lucrative stretch of overtime, a retirement “incentive” from your employer, a surprise chance to pick up extra pay or something else — is that you don’t want to blow it.
Even small windfalls can be life-changing opportunities if you are prepared for them.
Thus you turn your losing tickets into winners by holding them in your hands and saying, “What if … ?”
Make this a real self-examination of what you would do with a windfall. Start with the big jackpots, but work your way down through smaller amounts, all the way to what you might expect to get in any future economic stimulus checks.
Make a list of the ways you complete the following statement:
If I came into a big sum of money tomorrow, I would …
Your answers might include quitting your job, paying off credit cards, eliminating other debts, securing college tuition for the kids, paying off the mortgage, securing your retirement, supporting your favorite charities, starting a business or buying a franchise, etc.
Post-pandemic, I’d expect most lists to include travel and dream vacations, and to provide better care for elderly relatives and more.
Build that list until it includes everything you’d believe you could do with the Mega Millions jackpot.
Next, decide what gets cut from the list every time you move the decimal place one spot to the left (turning $865 million to $86.5 mil, then down to $8.65 mil and so on).
What you’ve created is a financial wish list with your dreams and desires ranked in priority, able to help you if your sudden money is just $865 all the way up to millions.
It’s a worthwhile exercise, even if no windfall ever materializes.
If zeroing debt would be your first move after collecting lottery winnings, it probably should be the first move in your everyday financial planning. Thus, if you pick up extra work and can reduce debt in the process, that’s likely where you should focus your financial attentions.
You’re much more likely to get rich slowly, reaching your goals via conventional solutions — cutting spending, hiking savings, living within your means and so forth — than from collecting a jackpot.
Thus, by wondering how you’d handle the grand prize, you deal with your reality and the question virtually all of us face in our finances, namely “What if I never win the lottery?”