I realize this article may be a tad strange to submit to a website devoted to getting rich slowly, but I never cease to be amazed at the number of people who intrinsically know the lunacy of this game but still fall prey week after week.

Have you ever thought that you would somehow beat the odds and win the lottery? If you have, you’ve got plenty of company. In fact, about one out of every three people in America think that winning the lottery is the only way to become financially secure in their lifetime. Yikes!!! This is a frightening statistic on many levels.

With the following tip you won’t win the "jackpot", but there's still a way to win on every draw.

Everyone knows that the probability of winning the lottery is one heck of a long shot… for everyone else that is! How remote are the odds of winning the jackpot? Your actual odds of winning the lottery depend on where you play, but to hit the jackpot in single state lotteries your odds are about 18 million to 1, while multiple state lotteries have odds as high as 120 million to 1.

Are you able to picture 18 million people? I can’t, but I can picture the crowd at the Super Bowl. How many attend the annual Super Bowl? Let’s say 100,000. Now imagine 180 Super Bowls being played at the same time. To accurately reflect the odds, out of all those people, 180 Super Bowls, just one person will be plucked from the crowd to win the coveted grand prize.

To put it in another perspective, this would be like adding up the Super Bowl crowd for an incredible 180 years, just to amass enough people to match the odds. In that perspective it's easy to see how ridiculously remote your chances of winning the jackpot really are. It makes me nauseous to think that some people are counting on the lottery scheme for their old-age financial security.

Interesting stats from the law of averages.

In 2004, the average American spent more on lotteries than on reading materials or attending movies. The average spent on lotteries that year was $184. The average return on lotteries is only fifty-three cents on the dollar. For the average investor, over a forty-year period, the stock market returns 811% more than the lottery.

A number of years back at a family reunion, someone proudly announced that they had just won several hundred dollars in a lottery. After the usual good wishes and congratulations subsided my Uncle Peter calmly said that he had figured out a system that allowed him to consistently beat the lotteries. Naturally we all scoffed but at the same time we urged him to share his secret to the Holy Grail. Uncle Peter just smiled and waved us off, but he peaked our interest so we wouldn’t be dissuaded.

After a few minutes of cajoling he asked which of us played on a regular basis. Several people admitted that they played on occasion… but just for fun of course. “How much do you spend?” Uncle Peter inquired. The consensus averaged around fifteen dollars a week. “That’s incredible!” gasped Uncle Peter, “because that’s exactly how much I’m ahead each week.” Some of the family rolled their eyes and groaned because they immediately saw where he was going. A few others continued to pressure him to reveal the formula. Finally he relented and shared the secret. “My secret to coming out ahead every week is this… I don’t play! Every week that I don’t play, I’m ahead.”

Among the jeers and laughter and a few well-aimed dinner rolls, Uncle Peter laughingly insisted his reasoning had total merit. “If I compare myself to the people who play every week,” he said, I really do come out ahead on every single draw. After every lottery I am guaranteed to have $15 in my pocket. If you play and don’t win, you’re out $15. In fact, when I compare myself to the people who play, I win $15 every single week.”

From one standpoint Uncle Peter’s logic is unassailable. On the other hand, I’m not about to suggest that people shouldn’t gamble or play the lotteries. That’s the last thing I would do. I will say however, that everyone should do themselves a huge favor and get out of the “something-for-nothing" mentality, and the quicker the better.

Playing lotteries or gambling are two perfectly legitimate forms of fun and entertainment, but only under the scrutiny of the following two reasons;

Number one: if you play you can truly afford to lose the money. That means losing won’t affect your happiness, your lifestyle, or your long-term financial health in any way.

Number two: (assuming you can say yes to number one), you really, truly enjoy playing.

If you love the fun, the excitement, the suspense or whatever it is you get out of playing, more than you value the money you lose, then you win every time you play.

If you can’t say “yes” to both reasons for playing, then you may want to try the other method of winning every week… follow Uncle Peter’s example and stop playing!

Richard Fast is the author of 29DAYS ... to save money and achieve financial independence.

Q: How do you double your money in Vegas?
A: Fold it in half & put it back in your pocket.

The lottery is a tax on people who are bad at math.

Buying one lottery ticket every now and then is better than $15 worth every week.

The expected value of a $1 lottery ticket is about 50 cents, so you lose 50 cents every time you play. With the first ticket you can imagine you are buying cars, houses, jets, vacations, and whatnot. Those imaginary purchases are probably worth 50 cents of utility if they give you a warm fuzzy feeling. However the rest of the tickets don't let you purchases incremental imaginary cars etc. So for those you are just wasting 50 cents. Even if you could buy more imaginary cars with multiple tickets, the marginal utility of each imaginary car decreases. Also the opportunity cost of time spent imagining cars goes up.

Couldn't one argue that your uncle used the same kind of logic? He didn't do anything and therefore won, i.e- got something for nothing.

I play the lottery every week. I do win sometimes but I lose most of the time. However, I only play for a few euros per week so the annual expense is comparatively low.
I play the lottery for the chance, no matter how small, to win. It grants me a few minutes of "what if...".

I have long ago come to the conclusion that the only realistic way of amassing money is to save every month for years. But no matter how hard I save, I will most likely not ever be able to save millions, not even if I save the money I spend on lottery tickets.
Realistically, I will not ever be totally financially independent (and by that I mean just being able to sit around collecting interest) so what I am buying for those few euros is a small chance and the right to dream.

Sports betting on the other hand; I do that once in a while to see how good I am and to make it just a bit more interesting.

I don't *need* to gamble and I *could* save the money but it's just one of those little things that makes life just a bit more interesting and enjoyable.

The way I look at it, lotteries are just another notch on the same "risk/return" spectrum as any other type of investment.

Think about it.

If you invest in a CD, you stand to gain very little (~1.5%?), but your risk is also very low. The only way you lose your money is if the bank fails and FDIC cannot/will not pay.

If you invest in bonds, your anticipated return is a little higher, but so is your risk of losing money.

If you invest in a stock, you could make double-digit returns, but if the company flops, you could lose a significant portion of your capital.

If you invest in leveraged real estate, you could gain a lot of money, or the market could nose-dive (a la 2008) and you could end up in the red, owing more than your asset is worth.

If you invest in a lottery ticket, your rate of return could be astronomical - literally millions of a percent - but your risk of losing your entire "investment" is almost certain.

They're all just different "risk/return" ratios on the same spectrum, in my opinion.

Hey Jonas

Couldn't one argue that your uncle used the same kind of logic? He didn't do anything and therefore won, i.e- got something for nothing.

I love your "lateral way of thinking"

I had a good chuckle over that one and you're absolutely right.

Well, to using some gambling/probability terms, stocks, bonds, and CD's are all +EV (expected value). Stocks are more +EV but also high variance; down to CD's which are lower EV but low variance. You could draw a graph with data points for CD's up to leveraged real estate. Each data point would have a higher EV and a higher variance (risk), so you could draw a line showing the positive correlation between the two variables. The line, in investing terms, is known as the efficient frontier.

However lottery tickets are both high variance and -EV. So if you put it on that graph, it would be well off the line. Thus, it is a bad investment.

losing is definitely a frustrating feeling when gambling. So what i suggest is to plan the amount of money which you will spend in every game. When you feel like losing, quit playing. Never chase your loses

That's not a great way to look at it. Stock options have an EV=0 yet they can be used either for speculation or as insurance. When used as insurance they reduce risk. They fall closely on the efficient frontier to lottery tickets. But that does not make options a bad investment.

Personally I don't play the lottery and I do not consider it an investment in any sense of the word. But I have seen various analyses of the lottery that look beyond just EV that make an academic case for lotteries.

For example, it is common in academic literature to focus on expected value as the rational way to make decisions. It is also known that humans do not make decisions based on expected value. We tend to focus on the risk side. Risk aversion is given a greater weight than reward-seeking. This behavior has been observed and documented consistently across a wide range of decision environments.

In the context of investing, this means that if you make decisions based on expected value when you are playing the game with a bunch of other people that are using different criteria, you might not be as smart as you thought. The trouble is that this behavior is hard to quantify. But it explains many characteristics of markets including the formation and collapse of bubbles. (Differing perceptions of risk lead to different behaviors even though the objective situation (EV) remains the same.)

In the context of the lottery, the risk is always $1. The expected value might be -0.5 but the situation is so asymmetric that people will play. And it is not necessarily a bad decision when considered under an alternate version of decision theory that is based more on reality than the expected value approach.