Lottery luck

The last Powerball lottery in the United States inspired thousands to line up for a chance at winning the big bucks. But is a lottery win as desirable as it seems?

There has been a lot of buzz recently about lotteries because the jackpot for the Powerball lottery in the US reached US$1.6 billion earlier this year. People lined up around the block at many US retailers to get in on the action.

While the potential prize was big, the odds were long. According to the Powerball website, on a US$2 play, the odds of winning the grand prize were one in 292,201,338. That didn’t seem to stop too many people from handing over wads of cash.

But have you ever really thought about what your life would be like if you won?

Let’s weigh the pros and cons of winning a lottery such as this.

Pros: well, you’re rich! You can pay off all those nasty credit card balances. You can catch up on that RRSP room you have available since you couldn’t afford to max out before now. TFSA? Fill it up to the limit. Got a mortgage? Pay it off. Heck, why not even buy a luxury house in a tony part of town?

Worried about the cost of your kids’ education? Not anymore.

Oh, and toys. You can now afford that home theatre in the basement and that Lamborghini Veneno you’ve had your eye on. Might as well throw in a cottage too.

And you’ll never have to work again.

Cons: the first issue you would be faced with is that your identity would be made public. You’d probably have to pose for a photo with one of those giant cheques in your hand with your full name, the city you live in and the amount you won printed in huge typeface for the world to see.

The problem with that is that many people, some you know and many you don’t, will want some of your loot. That means your voicemail and email will probably fill to overflowing with requests to pay off friends’ credit cards, help ailing mothers and to donate to innumerable charities. You’ll even be an easy target for identity thieves trying to steal your credit card numbers.

Now let’s talk about that job you go to each day. Sure, it would be a pro if you hate your job, but what if you love your job? For many people, the fact that they’d never have to work again could actually be a con instead of a pro. Many people would feel lost without their job.

What about the effect on your kids? Little Johnny just turned 17 and is deciding on what university he would like to attend. He found out that you won $25 million. Hey, problem solved. Why bother with the stress of university when mom and dad could just write him a cheque for $5 million? He doesn’t have to worry about getting an education, finding a job or applying for a mortgage.

Your big win could essentially deprive your kid of a chance at a normal, productive life.

Consider my situation as a self-employed individual. I love serving small businesses to help them grow while making sure they file their tax returns. But if my clients knew I had $25 million in the bank, how do you think they would react to an invoice for $1,500 for a notice to reader? I can hear them: why are you billing me this insignificant amount when you have eight figures in the bank?

If I had won in the ’80s when I was starting out, would I have bothered to develop a practice that gives me joy almost every day? Would I have gained the knowledge, through some painful personal experience, to write books helping people understand their finances in order to prepare for a comfortable retirement? The answer is probably no. I have no idea what I would be doing today if I had won years ago. And that is a scary thought.
So what is the best lottery strategy?

One of the keys to happiness in life is anticipation. We feel better when we have something to look forward to. For many it’s the weekend. For me it’s movie night on Tuesday (it’s cheaper!), among other things. I’m sure for many people, buying a lottery ticket would have the same effect. Dreaming about the things they would do with the money is probably a great source of pleasure for many people. But as in most cases, the fantasy is often better than the reality.

Here’s a thought: if you do play the lottery, maybe a smaller win would be better. While US$1.6 billion or even US$25 million would change your life forever, maybe a lesser amount would solve many of your financial problems, while not totally changing your life. For example, a recent SickKids lottery had a grand prize of $1 million with one in three odds of winning some kind of prize. That’s a lot better than one in 292 million and you’d be helping kids at the same time.

About the Author

David Trahair


David Trahair, CPA, CA, is a personal finance author and speaker (www.trahair.com). His latest book is The Procrastinator’s Guide to Retirement.

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