I Only Play The Lottery When The Jackpot Is Substantial

Let me start by saying that I’m not the one who said that. In fact, I don’t play the lottery at all. Heck, I don’t even buy scratch-offs or go to the casino to play Hold ‘Em anymore. The person who said that line was a complete stranger who I had never seen before. Secondly, I’m not condemning those who play the lottery for “wasting their money”. I don’t see the harm in spending a dollar or two twice a week if you have it to spare. That issue is left to the people who want to argue the definition of “wasting” money, or who are holier than thou with the attitude of “if I don’t do it you shouldn’t either”. I just happened to overhear a conversation that didn’t make much sense to me.

 

I was in the gas station paying for gas (since the terminals on the pumps were down) and one patron commented to their companion that she didn’t play the lottery unless the jackpot was over $50 million when asked if she wanted to go in on some quick picks. My immediate reaction was “that has to be the most ignorant thing (not relative to race, sex, or nationality) I have heard in a long time.”

 

I don’t know about anyone else, but to me winning the lottery is a huge windfall that is significantly more than the initial money spent is worth it. That being sad, I know it’s not for everyone but if you choose to participate, I don’t see the distinction between “large” or “small” winnings. Now, I’m not talking about the 3-number $5 payoff, but rather I’m referring to jackpots of any size. But for people to sit (or stand) there and actually say with a straight face that the initial drawing isn’t enough to make them play is absolute lunacy. If you play the lottery, then play the lottery, but don’t try to justify it by using the size of the jackpot as your determining factor for doing so or not.

 

There is one huge reason why this argument is flawed and makes little sense:

 

The lottery isn’t a raffle where the more you enter relative to others, the greater chance you have of winning; the odds of winning remain the same no matter how many entries are involved. The chance you have of winning is determined by the parameters of the drawing: the number of choices you have to make in relation to the overall options. The one thing that does change is the number of possible winners increases as the number of entries increase. It’s simple math–with a finite number of combinations available the likelihood of multiple people picking the winning combination increases as more people enter.

 

As the jackpot increases, the number of entries is almost guaranteed to increase. Therefore, while your odds winning don’t change, the amount you may win decreases as the player pool increases. That, in and of itself is reason alone to choose to play lower-paying contests: your odds of picking the right combination remain the same but the number of winners isn’t likely to be as great, and your percentage of the possible winnings is greater should you win. Of course, nothing, not even a winner being selected is not guaranteed when it comes to the lottery.

 

Perhaps people simply don’t understand how a lottery works, which is why comments like that are heard fairly often. Perhaps they can only see the little picture–the amount in the prize pool–and can’t consider anything else that factors into the equation. I’m certainly in no position to judge. I nether have any background in psychology nor do I particularly care to attempt to pick apart the brains of people in general in this instance.

 

I just find it funny that some people place limitations on the amount of money they will have to win in the lottery before they buy in, even though the odds of winning are exactly the same regardless of the prize; that they scoff at possibly winning a “pittance” like $5 million when it’s still that much more than they currently have.

 

Without getting into the “waste of money” discussion, if you play the lottery, do you have a minimum jackpot before you will buy in? Do you know anyone who plays by this strategy? What do you think of this line of reasoning?

About Eric J. Nisall

Former NY'er, accountant & business consultant, founder of GreenBridge Advisors. Blogging about personal financial, small business topics, and other fun topics at DollarVersity. Fan of the NHL and everything hockey! Follow me on Twitter, Facebook, and on Google+

  • TKRAMER

    Eric – I have been reading this newsletter for a few weeks now, and I am appalled at the number of typos and misspellings that I have to struggle through to read this.  If you want to be taken seriously, please take your writing seriously.  Don’t foist your opinions on others – which are mostly unsubstantiated within the article – unless you can express yourself with proper grammar, syntax, and spelling.  Thank you.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      If you are not satisfied with the content, then you are always free to unsubscribe or stop reading.  Thanks for stopping by!

  • http://www.moneybeagle.com/ Money Beagle

    I’m one of those that only buys when it hits a certain amount.  I well understand the workings of the lottery, it’s just that I don’t like to spend money week in and week out on the lottery, but I do like to at least have the chance at winning once in a while, so I choose to participate when the amounts are higher.

    One thing I always do when I do get lottery tickets is buy one ticket.  Why?  Because your odds don’t go up that much by getting 10, 20, 100 or however many tickets.  If the odds of winning the big prize are 1 in 150,00,000 or whatever it is, what does 10 tickets get you?  Still really astronomical odds.   So, I’ll put myself in the game with one ticket every now and then, and don’t get disappointed when I don’t win. 

  • http://www.moneybeagle.com/ Money Beagle

    I’m one of those that only buys when it hits a certain amount.  I well understand the workings of the lottery, it’s just that I don’t like to spend money week in and week out on the lottery, but I do like to at least have the chance at winning once in a while, so I choose to participate when the amounts are higher.

    One thing I always do when I do get lottery tickets is buy one ticket.  Why?  Because your odds don’t go up that much by getting 10, 20, 100 or however many tickets.  If the odds of winning the big prize are 1 in 150,00,000 or whatever it is, what does 10 tickets get you?  Still really astronomical odds.   So, I’ll put myself in the game with one ticket every now and then, and don’t get disappointed when I don’t win. 

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I’d definitely say that you are the exception to the rule, but it’s the one in a while statement that really separates you.  Too many people will play every time the payout crosses a threshold but only those times.  I am curious as to what makes $125 million different than say $15 million for you?  I mean, they’re both a LOT of money and I’m willing to venture a guess that either one is significantly more than any of us has ever possessed.

      The problem is that many folks don’t understand how astronomical the odds really are.  Sure, if you buy those 10, 20, 100 tickets your odds will increase incrementally but as you said it’s still a minuscule increase.  That only counts if all of the tickets are completely unique numbers.  If you have overlapping numbers the odds don’t really increase much as you are now dependent on a common number showing up as well.

  • http://www.fromshoppingtosaving.com/ From Shopping to Saving

    I think it’s definitely flawed. I would play the lottery no matter what size the jackpot was, if that was really my thing. I don’t mind playing scratchers or a game of slots or roulette at the casinos because gambling serves as a form of entertainment for me. I go in thinking that I will lose all of my money, so that I’m not invested in the fact that I may gain more money.

    If anything, I think people should play the lottery when the jackpot is small too. No harm, no foul. 

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I used to get entertainment out of the whole gambling thing.  I would go play $1/$2 hold ‘em–never lost big money, as I never played any big money, but the casino down here just grew to be too big and crowded for my tastes so I completely stopped.  Never really got into the scratchers, but if I was to play the lottery, I’d definitely wait until the the first one after a jackpot so the if I did win, the odds would be in my favor to collect a bigger (if not total) share.

  • Andy Hough

    The statement seems reasonable to me.  It is a way of limiting one’s playing of the lottery. Plus, when the lottery grows it can actually have a positive expected value.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      I see it like this: if you’re going to play, play.  Don’t try to rationalize it by saying that the money spent on tickets was justified due to the prize pool.  The reality is that even at smaller amounts in the tens of millions, the same justification should hold true, unless you are already a multi-millionaire.  Don’t get me wrong, I have no problem picking when they play, but it’s the reasoning behind such things that gets to me.  I mean, if someone had a magic formula then I could sort of understand playing only the mega jackpots.

    • Eric Valpey

      No. The lottery never has positive expected value. Not even close. As the jackpot grows, the expected number of people you would split the jackpot with also grows in line with the number of tickets purchased. This keeps the expected jackpot given you have a winning ticket substantially in check. Add to that the discount between the nominal, publicized jackpot and the present value “lump sum” equivalent followed by a discount due to taxes. The expected value won’t ever really go above 60% of the ticket price. (this is in contrast to a hand of blackjack, for example, with an expected value of 97% of a bet). But beyond the huge haircut the lottery takes in expected value, There is also the perplexing problem of the diminishing utility of wealth as one becomes wealthier (and that researchers find that after some time, lottery winners tend to be no happier than anyone else).

  • http://www.carefulcents.com/ Carrie Smith

    I totally agree with your point here. I don’t think a lot of people stop and use common sense when it comes to the lottery. If you wanna play it, then play it consistently, which will have a higher likelihood of winning than only playing when the pool is so massive you won’t have a chance.

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      Yeah, it’s like I said to Andy, if you’re going to play, then play.  I guess people have to justify it to themselves or worse yet get caught up in the prospect of a mega windfall that they let go of reason and let hope carry them.

  • http://www.howimportantisyourfinance.com/ Salvador Antonacci

     My philosaphi about this article,is that can’t win if you don’t play therefor

    if you gone to play only on a big JACK POT, your chances are 1/14000,000.The best way is to play little but consistently.

     

  • http://www.nextpay.com/ Merchant Account Provider

    Nice article Eric. I’m not into lottery- for me, it’s a waste of money. If one lottery ticket has winning probability of N, having two tickets will mean winning probability of 2N. However N is so so small that 1000N is not big enough to make the difference.

    In addition, sudden influx of windfall may cause more harm than good.  How many lottery winners did we see ending up a miserable life? Far worst than before winning the lottery.. with regrets and emotional baggage.

    Best regards,
    Belinda

  • http://www.mastertheartofsaving.com/ Jen @ Master the Art of Saving

    Those people drive me NUTS! I don’t care if the jackpot is $10 million or $200 million, I’d be ecstatic to win any size jackpot. We only buy Power ball tickets a few times a year, randomly, but it’s nice to dream for a day. :-)

  • http://www.mastertheartofsaving.com/ Jen @ Master the Art of Saving

    Those people drive me NUTS! I don’t care if the jackpot is $10 million or $200 million, I’d be ecstatic to win any size jackpot. We only buy Power ball tickets a few times a year, randomly, but it’s nice to dream for a day. :-)

    • http://www.dollarversity.com Eric J. Nisall – DollarVersity

      Exactly, Jen!  Unless someone is super-rich already, then qualifying the winning of the regular jackpot in the lottery as being “not enough” is ridiculous to me.  If I played, I would play a buck or two pretty regularly, as any winnings would provide an improvement over where I was previously.