Is It OK to Buy One Lottery Ticket?

Indiana Mega Millions Lottery Ticket

These numbers will not win since they aren’t mine!

“Lottery tickets are a surtax on desperation.”
–Doug Coupland

As of the time I wrote this blog post, the Powerball lottery winnings stood at $550 million. The chances of winning the lottery are 1 in 175 million.

Positive expected value, right? By the time the actual drawing occurs, I imagine that the jackpot will be closer to $600 million. At that point, the odds are less than the winnings, even if Uncle Sam takes a 40% cut.

So, I bought a ticket.

What?

A financial planner buying a lottery ticket?

HOW IN THE WORLD CAN THIS BE JUSTIFIED?!?!?! Has Monkey Brain taken over?

Probably just a little. We aren’t all perfect.

So, how did I justify this purchase?


Continues Below


Subscribe to Receive My 52 Week Financial Game Plan and Get a Free E-Book!


  • It is entertainment. Buying the ticket gives me the justification to dream of all of the things that we’d do if we won. Give to family. Give some to the Wounded Warrior Foundation. Travel around the world in style for the rest of our lives.
  • It came out of my blow fund. As we budget each month, we divert some money into a blow fund for each of us. We can spend that money on whatever we want, no questions asked. If I came home with clown shoes, it’d be OK as long as it came from the blow fund. It’s a way to fight ego depletion – giving in with small purchases rather than screwing up a big one.
  • I’m only buying one. Since I’m buying this for hedonic pleasure rather than the true expectation that I’ll be mega-rich, I’m valuing the $2 I spent as an investment in my own entertainment. Otherwise, I could easily purchase tickets in a reductio ad absurdum manner and empty out all of our accounts.

Here’s the problem with thinking that if it’s a positive EV gamble, it’s worth doubling (or gazillioning) down on the bet:

Skewed distribution of outcomes.

See, there are a lot of times when you won’t win anything. You win $0 a whole lot of the time. Then, you make some very small wins–$2 or $5. Every once in a while, you have a bigger win–$100 or even in the thousands or tens of thousands. However, there will probably only be one to three big winners. Unless you’re one of the big winners, the actual EV for everyone else is negative. It’s really quite negative.

There’s a similar thinking in video poker when you can find a mathematically profitable machine. You have to be willing to sit there and play and play and play until you hit the royal flush. This requires a big bankroll and a lot of time.

If I had the machinery, the manpower, and the capital, I could flood the market with lottery ticket purchases and guarantee myself a win. However, if two other people won, I’d still lose money, and I’d lose a lot of it.

So, in this case, buying two tickets, or even more, doesn’t give me any more hedonic pleasure than buying one ticket. I can only have so many dreams between now and the big drawing.

Could I have spent the money more wisely. Probably. But, it’s OK. It’s in the budget, and it’s not going to wreck our financial lives if I buy one ticket every time there’s a positive EV opportunity in the lottery – an event that doesn’t even happen annually most of the time.

Focus on the big wins, like budgeting, investing in yourself, and putting aside enough money for retirement. It’s OK to have the occasional splurge. It’s part of living. Just keep in check and keep it in reason.

And keep rooting for my numbers to win! If you don’t see any more blog posts out of me after this one, you can take a wild guess what happened!

That’s a sure bet.

Update

I matched the Powerball number, winning a whole $4. 100% ROI, baby!

Disclaimer: Past performance does not indicate future results. Your performance may vary!

Whoo! Off to go spend that big $4!!!!

Did you buy a lottery ticket? Why or why not? What would you do with the winnings? Tell us about it in the comments below.

Subscribe to Receive My 52 Week Financial Game Plan and Get a Free E-Book!

About Jason Hull

Jason Hull is a Fort Worth financial advisor. Before becoming a Fort Worth financial planner, Jason co-founded, built, and sold a software development company. He is a CFP candidate, has a MBA from the University of Virginia, and a BS from the United States Military Academy at West Point. He is the owner of Fort Worth financial advisor Hull Financial Planning.

Comments

  1. I buy lottery tickets under similar circumstances – only about one or two tickets a year, and only when the pot gets into the astronomical range. I don’t expect to win, but it’s fun to throw a dollar in the pot and dream for the 15 minute drive home. :)

    • That’s about what we spend. Maybe 2 per year, almost always when we’re doing a trip with friends so it gives us an excuse to dream all night. Plus, I’m supporting children’s education, right? :-)

  2. As long as you have room in your entertainment budget, and you don’t get stupid with how much you spend, I think it’s harmless. I put it on par with splurging on a $5 Starbucks every now and then.

    Speaking of the lottery, there is an entire show on TV about “how the lottery changed my life.” Some of the stories are SCARY bad!

    • I’m with you. That’s why we have a BLOW fund. If I want to buy lottery tickets with my BLOW fund, then so be it.

      I’ve seen that show, and yes, most of them did not adjust well. They hopped on the hedonic treadmill and had 500 relatives with “great business ideas” all hound them for money, and pretty soon, they were right back (or worse off than) where they started.

Close