It seems to be a natural human impulse to buy lottery tickets. After all, it’s only a few bucks and there’s the possibility of winning the big prize. But that’s precisely what lotteries are counting on — the fear of missing out (FOMO).
While lottery participants may not realize it, the odds of winning are astronomically low. For instance, if you pick the correct six numbers out of a set of balls that have been numbered from 1 to 50, your chances of winning are only one in 18 million.
But the odds don’t change much even if you play regularly or up the amount of money you bet with each drawing. That’s because the initial odds are already so high that the additional minuscule probability of winning doesn’t make much difference.
Despite this, there are a number of people who have been playing the lottery for years, spending $50 to $100 a week. And while it may seem irrational, there is something to be said for their tenacity. “They’re not stupid, and it really is a matter of chance,” says Fern Kazlow, a New York City-based clinical psychotherapist who has worked with lottery players.
She says that many of her clients feel that they can’t go through life without a little luck — and the lottery is a great way to have some of it. But she warns that if you do win the lottery, it’s important to have a team in place before you start handing out your winnings. That includes financial and legal advisors, a tax consultant, and an estate planning attorney.
Another issue is the fact that a winner doesn’t necessarily receive the advertised jackpot in one lump sum. Instead, it may be paid out as a series of annuity payments over decades. That reduces the total payout, especially after income taxes are applied. Moreover, winners who choose the lump sum option will likely pay more in state and federal taxes than they would have otherwise.
Lottery organizers also keep a large percentage of funds for administrative purposes, including advertising and salaries for lottery officials. The rest of the funds go toward paying out prizes to winners and other expenses. Historically, the proceeds from the lottery have been used to fund public projects, such as canals and roads, churches, libraries, schools, and colleges.
Regardless of whether the lottery is good or bad, it remains an enormous revenue generator for state governments. And while it may be easy to dismiss that 100 billion dollars spent on tickets as a huge waste of money, it is a source of revenue that states and localities need. In an era of increasing inequality and limited social mobility, that may be a worthy trade-off. Just be careful not to become addicted. If you do decide to play the lottery, take a step back and review your finances first, and be sure to keep track of how often you’re spending. If it becomes a compulsion, seek help.