I’ll be the first to admit that I have a very narrow minded view on the world when it comes to money. I hate wasting money, and I’m not too fond of watching other people waste it either.

Lotto

This Tuesday (30th October) is the 70 million OZ Lotto draw.

Lotto

In OZ Lotto, a total of 9 balls are selected in which you need to have the first 7 to collect the major prize. The final 2 balls are supplementary numbers, which are used to calculate the other prize pools.

For those of you who don’t know much about the various Australian lotteries, this one has odds of 45,379,620 – 1 and a game costs $1.35. Note: If multiple people win the major prize, the 70 million is shared equally between them.

Lets recap on the odds of picking up first division for a minute – Forty five million, three hundred and seventy nine thousand, six hundred and twenty to one! Just typing that felt like I deserved some sort of a prize…

 

Fantasy Land

Each time there is a lottery with a major prize of more than $20 million, one of my colleagues will walk around the office rattling his lottery tin looking for suckers people interested in entering the syndicate.

This ritual normally happens a few days prior to the actual draw, and can involve anywhere between 25 – 70 people – all of which can’t wait to donate their money.

Normally the entire thing wouldn’t bother me, except I have to listen to each and everyone one of them tell me about how they are going to spend their winnings for the days leading up to the draw.

They feel that they have to express to me how great their lives are going to be when they suddenly become rich and can leave the rat race. I think this is because I am 1 of only 2 people in our team who never submits an entry.

I understand that for many of them, living in this magical fantasy world where they are expecting to receive untold riches, is a classic form of escapism. Unfortunately, it is likely going to be the only way that many of them will ever retire early.

 

Tortoise and the Hare

I understand and appreciate the value of money, that’s why I actively manage all aspects of our finances.

A couple of the key money management strategies I employ, which I feel are pertinent to lotteries are:

  • Reduce money wastage
  • Invest only in things which I feel have a good chance of a positive return

I feel that by managing my money, I have a better chance of ensuring that I will retire at least 10-15 years earlier than the standard retirement age. Just to be clear – I’m not looking to get rich overnight. I know that every dollar I spend now that doesn’t make a positive return, will only hurt me in achieving my goal of early retirement.

Lets evaluate how lotto fits in with my strategy.

Reduce money wastage

I like to know where every dollar I earn is being spent. If I can cut back on something that’s unnecessary or frivolous, then I aim to do so.

That doesn’t mean that I don’t mind spending money on things which will provide me with enjoyment, or some other form of benefit. A few examples are:

  • Going out to dinner with friends
  • Renting or buying a DVD
  • Purchasing a computer game

All of these things are enjoyable to me and I feel that it can be a good use of my money – when done in moderation.

Entering the regular lotto draw is not something that I feel is a good use of my money, and therefore the money could be better invested in furthering my goal of early retirement.

 

Invest only in things which I feel have a good chance of a positive return

This rule is in place for pretty much any activity, where the sole purpose of that activity is the expectation of a net financial gain.

I feel that I have no realistic chance of returning a profit (no matter how big the prize might be) so I just can’t bring myself to buy a lotto ticket.

My colleagues regularly tell me that “I have to me in it, to win it”. I can’t argue that point, its 100% true. Without an entry, my chances of winning the 70 million on Tuesday night are 0%.

I normally respond to my colleagues that their odds of winning are almost the same as mine, as 45,379,620 – 1 is close enough to 0% chance, so in my mind I may as well save my money.

To prove this point, one day I created a spreadsheet in excel with 45 million highlighted green cells and 1 highlighted red cell. I then asked the lotto entrants to find the red cell within the sea of green. Unsurprisingly,  no one ever found the red cell until after I told them where to look.

I was going to do the same thing here today, but the excel file bloated out to 120mb and I didn’t want my hosting company to shut down my account. So I have devised a new example here.

There is 1 red cell in this spreadsheet between the borders of yellow cells located at column KA (scroll really far to the right) and row 174,538 (scroll even further to the bottom).  The red cell location is specified on sheet 2 if you want to check that it’s really there. Good luck if you choose to go red cell hunting Note: The file is less than 1mb so it shouldn’t take very long to download.

 

A question to my readers

What are your thoughts on lotto? Perhaps you have had a big win and you can tell me how wrong I am?

 

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Thanks Glen