Lottery Dreams Don't Solve Financial Problems


Helaine Olen had a blog post for the Washington Post about what a bad idea it is to play the lottery. When jackpots grow in size to become headliners there is a flurry of these articles and they are generally on point. Lotteries, as many have said, target people who can least afford to play regularly (Olen cites a lot of evidence to support this). The way she tells it, and I have no reason to doubt her, the lottery is a last/best hope for too many Americans to become wealthy. Obviously the context goes beyond playing a couple of times a year to regularly spending money on tickets.

It feels like the country collectively is moving backwards on many fronts and financial literacy has a seat at this table; we may not be moving backwards in our collective understanding of financial matters but we are not moving forward in manner commensurate with the technology available to us or the savings vehicles that allow for increased efficiency for accumulating assets.

Olen says one thing that I don't so much think is incorrect so much as believe that we don't have to simply accept what she says is the outcome;

> The lottery is all too symbolic of our society, where wealth is pitched as something almost anyone can achieve with the right attitude, when, in fact, the odds are against you in more ways than you can imagine.

Olen's comment is top down in nature isolating the system's flaws at a very high level. The solution however is bottom up, it starts and ends with us as individuals figuring out and then solving our own problems. The odds being against us and the solution being bottom up can coexist.

A phrase that I think I coined is to ask who is wealthier, the person who makes $20,000 but lives like they make $10,000 or the person who makes $100,000 but lives like they make $200,000? Every aspect of your financial life will be easier once you can get to the point of living below your means. Even if that is not possible today for whatever reason, what is your path to that point? Figure it out and then try to make it happen.

Living below your means creates the opportunity to begin saving money if you haven't started. I've written blog posts detailing how someone in their 50's making close to the median income level (currently just shy of $60,000) who'd payed off their house could accumulate $200,000-$300,000 in their last ten years before traditional retirement age. That amount probably won't make for a lush retirement but it can create some optionality and goes beyond merely having an emergency fund.

The above comments don't really do much for the impoverished, making more like $25,000 which Olen seems to focus more on. I imagine the starting point is education but what would prompt someone with a very low income to learn about personal finance? That is beyond the scope of this post and probably my skill set but at least a small part of the answer like above, is from the bottom up.