You’ve probably gotten swept up in Powerball mania as well. The lottery jackpot is up to an approximate jackpot of $800 million, the largest ever. But this ends up being about $496 million as a lump sum, which is still the smarter take due to the smaller net present value of the annuity. And don’t forget taxes, 25% off the top to the feds, plus state taxes (you can find your projected post-tax payout here).
But at least your chances are great. At losing. Odds of winning are 1 in 292.2 million. I was reading some analogies to put things in perspective. For example:
- Place a line of pennies along the ground from New York to Los Angeles. One of those pennies is steel, all the rest are zinc (the copper looking ones). Now pick out the steel penny.
- 25 people are randomly selected from the entire population on our planet. The odds of winning would have you be one of those 25.
- Take a quarter out of your pocket. Now flip it. Flip it again. Now flip it one more time. Likely you didn’t flip those three the same (all heads or all tails). The odds of winning are flipping heads 28 times in a row.
- Or you take one NFC team and one AFC football team, the liklihood of them meeting in the Superbowl 7 consecutive years, or one team winning 6 consecutive Superbowls are on par with the odds (assuming that each team is equally likely to win, which in today’s NFL isn’t quite true, but happens enough to buy into that concept).
So I’m telling you there’s a chance…
It hasn’t stopped me from getting into a work pool (insurance against being the only guy working if against all odds we win), or an individual ticket. Yeah, yeah, it’s a tax on the poor and stupid, and the states are getting bailout money on their backs. I can’t change that, nor can I change the fact that most people are stupid and will continue to be weak willed, greedy, and slothenly. You and others reading this are better than that, and I would expect if you’re like me you aren’t blowing your grocery money on lottery tickets that don’t pan out. Therefore, I’d expect your results upon winning the lottery to be better than the average deadbeat who is broke a few years later.
If you have some time, check out the Reddit Ask me Anything (AMA) about a young man who won $30 million. What is interesting is that he started as an early 20’s recent finance grad with a good head on his shoulders, who set up a blind trust and paying off his debts. After a few splurges (like a 3 acre land and home with a servant’s home on the property, and a garage full of Porsches) he set his trust up to live very small percent of his wealth each year (<$100,000 a year). And the guy is traveling, helping third world villages, and doing the best he can. It’s an interesting read. And there’s another Reddit guy who had take home of $5 million too, another interesting read and actually inspired the second guy to do AMA.
So maybe you too got a ticket. Probably. It’s worth the $2 price of admission for the entertainment that comes with the day dreaming. For me, I am not sure I’d like to win the full jackpot as an individual, it would turn your world upside down. At least I could buy this sweet NYC penthouse (for a mere $72 million, but the views man!).
Sharing it among 40 or 50 coworkers, each with a nice little egg (say 8 million each), that would be more ideal. You could possibly(?) go back to your same neighborhood or town (depending where you live) with your same friends and life with more freedom. Isn’t that what we’re really buying? Who cares about the stuff? The high wears off and goes back to a new normal, but hopefully that new normal is one of your own design. That your purpose is now something you can follow every day.
I’ve given it a fair amount of thought to how my life would change. After spending 10 days on staycation over Christmas break I know that gets old quickly. I’d like to think I would still be able to raise kids with values and insulate them from being entitled. My “job” (which to me isn’t much of a job) would be to follow the path I’m on with coaching, writing, and expanding AMD empire to something more meaningful. I’d work to expand my network and help conduct workshops that have greater impacts. Giving back would play a priority as would travel, and I’d likely meld them together into something like Engineers Without Borders (I have several friends involved) which fits my skillset. Basically, a lottery win would accelerate the path I’m on. It would make things easier, but like our friend at Reddit, I’d like to be the same individual after that I am today.
The trickiest part of winning is how to handle friends and family, and the inevitable sob stories that come out of the woodwork. After getting things secretly squared away with lawyers, financial planner, and accountants, this is a question that has many nuances. Set up scholarship funds? Pay off mortgages? Do what Mr. Reddit did and simply give money to your mom and dad and have them divvy it up among each side of the family? I’m not sure.
Hopefully whoever wins has the good sense to talk to those accountants and planners, and set up things for the long haul. Statistics I’ve seen are like professional athletes where 70–90% of the lottery winners are broke within 5 years. Which is why I think it’s a bad idea to give people money – they simply blow it too (just like most winners). Better to give an education, or lesson daily expenses (mortgage) that give them an excuse to get into trouble. I personally like the idea of investing the lottery winnings and following the retirement 4% withdrawal rule. If you’re more like me and wish for a $10 million win, that still means an annual income of $400,000 off principal. Or if you take the nearly $500 million jackpot as a lump sum single winner, that’s $20 million per year. Unfathomable, but I’m sure someone would find a way to blow through that – private plane, private island, hookers, blow.
Finally, I hope the winner does find charitable and meaningful ways to use the money. Set up a foundation. Make a difference. So many are suffering in the world, that being able to make a difference and impact is something that should come part and parcel with winnings.
Good luck to all my readers! If one of you wins, shoot me a private e-mail, I’d love to quietly celebrate your life change!