Who wants to be a billionaire? Not me. Between Tuesday’s estimated $1.6 billion—that’s with a “b”—Mega Millions jackpot, and Wednesday’s estimated $620 million Powerball drawing, much of the country seems to have lottery fever. A Mega Millions spokeswoman confirmed Wednesday morning that one winning ticket had been sold, in South Carolina, but no word on who bought it.
Others, as an article in Politico notes, seem willing to criticize those who use the lottery to dream big. In it, Jeff Greenfield quotes Voltaire’s maxim that the lottery represents a “tax on stupidity,” and highlights the studies showing first the infinitesimal odds of hitting a major lottery jackpot, and second the disproportionate number of lottery tickets purchased by low-income households.
Greenfield attempts to defend the lottery as an exercise in giving participants “psychic value”—the ability to dream big about what they would do if they hit the jackpot. But his analysis ignores two particularly salient points about the choices people make both before, and after, winning the lottery.
Saving Provides Psychic Value, Too
While some people spent time in line on Monday buying lottery tickets, I took the opposite tack. I called my cable company and got them to remove an unnecessary recurring charge from my monthly bill. With interest rates rising, I called my bank to move my savings into an account generating a higher yield, and will do the same with my business’ bank account.
These changes will literally save me hundreds of dollars over the course of the next year—far more than 90-99 percent of people will see from the Mega Millions and Powerball drawings this week. Having a quantitative mind, I watch every penny of my budget, look for opportunities to stretch it—both in lowering expenses and increasing revenue—and take pride when I do.
Greenfield’s column notwithstanding, savings can provide as great a psychic value as spending. In fact, spending after saving up to meet a goal can provide a greater psychic value, because of the delayed gratification needed to save up the funds.
Second Thoughts about Fancy Splurges
I know a bit about the “urge to splurge” that accompanies a major financial windfall, having won $100,000 on a game show more than five years ago. When I found out I would appear on “Who Wants to Be a Millionaire?,” I set a mental goal of reaching the $100,000 threshold. I doubted I would take home the ultimate prize—no one has in more than 15 years—but thought the six-figure mark an aggressive yet achievable goal.
If I reached the $100,000 threshold, I figured that taxes would consume about 40 percent of my winnings. If I netted out roughly $60,000, I could spend 10 percent of that, or about $6,000, on a celebratory splurge. After staying in low-rent Manhattan hotels (“Millionaire” still taped in New York back then), I planned to rent a suite at the Plaza Hotel and celebrate in true high-roller fashion.
So how much did I spend on that luxury vacation after meeting my goal and taking home $100,000? Nothing. My tape date kept getting delayed. Hurricane Sandy decided to hit New York on one of my tape dates, and (unsurprisingly) the producers decided they couldn’t tape a show without power.
By the time I finally taped my episode, the 2012 election had come and gone, and a busy lame-duck session of Congress awaited. Rather than departing the studio for a celebratory suite at the Plaza, I got on the subway to Penn Station, took the train back to Washington the very same night, and was at my desk on Capitol Hill the following morning.
Then, three weeks later, my boss resigned, and my job situation grew very unclear very fast. I quickly decided not to spend any of my winnings until I had clarity about my employment status. (I had pledged during the show—which taped before, but aired after, my boss’ resignation—to give money to charity, including my alma mater, a commitment I kept.)
After I finally found a new job, I realized I would have to pay taxes on my winnings. “Millionaire” sent me a check for the full $100,000 sum, but the producers used the example of Richard Hatch—the “Survivor” winner who later went to jail for tax evasion—to warn contestants not to play games with the IRS. I figured I really didn’t “own” the money until I paid the taxes on it, so I again deferred the decision of what to do with my winnings.
On the one hand, the turmoil going on at the time of my “Millionaire” win prevented me from “living it up” and celebrating the victory. But on the other hand, circumstances forced me to take time to decide how to spend that windfall wisely—and I’m glad they did.
Start by Making Better Choices
Instead of using the money from “Millionaire” to take a fancy vacation or buy a splashy car, I hope to use those funds to pay off my mortgage in the coming months. It’s a decidedly boring decision, to be sure, but one that provides a great deal of psychic comfort—particularly to someone running his own business.
It provides far more psychic value than photos from a fancy vacation could provide. And, of course, nixing the mortgage payment makes affording more vacations in the future an easier possibility.
I won’t criticize those who partake in lottery fever this week, or the next time the Powerball or Mega Millions jackpots reach the stratosphere. I get the psychic value of the dreams that come from winning big—after all, I had a taste of that myself.
But I do think that, by taking the chance to have that second thought, we could all make better choices about money. That mantra applies equally to splurges and everyday purchases, because caring about the small stuff ultimately matters a lot. For instance, the $5,000 you hold in your savings account could generate more than $100 in interest during a year—enough to pay for at least one nice dinner out, depending on where you live.
Unfortunately, hordes of reporters don’t much cover the person who saves well and makes a fortune bit-by-bit, as opposed to the lottery winner who wins big through sheer luck. But the fortunes made by each are just as tangible—and the average saver has a much better chance of achieving his goal than the average lottery player. It’s something worth thinking about if this week’s windfalls pass you by.