The Psychology Behind Buying Lottery Tickets
Why do people waste money playing the lottery?
Happy Friday everyone, I hope this week has been good to you. And if not, it’s almost over. Today’s topic is the lottery, specifically the lottery as it relates to poor people; special thanks to my girlfriend’s dad Andrew for my inspiration.
Between last week’s newsletter and today I published two articles on Medium, Are Roth IRAs Always Better Than Traditional IRAs? and It’s 2019, but Politics Is Still a Man’s World, so check those out if you’re interested.
When I was younger, one of the topics my grandparents frequently landed on in conversation was the lottery. My grandparents didn’t play the lottery, they just couldn’t understand why people (who were usually poor) bought tickets, and I vividly remember the lottery being referred to as a tax on the poor and the stupid. The odds of winning the lottery are slim to none, and many people who buy tickets can’t afford to. So why do they do it?
It’s about the hope
I never understood why people bought lottery tickets either, until the day I bought one. I was working in a call center (I wrote an article about that last week), I couldn’t sleep at night, I was anxious, and worst of all, broke. The lottery jackpot got really high, around $800 million, and I bought a ticket. Of course I didn’t think I would win it, but what if I did? I could buy a home, a car, and quit my job. I would never have to worry about money again, and none of my friends or family would either.
The day I bought a lottery ticket was one of the few days I wasn’t anxious at work. I went home that night, fell right asleep, and dreamed about winning the lottery. The hope that lottery ticket gave me was well-worth the $2 I paid for the ticket. It wasn’t a rational hope, but an aspirational hope. It was a “wouldn’t it be funny if this happened” kind of hope. Unfortunately I didn’t win the lottery, but in the end it all worked out and I’ve now moved past my wild lottery ticket buying phase (that was actually the first and only time I bought a ticket).
Are most people who play the lottery poor or is that a common misconception? Unfortunately the statistics tell the same story as the common knowledge: most people who play the lottery are poor. 28% of households earning less than $30,000 play at least once a week, and spend $412 a year on tickets. Households earning at least $75,000 a year spend $105 on lottery tickets, which is almost 4 times less than poor Americans. The most shocking statistic I found was that households who make less than $12,400 a year spent 5% of their total income on lotteries.
There are many articles out there that blame the poor, but this won’t be one of them. The opinion expressed in poor-blaming articles is usually something like “if poor people bought less lottery tickets, Starbucks, and fast food, maybe they wouldn’t be poor.” Well, maybe if poor people made a living wage, they wouldn’t feel the need to gamble the little money they do have for an astronomically small chance at having a better life. Maybe the cause of careless spending isn’t the lack of self-control of the poor, but the anxiety and feeling of being trapped.
Can’t they just find better jobs?
Michael Kitces, one of the most well-respected names in personal finance, believes that it doesn’t really matter if poor households reduce discretionary expenses because they aren’t making much money to begin with. Kitces writes that “trying to earn more — whether by getting or retraining for a new job or industry, putting in extra hours for a promotion, or starting a side-hustle — can have far more immediate and positive impact on the spending rate.”
While we can all agree that poor people would be better off if they made more money, how they can go about doing that remains a point of contention. Sure, finding a new job, going back to school, working overtime, and picking up a side-hustle would all bring in more money. I believe that anyone who works full-time should make a living wage; working overtime or picking up a side hustle shouldn’t be required to just get by in life. So that leaves us with finding a new job, or getting more training or education to acquire the skills necessary to get a new job.
With the way our economy works currently, there just aren’t enough good jobs to go around. Even the hardest-working Americans can get left in the dust, barely making enough to survive. I have a friend at the grocery store I used to work at who wanted to go back to community college so he could get a new job and make more money. He is an extremely hard-working military veteran in his 40s who got stuck. Life happened to him, and it wasn’t kind, but he was doing everything in his power to improve himself and his situation.
Our employer offered tuition reimbursement, but they didn’t pre-pay expenses. My friend didn’t have the money to pay for school upfront and he didn’t qualify for any type of federal aid or loan programs, including private loans. He hasn’t had the opportunity to go back to college like he wanted, but he’s still actively searching for better job opportunities. My friend has done everything right and everything in his power to better himself and get ahead in life, but it hasn’t worked out for him yet.
People that buy lottery tickets have run out of luck, and they’re usually spending their last few dollars to try to buy some more. Money wasted on lottery tickets is only a symptom of a larger disease. There simply aren’t enough jobs available in America that pay living wages. I don’t know if a minimum wage increase would solve all of our problems (don’t worry, I will be writing about the potential effects of minimum wage increase in the very near future), but I do know the country that has 31% of the entire wealth of the world has the responsibility to ensure every citizen has the means to live a happy and fulfilling life.