I Feel Lucky; Gambling as a Road to Wealth

EXCITING NEWS: I was selected to deliver a national training in San Francisco this November entitled: Personal Finance Solutions for Busy Mental Health Professionals. This 3 hour workshop includes material from my upcoming eBook about Investing. Stay tuned to get first crack at the NEW EBOOK; and it’s FREE to my readers.

This article is the 4^th  in a series relating poor money behaviors with stress. The topics are inspired by an article entitled Emotions, Money, & Financial Stress by Nancy Losinno, published at the US Department of Energy, Brookhaven National Laboratory website.

Why not read the whole series?

Part 1: GO SHOPPING to solve your problems?

Part 2: Overcome a Passion for Procrastination (in dealing with financial matters)

Part 3: Money & Relationships-Make it Work!

“Here’s something to think about: How come you never see a headline like ‘Psychic Wins Lottery’?” Jay Leno

 Is this an indictment on psychics or the lottery? I’m not certain, but either way winning the lottery is highly unlikely.

MAIN TOPIC: Can you Believe this Guy?

Last week a well dressed business man pulled up a chair, laid down his laptop, and proceeded to the counter to pick up his coffee. As he walked into the shop, I marveled once again at the number of virtual office workers who congregate at the coffee shop.

 Wow, was I surprised when the man laid out his “work.” He had about 10 lottery tickets which he began scraping with a small tool. This time I forced myself to KEEP MY MOUTH SHUT! 

 Here’s what went through my mind:

 “Oh my G-d. Doesn’t this guy know that he is flushing his money down the toilet? Didn’t anyone tell him the odds of winning anything significant is at least 1 in a million? He should take the amount he regularly wastes on the lottery and put it in a broad based index mutual fund like the Vanguard Total World Stock Index! ……… I really want to talk to him, but I know it is none of my business.”

This is one of my biggest financial pet peeves; trying to WIN YOUR WAY TO WEALTH. Unfortunately, this stranger is not the only one I know with this mindset. Several family members share this distorted money-making attitude. It’s the demonstration of trying to GET RICH QUICK. It is very very unlikely! The lottery ticket buyers are frequently those individuals who carry large credit card balances, and collect the latest gadgets (even when they can’t afford them).

 These individuals are missing a key SUCCESS STRATEGY: the ability to DELAY GRATIFICATION.

 PRACTICAL APPLICATION: Get Rid of Toxic Thinking

Any sort of gambling will not lead to wealth; not lotteries, black jack, roulette, poker etc. The odds are IN FAVOR OF THE HOUSE.

If you even consider gambling or playing the lottery in the hopes of “STRIKING IT RICH,” ADJUST YOUR THINKING NOW.

 As Losinno said, “The reality is that most of us will have to work until we get to retire, and only a tiny percentage of people ever win lotteries.  It’s far better to use your wits to plan soundly towards making your retirement dream comfortable.  You’ll probably come out ahead anyway, by being a tortoise rather than the hare, since most Lotto winners have lost their winnings within the first five years.” 

Old thinking: Buy lottery tickets to get rich!

New thinking: There is no such thing as a free ticket to wealth. I have to plan, save, and invest in order to gain wealth. It’s not easy, but if I take it step-by-step, it’s possible. Delaying Gratification leads to financial success.

 ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Go to the human resources (HR) office at work to set up an automatic withdrawal from your paycheck into a savings account. If it’s taken out immediately, you will not miss the cash.
2. While you are at the HR office inquire about a savings plan &/or 401(K). Don’t get scared if you don’t understand the program, ask the human resources staff to help you. It’s their job!
3. Pick up my RSS feed (the big orange striped button on the top right) and read BarbaraFriedbergPersonalFinance regularly to learn how to achieve wealth.

RECENT PERSONAL FINANCE CARNIVALS

I am honored to have my work showcased at these sites recently. Why not stop by the CARNIVALS and check out the fine articles?  

The Carnival of Personal Finance at Miss Thrifty featured my article, 3 Amazing Career Tips

The Carnival of Money Stories 2 at Simply Forties ran How Daniel Makes Extra Money and you can too.

Originally published on March 21, 2010

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”
Peter Lynch   

One of the greatest investors of our time attests to the simplicity of investing in the stock market. Read this post and find out why. Following is the “Cliff Notes” version of why you need to put part of your long term investment dollars in the stock market. 

Main Topic; Stocks  

The historical long term growth of American business is amazing. American business is frequently represented by the Standard and Poor’s 500 Stock Index (S & P 500). This index of 500 stocks is considered a barometer for the complete US Stock Market. 

Forget about the recent recession and downfall of the stock markets for a minute and take a peak at some historical returns of the S & P 500. Although historical returns do not guarantee future returns, take a look anyhow. When looking at these returns, think about the stock market as a collection of U.S. businesses, not mutual fund or brokerage account statements. Then ask yourself if you think U.S. businesses and the economy will grow over the next 20, 30, or 40 years?

The first time I really studied this type of data was in 1993.  Although I had been investing for a while prior to that time, my husband was still skeptical. I wanted to convince my husband of the importance of putting money into the stock market so I prepared some data for him. Fortunately, for us he was convinced by the historical information, so we boosted our investing at that time and have watched our investments grow over time while continuing to contribute regularly to our investment accounts. 

 But what does this return mean in real dollars? 

Consider this, if you are in your 20’s, 30’s, or 40’s you have many years until retirement. You can stick some money in a brokerage account at one of the discount brokers (like Fidelity, Vanguard, Schwab, or  TD Ameritrade), invest that money in an S & P Index mutual fund or ETF and forget about it. Fast forward 20, 30, or 40 years, it is highly likely that your investment will have grown substantially! Even Rumplestilskin could try this and probably wake up a rich guy after sleeping for a really long time! 

Certainly, it is better to INVEST REGULARLY and not just one time! 

Now, I don’t recommend that you run out and stick the money into the account tomorrow unless you have a bit more financial knowledge. Continue to read BarbaraFriedbergPersonalFinance and before you know it you will have the skills to grow your net worth. 

Practical Application; How do I Proceed?     

• Here is the takeaway from this post: 
• The more time you have, the greater chance you have to get wealthy. 
• Over time, the stock market has been a wonderful way to accumulate wealth. 
• Since the stock market is very volatile, only put money into the market that you can leave there for 5 years or more. 
• Invest only in stock index mutual funds or exchange traded funds (ETF’s) unless you have a lot of money and want to devote hours per week to researching individual stocks. 
• For the best low effort long term returns, AUTOMATE! Have a regular amount automatically transferred in to a brokerage account each month from your paycheck or bank account.    

Action Step: 

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans. 

Grow your emergency savings to 6 months of living expenses in a bank savings account or money market fund by transferring automatically from your paycheck or checking account to a savings account. 

CAUTION: This post if for educational purposes and is not advice to run out and buy a stock mutual fund! Before investing, it is really really important to gain some basic financial education. And before sticking any money in investments you need to have savings for emergencies and no consumer debt! Think of this post as part of your lessons in “financial literacy.” Read this blog regularly, try out the action steps, and learn the basics before you start investing. Keep reading and become financially smart!

How has the recent stock market volatility affected your investing activity?