We have been discussing the Habits of Successful People and are now on habit #5 on our list: no gambling or playing the lottery. Dave Ramsey’s data showed that only 23% of the wealthy people polled participated in gambling activity, including playing the lottery. Why is this and what are the pitfalls of gambling?
In an article on HubPages.com titled Why The Rich Don’t Gamble and Neither Should You, reads the following:
Lotteries are the worst bet of all. They generally pay out about half of what they take in. If you play lotteries over a period of time, you can reasonably expect to lose half of what you pay. This is sort of like buying a house at the top of the housing bubble, only with the lottery you KNOW you will lose money.
But as the ad campaign for a large state lottery says, someone has to win, it might as well be you. Assuming this highly improbable event comes to pass, do you currently have the knowledge to wisely invest a million dollars? 10 million? My advice would be that the money you would spend on lottery tickets would be better spent on a financial education. I’d rather have the lottery endow me with the ability to manage the money than the money itself. Without the former, the latter will quickly vanish, as studies of lottery winners demonstrate over and over.
Table games at casinos pay a little better, but you still lose money. If you absolutely must lose money at a casino, plat Baccarat or Blackjack, two games where the odds are lowest at losing money. Over time, though, you can still expect to lose money at these games.
Depending on how they are set up, slot machines can lose you a relatively small amount as well. In places where casinos have to compete against each other, casinos can pay back to 93-97% of what is gambled. But let there be no mistake: over time the house still wins and you still lose, you just lose less.
So think about that casino paying out 93 cents on every dollar…Each time you give them a dollar they give you back 93 pennies. You just lost 7%, and you will continue to lose 7% each and every time you hit the button or pull the arm!
Wealthy people avoid gambling as a habit because they are generally good at math and they like their money! I once heard Mr. Wonderful on Shark Tank refer to his money as little soldiers that he wants to send out to bring back other “soldiers.” Meaning he wants a return on his investment, usually in the 20-25% range. It does not take a genius to understand the difference between earning a 25% return and realizing a 7% loss!
And the lottery has even tougher odds. In a state lottery the odds of winning are approximately 1 in 18 million. The multi-state lottery jumps to 1 in 121 million. The thought of hitting the lottery has been romanticized in movies and imaginations for generations dating back to playing the numbers game.
According to research from the National Endowment for Financial Education estimates that 70 percent of people who had unexpectedly come into large sums of money ended up broke within seven years. This information is not solely dedicated to lottery winners, but winners to make up a large part of those studied.
I know a few wealthy people and have interviewed them several times to obtain insight for articles. Those that I have spoken with hold the opinion that poorer people are poor because of the habits they use to run their lives; gambling being one of those mentioned. The other insight I gleaned during interviews was that poorer people simply use poor math skills and do not use their money wisely.
The state of Massachusetts reports that every man, woman and child spends approximately $800 per year on the lottery, with the vast majority of that money coming from the poorer end of the financial spectrum.
In each of the habits we have talked about I keep coming back to the chicken or the egg scenario. Do wealthy people set out to not gamble and that helps them become wealthy? Or are they wealthy and they just happen to also not practice the habit of gambling? In this instance I must say my opinion is that wealthy people have a mindset to respect the money that represents their hard work and thus have more of it because they do not gamble.
The mindset behind the gambler is often contrary to the mindset required to accumulate wealth.
Honestly, if you visit Las Vegas once per year and have a “fun” budget set on how much you are willing to lose, fine. But I do not recommend making a habit of playing the lottery or hitting the tables! Be smart with your money folks!