Prize Linked Savings (you may also see them called ‘Save to Win’ games) are an interesting take on savings accounts, where every deposit is ‘kept’ unlike in normal lotteries, but some proportion of interest is assigned to a lucky winner through a lottery. In that way, prize linked savings games hit our psychological love of […]
How much would you pay annually in order to receive $1,000,000 today? This question is often a good measure of risk tolerance. For the purposes of this article, I am considering this the same as asking how much would you need in return annually if you paid $1,000,000 today. For me, it is around $50,000/year. […]
We’ve talked about the lottery and gambling a ton of times on Don’t Quit Your Day Job, but with a topic as wide and varied as games of chance you can’t be surprised that we keep coming back to it. Today’s entry? A story about something you’ve always wanted to do – beat the lottery. […]
Presented on this page is a calculator which allows you to enter some details about an upcoming Mega Millions drawing and receive the tool’s best guess of the expected value per ticket purchased. For details, read the article below the calculator.
Happy Thursday, readers! I’m delighted to share with you this short story about my entry into the recent Mega Millions drawing. Alas, I didn’t win anything, but I’ll share this little anecdote with you nonetheless. Skip to the end if you are easily bored by math!
As has been mentioned in previous articles, people from all demographics have a taste for gambling. As Personal Finance blogger, I may not seem like the type of person who is intrigued by lottery payouts, but here in the States the recent Mega Millions drawing was estimated at a lump sum payment of $462 million. If we assume a 1 in 176 million chance to win and a 50% tax rate, the expected value of a $1 lottery ticket seems to be $1.31! Additionally, losses are tax deductible against other gambling winngs (meaning that $1 may only cost you $0.75 or less) and a significant portion goes to fund state governments, very often in the form of education subsidies.
We recently talked about paradoxes with insurance and the lottery, but I’m not ready to give up on this topic just yet! I present to you this article which uses IRS data to try to answer: “What is the relationship between gambling and income?”.
Most of those comments I’ve seen on this blog and others seem to imply that the lottery (and most other forms of gambling…) is a game only for the poor – even sometimes referred to as a ‘poor tax’. Lucky for the naysayers, the IRS has compiled data which shows that Americans in all income classes (even the 1%!) love to gamble. Yes, in 2009, 284 of the taxable returns with over $10,000,000 in adjusted income had gambling winnings reported! So, dear readers, let’s take a look at gambling in the United States…
Behavioral finance and economics have recently exploded onto the national scene. These two behavioral topics deal with the idea of ‘rationality’; they are concerned with the rationality of the decisions of members of a population and the limits to an individual’s rationality. Studies show that humans have many irrational tendencies which can be shown experimentally.