Paying Stupid Tax

The phrase "Stupid Tax" means slightly different things to different people.  Pretty much everyone can agree, however, that it is intended to mean spending money (voluntarily or not) because you did something dumb.  Potential stupid tax reasons could include paying a speeding ticket (the speed limit is posted but because you chose to ignore it you now owe stupid tax).... paying doctor bills because you did something you shouldn't have been doing (that you KNOW you shouldn't have been doing - aka those things that get you on America's Funniest Videos) and got hurt doing it... "investing" in get rich quick schemes that turn into scams... or even playing the lottery.

Many people may disagree about playing the lottery, but it really is stupid tax.  Why?  Here's a list:

1) "But look at the winnings!" also known as "But someone has to win!"  Yes, the huge numbers plastered over billboards everywhere are an amazing enticement.  I love to sit and think of what I would do with a large sum of money like that... who I could help and what I could experience.  But when it comes to playing?  No thanks.  See... someone is going to win.  But no matter how many people play, your odds of winning a traditional 6 number lottery are about 1 in 176,000,000.  I heard recently that the average spent on playing the lottery is roughly $35 PER WEEK and funny enough, less in wealthier neighborhoods... more in poorer neighborhoods.

What would happen if you took that $35... or for the sake of easier math, $50... every week and invested it at a modest 10%?

If you started at age 20 and ended at age 65 (45 years) and spent $50 every week on the lottery, you would spend $117,000.  Even if you only played $50 every month, you'd still spend $27,000.

If you invested it?  $50 every month for 45 years nets you approximately $524,125!  And if you are a silly person who plays the lottery every week?  By investing you change your 1 in 176,000,000 CHANCE at winning millions into a GUARANTEED $2.3 MILLION EVERY TIME!!

2) "But I have fun playing!"  Uh... yeah... but is it really $2.3 MILLION worth of fun??

3) "But the lottery helps the schools."  This is one of those turns of phrases that marketing folks use.  It's similar to toothpaste ads saying that Brand X whitens teeth "50% better".  Have you ever looked at the comparison?  In small print is probably the phrase "vs no toothpaste".  In the case of the lottery and schools, yes that money does go to schools, but it's not like some massive windfall that will help the schools.  What they get from the lottery is a fairly known number.  So guess what cash-strapped, budget deficit governments do?  They DEDUCT the lottery contribution amount that goes to schools from the overall school budget that they have to fund.  So lottery money "goes to schools" but the schools are still getting the same amount of money... just from a different pot.

Bottom line... everyone has to have some fun in their lives.  But to really look at the cost of what your "fun" is... that something as simple as not throwing away money on what is essentially a pipe dream of hitting a 1 in 176,000,000 chance, could change your life in retirement to the tune of $2,000,000.... well, I think you know what my answer is.  Don't Pay Stupid Tax!