Lottery Tickets: Throwing Away Your Money
I want to tell you a story. I remember one day I was in a major shopping centre, waiting to go and see the dentist. I was early and so I sat down on a seat outside a newsagency and just watched the people going by.
I remember watching this middle-aged lady go up to the counter at the newsagency and buy an instant scratch-it ticket. She proceeded to walk directly, and unerringly, straight towards a bin that was just outside the shop, scratching the ticket as she did so.
By the time she had finished scratching she was at the bin and threw the (losing) scratch-it away and walked off. It was as if she knew she was going to lose and was resigned to that way before she ever made it to that bin.
I couldn’t help but think that she would of saved a lot of time if she had just thrown the $5 she paid for the scratch-it straight into the bin. It would have had the same result: she still would be $5 out of pocket.
This one event, that lasted all of about 30 seconds, had a profound effect on me and cemented my thoughts on scratch-its and lotteries: they are a complete and utter waste of money.
If you head over to the Golden Casket website, which is the company that owns and runs Gold Lotto, Power Ball, Scratch-Its, Oz Lotto and more, they will tell you that the odds of winning the first division for any of these games are in the millions-to-one.
For example, if you play the standard 4 game panels in Saturday’s Gold Lotto, the odds of winning the first division are 1 in 2,036,265. To put that into perspective, if you played those 4 games each week you would have to play for 9,789 years before you would be statistically guaranteed a win. Once.
To put this another way, if you and all your descendants played the same games and all lived until you were 65 it would take 150 generations to get a win.
And the cost? In an average life time, say from 18 to 65, if you played each and every week, hoping to win, the total cost over your life time would be $6520.80 (assuming the cost remained the same, which I am sure it won’t).
That may not seem like a lot of money, but what if you saved that money each week rather than buying that lottery ticket, how much would you have? By the time your sixty-fifth birthday rolled around you would have amassed a total of $33,925.00! (assuming an interest rate of 6.9%).
As you can see, you would be much better off saving that money rather than buying that lottery ticket. Unless of course you win - which is what I am sure a few you are thinking - but look again at the odds of winning. Do you really think it’s a wise investment? You would be better off taking that money to the casino.
But to put my money where my mouth is and to prove a point, I am going to start an account in which I deposit the price of a lottery ticket in each and every week, starting this Saturday. I will do this each week until I get enough in there to start investing it and I will show how it’s better to hang on to that money rather than throw it away like the lady in my story did.
You will be able to track how much I have in the Anti-Lottery Fund by the total I have in the right-hand column of this site.
This is obviously a long-term experiment, but one which I hope will open a few eyes and sway a few minds.
Do you buy lottery tickets or scratch-its?
Just before I go I thought I would show you a very humourous image I found by NotionsCapital. I laughed out loud.
Image credit: qnr
What I learned From The Intelligent Investor
Over the last few weeks I have read (and re-read) a book by Benjamin Graham called The Intelligent Investor
You have probably never heard of Benjamin Graham but you should get to know his work. With one textbook, Security Analysis, he brought the way experts think about investing into the modern era. The Intelligent Investor is the book he wrote for the rest of us, lay-people.
You would of probably heard of his Graham’s most famous protégé, Warren Buffet, who is not only the second richest man in the world, but made most of his vast fortune through investing in the stock market and businesses.
If you were to only read one book on share trading, The Intelligent Investor is the one book you should read. It is written by an American, about the American stock market, but the book isn’t primarily about the stock market - American or otherwise. It is about having the right attitude towards investing in shares and how you can invest wisely and for the long-term.
Right from the start, Graham makes an important distinction between an investor and a speculator. The former is someone who invests in businesses for the long-term and the latter is someone who tries to out-perform the market and ride the wave of whatever the latest fad in Wall Street is (all the way to its crashing finish).
So what did I take away from the Intelligent Investor?
A lot.
I would highly recommend reading this book and following its guidelines before investing any money. The main points I gleamed from the book are:
- Investing is for the long-term.
- You are investing in a business, not a ticker number.
- If you don’t want to, or cannot, take the time to research the businesses you want to invest in, then simply invest in an Index Fund and don’t stress about the stock market again.
- If you are investing in individual businesses then you want to make sure you buy the stock at a reasonable price - this will give you a good safety of margin.
- Never follow the “hot stocks” of the moment and never take anyone else’s advice - do your own research.
The great thing about the edition
I have read quite a few books on the stock market and share trading but the Intelligent Investor is by far the best. I said at the start of this post that if you only read one book on investing then this is the one you should choose. If you want to read two then I would read this one and one specifically on how the Australian stock market works (I recommend Teach Yourself About Shares by Roger Kinsky).
Have you invested any money in the share market? How did/are you fairing?
Image credit: Martini Capture
Save Money On Home-Made Pies, Made Simple
In a recent post I told you how I bought a Sunbeam Pie Maker and how I was going to be using it to save myself some money.
Well, I have.
And today I wanted to share with you the fruits of owning a Sunbeam Pie Maker.
I love a good hot savory pie. And I have bought many over the years, as have a lot of Australians. You could say it’s our National Dish. And like many others I usually buy mine from corner stores, bakeries or (more recently) dedicated pie shops.
But no more! This Sunbeam Pie Maker will be saving me a lot of money over the coming months and years.
I made my first patch of pies from it today and to be honest (and less than modest) they were great! And it was probably the cheapest lunch I have had in ages. Each pie cost me only $1.00.
I bought the pastry sheets for $5.00 for a pack of 5 sheets. Each sheet will make 3 pies, so there are potentially 15 pies in each $5.00 pack. If you divide 15 into $5.00 you get each pie costing approximately 33 cents for the pastry. But you also have to fill it.
Today I used left over Kangaroo meat and roast vegetables from a mini-roast I cooked two nights ago. I didn’t figure out the exact cost of the roast meal but it would of been in the vicinity of $10.00 for the ingredients. Halve this as I had one good meal out of the roast already, and that leaves you with a cost of $5.00 for the pie filling. Divide this by the number of pies made, which was 8, and that comes out at a cost for the fillings at approximately 63 cents per pie.
Add that to the 33 cents for the pastry and you get a grand total of 96 cents per pie. Or close enough to $1.00. And only about 30 minutes of my time.
Not bad considering that I bought a Big Dad’s pie for $5.00 the other day for lunch. Two of mine would be equivalent of one of those pies at a cost a mere $2.00. Less than half the price.
The great thing about the pies you make is that you can freeze them and re-heat them later. Great for taking to work for lunch.
And how good did the pies look? Well, see for yourself:
And they tasted as good as they look!
Image credit: Sunbeam
Start Budgeting Now For Higher Petrol Prices
With crude oil reaching US$120 a barrel last week, and petrol prices here in Australia reaching as high as $1.45 per litre, it might be time to start budgeting for further possible petrol price rises.
I don’t own a car, and for a very good reason: they are money-munches. Yes, sometimes I miss the freedom of owning a car, but most of the time I love the freedom of having money because I don’t own one.
But for those of you who do own a car (and I am sure that would be most of you) it might be time to think about factoring in the rising cost of petrol into your budgets now, rather than just waiting and suffering later.
The first thing you need to do is to figure out how much you spend on petrol now. If you don’t have any idea, for the next two week record every cent you spend on petrol. This is a simple thing to do and it will give you a better idea of how much you will need to put aside now for future petrol price rises.
Two quick and easy ways to record how much you spend on petrol is to write down how much you spend each time you go to the petrol station (on petrol, not on drinks or chocolates), or simply keep your receipts when you pay for your petrol - you can just stick them in the glove compartment until you need them.
Once you know how much you spend, you will need to figure out how much petrol will rise over the next year or two. But unless you have a crystal ball you won’t know exactly, but you can figure out rough estimates based on what has happened over previous years.
Petrol prices over the last few years have, despite the doom and gloom of media reports, fluctuated a fair bit. In May of 2006 the average price was $1.35/litre, while in May of 2007, the price had dropped to $1.30 a litre. And as you are probably aware, in May of 2008, the price of petrol has increased to around $1.45 a litre.
You can see from this data that the price of petrol has increased by 10% over this time last year. But had decreased by 4% from 2006 to 2007. So what will it be May of 2009?
Like I stated before, no-one is absolutely sure but if you have a look at the historical data from the last 7 years you will see that there has been a 32% increase in petrol prices over that time, which comes out at a 5% increase each year over the 7 years. (The maths isn’t as simple as dividing 32 into 7, that’s why the 5% figure is different).
Looking at the figures in the long-run it seems likely that petrol prices will continue to rise but not as dramatically as they are at present. Although in the short-term that may not be the case.
Also, other factors are at work now that were not around in the past: the increasing demand from China and India, troubles in the Middle East, and a shortness in long-term supply.
So how much more should you factor in when working out your budget? Based on the data available, I would say between 5-10% more. This will give you a nice cushion against any future price-rises.
The next thing to do is to re-write your budget to factor in this extra 5-10% increase. Say you spend $50 per week on petrol now and you decide to play it real safe and factor in a 10% increase. If you start putting aside $55 per week now (and saving any left over money) you will have built up a nice buffer (as in extra cash) if the price does increase by another 10% over time. And if the price drops for a while, keep budgeting $55 for petrol per week and you will not be stung in the future if prices rise again.
Also, you may look at using your car less, but that is a whole other post.
How are you handling the rising cost of petrol?
Image credits: Maccanti and Zimpenfish
Medicare Levy No-More For Average Australian
There is some great news come Tuesday.
The 1% Medicare Levy will now only apply to single people who earn $100,000 or more annually (instead of a mere $50,000 as it now stands).
This means a saving of about $600 for the average person per year, or around $50 per month.
This is great news as I always hated being slugged with the Medicare levy just because I chose not to join a private health scheme (which I think is a serious waste of money).
