Winning the lottery by being frugal
Yesterday, the lottery in The Netherlands was up to a record breaking amount of money (€27 million) to be won and it was guaranteed to be won by someone. You can imagine the frenzy. People literally bought hundreds of tickets and were already spending the money in their head. You know how that goes. “I would by a new car! No wait, two cars!” Aside from the stupidity of buying a new car as opposed to a relatively new used car is that really what’s important?
It’s well known that people who suddenly come to great riches tend do squander it just as fast. They’re not accustomed to managing money. One of the reasons few people become rich.
Even so, (almost) everybody dreams of being rich. I found a great quote on that I’d like to share with you:
“The best way to make your dreams come true is to wake up”
- Paul Valery
Yes, well all share that dream on one way or the other. Even those who are rich dream of being richer. It’s almost a universal truth. And yes, I dream of being wealthy too, or at least, having enough savings to be able to live comfortably from the interest. I estimate that goal to be €1,3 million in the bank at 3,5% interest. If the interest were higher (and it often is) say 5% under a million (.96) would more than do it. With relatively low risk to your savings you can generate an even higher interest rate.
See those numbers? It’s not that big now is it. Even if you don’t make a six figure income you can reach this point. It all depends on two things: Be realistic and be frugal, keep it simple and keep it safe.
Okay, now it’s time for you to laugh. Here I am, a blogger/student who’s 26. Doesn’t have a penny’s worth of savings talking about having a million in the bank. My old classmates are lawyers, engineers or otherwise already earning an income. And I’m being realistic or dreaming?
Actually, yes I’m dead serious. Chances of you winning the lottery are astronomical at best. You’re better of putting that money to some use instead of throwing it away. Let’s say you’re a typical player buying two lottery tickets every month, €5 Each and you do that for forty years, most people play their entire life. That’s €4800 spent. But with an interest of only 3.5% you could have had €10,337. An increase of 46% over all that time and very likely a better “result” than playing the lottery.
Okay, those are small numbers but there are so many things that are simply not worth what we pay for them. Most things we don’t even need. As I talked about before, the reason minimalists often have such great homes is because
- 1: They aren’t cluttered and
- 2: because they only need a few things, the few things they do buy are of good quality.
We live in a world that’s trying to convince us that quantity is all that counts. After all, we’ll buy two new cars when we win. More jewelry, more expensive watches, more bling (What a horrible word btw), more TVs, more useless clutter you “need” to show others your wealth.
It’s time to stop dreaming about those riches and come to grips with reality. You will not win the lottery. Being frugal and saving is the way to go. It’s not glamorous and it’s slow, but it’s a far better path to riches. And besides, you’ll learn a great deal about managing your money so by the time you do reach that point when you can live off the interest (a passive income) you’ll know how to manage your money and you’ll think twice before buying a new car. Make a habit out of saving and being frugal. Eventually you’ve worked so long and hard to get where you are, you’ll take great care not to throw it all away just like that.
Christiaan,
Timely post for me. I was driving down the highway this past weekend and came across a billboard for the Powerball lottery. $186 MILLION dollars. I spent the next half hour day dreaming about what I would do with it!
But you are absolutely right, there are much better ways to “win the lottery” than to just dream about it or buy hundreds of tickets.
I can hear the reality for yourself in your words and they ring true for me as well. I decided that slow savings and spending only on what matters was important a few years ago.
We’re short sited creatures until we really think about life. It’s only been a couple quick years that my meager “pay myself first fund” from mish moshed freelancing and real job wages has amounted to something. The decision to think with money in terms of years was the hardest step (hint: make it automatic). I don’t “work for the weekend” and I don’t ever want to. I can see now how what I have actually saved will be reinvested with smart decisions to earn more than a few interest dollars from ING.
I started with nothing but debt. I don’t have it down by any means, and am in the midst of hashing the “passive income” part out. I do know that for myself and many like me, getting there starts slow and involves exactly what you said; being frugal, money management, and getting real. Thanks for this reality check and the reminder!
I just wrote a post on saving money through minimizing, it might go perfectly with your thoughts here. Be well!
Great points, Christiaan. There’s nothing wrong with dreaming, but spending like you’re a millionaire when you’re living in debt will get you nowhere good.
Living frugally may be boring, like you said, but it’s also a common thread that most rich people share (aside from lottery winners). The best thing about building your own wealth through hard work will be the experience and wisdom you’ll eventually have. I wouldn’t mind winning the lottery, but I’d rather have the experience in the end.
And you are only 26, lots of years for that interest to compound. Compound interest is one of the wonders of the modern world.
wow.
You are only 26…… and so wise!
(I’m not being sarcastic actually)
My mom is in her late 50s now and STILL hasn’t figured out what you wrote here.
I have been saving small amounts since your age, and even with the economy smashing my investments to smithereens, I see enough progress to be encouraged that it is a better life I am building for myself (and my children) than if I had lived as if there were no tomorrow.