Buying Lottery Tickets and Going to the Casino?

In the early days, I wrote a lot of scolding pieces about spending money foolishly. I cringe reading some of these, but here is something I am still reasonably passionate about. Risk and gambling may be part of financial planning in a small way, but Casinos and buying lottery tickets should not. I wrote this back in 2008.

My wife told me about a new episode of “‘Til Debt Do Us Part” which Gail Vaz-Oxlade hosts, where one of the spouse’s financial tactics to paying off their debt was to go to the Casino and try to make some extra cash (no she wasn’t working there, she was gambling). Other folks I know buy lottery tickets or are part of “groups” buying lottery tickets weekly, hoping to hit it big so that they can retire.

Allow me to be clear on this one, neither of these “Financial Plansare efficacious, nor are they prudent.  My opinion is that if you have reached a point in your life where you feel you must gamble to catch up on your financial obligations, you are in dire need of serious help from some professional.

The Gambling Recovery Plan

If the Canadian Government came up with a plan to take $2B and go to one of the larger casinos in Las Vegas and attempt to double it using a “gambling system,” there would be an armed Coup D’Etat. However, if we hear of friends or family going to the Casino, how many of us stop them? Gambling your money on a hot stock tip, a game of no-limit Texas Hold’em or a pyramid scheme is not the way to recover from a financial setback.

It usually takes time to get yourself into a financial bind, and thus it will take time to get yourself out of the financial hole you are in. There are no quick fixes to financial problems, and if there are, usually you’ll be back in the same financial bind quickly if there was a quick fix (i.e. windfall money appears which helps you out, but you don’t fix the cause of the problem).

The only Gambling Recovery Plan I could think that might be a success is if you are a gambler and you have been blowing your money at the Casino. You decide not to go to the Casino anymore, that plan will succeed (as long as you don’t find somewhere else to squander your money).

The Buying Lottery Tickets Retirement Plan

Having worked in the lottery business many years ago, there are three groups of people who make money on the lottery:

  1. The person that runs the lottery makes the most money, hands down. Governments, however, have made it illegal to run your own lottery, so you can’t make money on lotteries this way.
  2. Printing and distributing lottery tickets is a fairly profitable business (look at Canadian Bank Note, or British American Bank note’s financials in this area), but it is a very small percentage compared to how much the lottery commission makes on a Lottery.
  3. Selling lottery tickets makes stores money, and they get to share in winnings of their customers too, but the sellers don’t make as much as the printers do

Note there is no mention on that list of BUYING lottery tickets as being a way to make money on lotteries.

I realize that most readers of this article know someone (a friend of a friend, or something like that) that Won the Big One in the lottery. That is what the Lottery Commission wants you to remember. You don’t realize that you most likely know of someone who was bitten by a shark or hit by lightning (both more likely occurrences than lottery winning).

If you are spending money on Lottery tickets, figure out how much you are paying yearly. Multiply that amount by 20, and that is the money you’d have in hand (plus interest) if you didn’t buy the lottery tickets (or the Cigarettes, or the Coffee, etc., etc.). Keep that in mind the next time you want to buy an “Early Retirement” lottery ticket.

Do you want a winning bet? Put that money in an RRSP or an RESP, or give it to a Charity, not buying lottery tickets.


Leonard Cohen a Cautionary Retirement Story

I was saddened to hear that Leonard Cohen, yet another famous Montrealer has passed on, but his  music will leave a legacy that will live long past all of us.

Leonard Cohen
A Poet and a Canadian Treasure
Link to Amazon

Mr. Cohen, unfortunately, was also a victim of losing his retirement nest-egg. In 2005, the news of how Mr. Cohen’s retirement funds had disappeared, allegedly due to impropriety from a former manager came to the public eye. Mr. Cohen, lost over $5 million dollars, and was forced to go back to work. Luckily, Mr. Cohen’s talents allowed him to try to recover from this set back, however, it meant his retirement evaporated.

We are continually barraged with stories of athletes and celebrities who have lost their money, due to financial impropriety (or even worse, simple overspending), but don’t get too smug.

It is easy for us to say, this won’t happen to me, but as a former Nortel employee, many folks I worked with (and retirees that I know) have had to dramatically change their retirement plans due to the Nortel Pension (and Stock) collapse.

Are you confident that your retirement plans are safe, and that when you retire, you can stay retired? Will you be healthy enough when you retire? Some good questions that need answering.

Tangerine Money Back Credit Card


Does Forced Saving Work ?

The title paraphrases a study from Stats Canada entitled, “Do Workplace Pensions Crowd Out Other Retirement Savings? Evidence from Canadian Tax Records”. This implies that forcing folks who don’t save for retirement to save for retirement by increasing their Retirement Pension Plan (RPP) contributions works quite well. A better question is, does forced savings work?

The study finds:

Is the Pension Tree’s fruit not suitable for You?

For workers who do not save much for retirement on their own, the $1.00 automatic increase in RPP contributions increased net savings by about $0.95. For workers who save regularly for retirement, the $1.00 automatic increase in RPP contributions was largely offset by a similar reduction in RRSP contributions. The study was designed in such a way that these results do not simply reflect program rules, such as contribution limits.


So if you take someone who doesn’t save much, save more, they keep more. If you make someone save more, who already saves, they will save less? Wow

Given this exciting perspective on Money and saving, where does the new Ontario Pension Fund fit in this equation? Food for thought? Forced Savings, an interesting idea.


RRSP Rebalance Season

I have given up ranting about how the whole concept of “RRSP Season” is idiotic (you should be putting money in your RRSPs (if that is how you want to save) all year long, not just in February), so if we assume that you still might want to put money into your RRSP now, maybe now is the best time to do a Rebalance of your Couch Potato RRSP Portfolio?

Mr Miyagi
Find Balance in Investing and Life (and don’t stock pick)

Wait a minute, if you have a Couch Potato Portfolio, aren’t you supposed to leave it alone once your money is in there? Yes and No, is the short answer to that question. When you first put your money into your portfolio, you make a decision about how you want your money to be allocated in the portfolio. There are many great examples of portfolios, but let’s go with a basic one:

Canadian Equities  25%
US Equities  25%
International Equities 25%
Canadian Bonds 15%
Cash  10%

Let us not get hung up on how the portfolio is set up initially. However, given a year has now passed since you set up your RRSP Portfolio (since this is RRSP Rebalancing season), we have a look at the portfolio and are shocked to see the following percentages of our total portfolio:

Canadian Equities  15%
US Equities  35%
International Equities 33%
Canadian Bonds 10%
Cash  7%

Now that is an out-of-balance portfolio. As with Karate (in the words of Mr. Miyagi), in investing, Balance is everything, so here is a portfolio in dire need of rebalancing. What do I mean by rebalancing? Simply get your portfolio back to being close to your initial allocations (when you set it up, see the first list).

Rebalance? How?

  1. Cash out all of the funds, pool the money and restart the portfolio with our initial allocations. This is drastic, and fraught with costs, not a good way to find balance.
  2. Sell off enough of the US Equities and International Equities funds and spread the funds between the remaining members of the portfolio to find balance. This works well, and the Canadian Capitalist has an excellent spreadsheet on how to to help you do that. This way you find balance.
  3. Bring in external money and rebalance using that, and hence the thematic premise, of Rebalancing Season! If you have extra money to put into your portfolio, take advantage of this and rebalance your portfolio, without having to do too many sell orders! Balance is restored.

Remember, in Investing, always try to find Balance ⚖. It is the key to a tranquil investing life. Enjoy the festive RRSP Rebalancing Season.


Debt and Financial Chains

Do you realize that you drag your financial past decisions around like Jacob Marley did in a Christmas Carol ? All of those odd decisions that you made in the past build a chain that you are now hobbled with, and will continue to be hobbled with. Dickens had Marley’s chain signify the horrible decisions he made about mankind. That is a lovely sentiment, however, the financial chain that you create for yourself here and now is just as crippling (if you continue to make bad decisions).

Save up to 50% on life insurance.
Jacob Marley
Jacob Marley and his Chains (Sir Alec Guiness)

Getting the point across to younger folks, that pretty much all the odd decisions that they make early on in life will follow them one way or another, in pretty much all aspects of life, but especially in financial terms, is not an easy task. When you are young you have all the time in the world, and if you make a few mistakes it won’t caused you any issues later in life, or will it?

  • If you decide to forego putting money in your RRSP, and decide to get a nicer car when you were 25, you then have more links in your financial chain to carry. You will have to save more later in life to retire the way you wish.
  • If you don’t quit smoking until you are 40, you have 20 years of spending money on your habit, and shortening your life (and paying more for your life insurance as well). More links in your financial chain. You might want to look up how much term insurance costs for a smoker over the age of 50, if you think I am being alarmist.
  • Every debt that you think you will pay off at a later date, or worse each month you carry credit card debt, you forge many more strong links in your financial chain.
  • Every lottery ticket that you have bought over the years adds more links to your chain.

The financial chains you forge in your youth, are a heavy weight to carry into your golden years.


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