Saving money is hard work. Even figuring out where to get the money in the first place is difficult. It's easy for some financial calculator to tell you to the penny how much money you have to save every month in order to have enough for your retirement, but try asking that calculator where you're going to find that $853.29 in extra savings each month. You'll get nothing but silence.
If you do manage to scrape up some spare cash every so often, then you have to decide how you're going to invest it. Stocks, bonds, mutual funds, commodities, gold coins, collectible sci-fi action figures -- what's best for you? You could spend months looking at all the possibilities, and still not be able to know exactly what will make you the most money.
Given the hassle of making money the hard way, you're probably thinking, "Wouldn't it be nice just to get rich quick?"
Appealing to your dreams
It's readily apparent that the dream of easy financial independence is not only alive and well but thriving in the mainstream of everyday society. Game shows demonstrate their ability to turn everyday people into instant millionaires. Winners like Ken Jennings of Jeopardy! have become recognized mini-celebrities across the country. If you turn on the television most Sunday mornings, you'll see a dozen different paid advertisements telling you about the magic of the latest money-making idea. Don't you deserve to make your fortune in the real estate market? Thousands of people just like you are making tons of money trading foreign currency in their spare time! Open a commodity trading account and start profiting from high oil prices today! Wouldn't you like to win millions in a poker tournament? Learn to be a professional card player and rake in the cash!
Even games of pure chance appeal to the desire to get rich quick. State lotteries have become big business, representing a vital source of funding for government programs. To keep money flowing into the system, the lotteries are constantly creating new games and gimmicks to attract players. In some states, such as California, lotteries even produce television programs in which first-round winners play a live game to determine whether or not they win the grand prize. In addition, the formerly ubiquitous $1 scratch ticket has given way to more expensive tickets that cost as much as $20; $30 tickets may be on their way in New Hampshire.
In part, people decide to spend money in the hope of getting rich quick because they don't believe that the money they use has any real value in itself. For the chance of owning a yacht, mansion, and private jet, why shouldn't you spend $19.95 for the secrets of making money fast? As for the lottery, you might well think that spending a dollar a day on a lottery ticket isn't really giving anything up; you figure that you won't miss it, and it's such a small amount that you might as well, for even a small chance at your dreams.
The real odds
Unfortunately, it's hard for people to get a genuine understanding of just how unlikely they are to get rich using a quick scheme. Take, for example, the Powerball lottery. According to the Powerball website, the odds of winning the grand prize are about 1 in 146 million. Some people, when they hear this, just ignore it; they figure someone will win, and it's just as likely to be them as anyone else. But a closer examination shows just how unlikely you are to win. If you played the Powerball lottery every day for 50 years, the odds of ever winning the big jackpot would still be about 8,000 to 1 against you. Meanwhile, over the course of your lifetime, you would spend more than $18,000 attempting to win.
Now consider an alternative. Instead of playing the Powerball every day for 50 years, say you take that dollar and put it in a jar. Every New Year's Eve, you take your $365 and deposit it into your investment account. Assume that by taking advantage of some of the investing resources available to you at the Motley Fool, such as the new GreenLight newsletter, you succeed in earning an average return of 10% on your investments. At the end of 50 years, taking into account both the money you put in and the returns on your investment, you would have almost $425,000. Granted, it's not the Powerball jackpot -- but it's a heck of a lot more than you and most of your friends are ever likely to win playing the lottery.
Slow and steady wins the race
Everyone likes excitement. The prospect of having a single random event improve your standard of living for the rest of your life appeals to anyone's romantic side. However, the basic principle you need to understand is that spending money now doesn't just mean that you won't have that money in the future. It also means that you won't have the income that money would have earned for you. In economic terms, the opportunity cost of spending a dollar a day on lottery tickets isn't just a dollar a day -- it's $425,000.
Some people will indeed get lucky with get-rich-quick schemes. Unfortunately, most people won't. Slow, regular savings may not be glamorous -- some might say they're outright boring -- but when you have time and the power of compound interest working for you, regular savings get the job done.
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Fool contributor Dan Caplinger avoids the lottery but has been known to play a hand of poker or two. The Fool's disclosure policy is never a gamble.
