Who wants to be a billionaire? The thought is likely on the minds of many Americans right now. No one won the latest Powerball drawing on Wednesday night. As a result, the lottery's jackpot jumped to a staggering $1.5 billion.
The next drawing will be held Saturday night at 10:59 p.m. ET. If there's only one individual with the winning numbers, the person will have the option to receive $1.5 billion spread out over 29 years or take an upfront payment of $745.9 million.
While lots of people will undoubtedly hurry to scoop up Powerball tickets, you're better off not following the herd. Here are five irrefutably smarter ways to use your money.
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1. Pay down debt
Your chances of winning the $1.5 billion Powerball jackpot are 1 in 292,201,338. To put that into perspective, the odds that you'll be struck by lightning this year are roughly 1 in 1.4 million.
By comparison, there's a 100% probability that reducing your debt will help you financially. Paying down credit card debt is especially wise because of the sky-high interest rates. The average credit card interest rate right now stands at nearly 19%.
2. Build an emergency fund
A LendingClub survey conducted in August 2022 found that 3 out of 5 Americans were living paycheck to paycheck. A recent Bankrate survey revealed that 58% of respondents weren't comfortable with their level of emergency savings. Three-quarters of the people surveyed didn't have an emergency fund large enough to cover three months of living expenses.
If you don't have an adequate emergency fund, chasing the nearly impossible dream of winning the Powerball jackpot is certainly ill-advised. Instead, use any extra money available to build a nest egg that you can tap when needed.
3. Contribute to a 401(k) plan and/or IRA
Only 22% of Americans nearing retirement age think they've saved enough for retirement, according to a 2022 survey conducted by asset-management firm Schroders. More than half of workers ages 45 and older didn't expect to save even half the amount needed to retire comfortably.
Contributing to a 401(k) plan or an individual retirement account (IRA) is a much wiser thing to do than buying Powerball tickets. That's especially true if your employer offers a match on a portion of employee contributions. Such matches are basically free money that too many employees don't claim.
4. Buy an I bond
Purchasing Powerball tickets will equate to throwing away money for the vast majority of people. But if you still have extra money after taking the first three steps listed above, consider buying a Series I savings bond (I bond).
I bonds currently offer an interest rate of 6.89%. It's easy to buy them on the TreasuryDirect.gov website. And with the full faith and credit of the U.S. government backing them up, there's arguably no investment that's safer.
5. Invest in stocks
Some might view investing in stocks as a form of playing the lottery. However, that's not the case at all. Sure, the stock market is down right now, but over the long term, investing in stocks ranks as a great way to grow your money.
You don't have to pick individual stocks, either. Exchange-traded funds (ETFs) such as the Vanguard 500 Index Fund offer a simple way to buy lots of stocks in one fell swoop. If you're interested in buying individual stocks, though, the current bear market could present the best investing opportunity in more than a decade.
The odds are stacked massively against you becoming a billionaire or a multimillionaire by winning the Powerball jackpot. However, investing in stocks and holding them puts the odds in your favor of making money over the long term.
