The odds of winning the lottery are astronomically long. Yet, the allure of pocketing hundreds of millions of dollars can tempt even the staunchest penny pincher. While there's no harm in playing your lucky numbers every now and again, coming down with a serious case of lottery fever can prove costly.
Consider this: A $20-a-week lottery habit adds up to $1,040 over the course of a year. Suddenly, we're talking real money. Here are three better ways to use that cash than buying lottery tickets.
Contribute to a 401(k)
Why not contribute to your retirement savings account at work, instead? If you have an extra $1,040 to spare, then put that money to work for you in your retirement account. Investing an extra $86.67 a month (which is what $1,040 breaks down to over 12 months) in a 401(k) over 20 years costs you $20,801, but after two decades the account balance will be $49,632, assuming an 8% annual return and a 25% tax bracket. If your company matches 401(k) contributions, as many do, the balance will grow even faster.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Open a Roth IRA
If you’re already maxing out your retirement account at work, then open a Roth IRA. By investing $1,040 in a fund that earns a 7% annual return, in 30 years you’ll have nearly $106,000. And you can withdraw your earnings tax-free after you turn 59 1/2.
Make an extra mortgage payment
Lastly, consider increasing your mortgage payments. Say, you’ve got a $200,000 mortgage at 4% over 30 years. That works out to a monthly payment of $955 excluding taxes and insurance. You’ll pay about $144,000 in interest alone over the term of the mortgage. By paying an extra $1,040 a year, you’ll save almost $24,000 in interest and retire your loan four years early.
Check out 14 more smart ways to spend or invest $1,000.
-
Do You Really Need That Wine Cellar?Home Features Wine cellars are a popular feature in high-end houses. Will installing one in your home increase its value, or would you be better off with a cheaper solution?
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
Should You Rent in Retirement?Making Your Money Last Renting isn't right for all retirees, but it does offer flexibility and it frees up cash.
-
How Big Should My Emergency Fund Be?Feature NFL linebacker and Kiplinger contributing editor Brandon Copeland discusses the importance of building an emergency fund.
-
Homeowners Insurance: How to Protect Your HomeBrandon Copeland NFL linebacker and Kiplinger contributing editor Brandon Copeland discusses the ins and outs of homeowners insurance.
-
The "Real" Cost of Buying a CarFeature Atlanta Falcons linebacker and Kiplinger contributing editor Brandon Copeland illustrates how car prices are far more than meets the eye.
-
How to Plan a Budget-Friendly Family VacationBrandon Copeland Atlanta Falcons linebacker and Kiplinger contributing editor Brandon Copeland provides tips on how to go on vacation without breaking the bank.
-
The Great Resignation: How to Quit Your Job With ConfidenceBrandon Copeland Atlanta Falcons linebacker and Kiplinger contributing editor Brandon Copeland provides tips on how to properly quit your job and upgrade your career.
-
How to Achieve Your 2022 New Year's ResolutionsBrandon Copeland You've already made your New Year's resolutions. Atlanta Falcons linebacker and Kiplinger contributing editor Brandon Copeland explains how you can stick with them and accomplish them.
-
Santa's End-of-the-Year Finance TipsFeature Atlanta Falcons linebacker and Kiplinger contributing editor Brandon Copeland shares a few ways you can improve your finances before 2022 gets here.
