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8 Common Causes of Debt — And How to Avoid them

Tim Lemke — Thu, 15 Feb 2018 10:00:06 +0000

Debt plagues millions of Americans every day. It is such a common problem that many of us don't even think twice about what we owe, or how we landed in such a predicament.

The simplest explanation is that debt happens when you spend more than you earn. But it's not actually that simple when real life steps in. Unexpected events, bad planning, and even a decision to pursue an education can leave you facing big debt that may take years to pay off.

By understanding some of the main causes of debt, we can make better financial decisions in avoiding it. Let's take a look at some of the worst offenders.

1. Medical expenses

Medical costs have long been one of the leading causes of bankruptcy in the United States. Even those with health insurance are not immune to medical debt. An illness, injury, or health condition can cause bills to quickly accumulate.

The Kaiser Family Foundation found that three in 10 Americans report that they or a household member have had trouble paying medical bills in the past year — 58 percent of which were affected in a way that had a major impact on their life. More than 60 percent of respondents claim their savings were wiped out. Another 37 percent turned to credit cards.

It's not easy to predict how your health could change in the future. Actually, it's almost impossible. But putting certain safeguards in place can help mitigate the risk of financial ruin. Health insurance is the first step. And while premiums can be expensive, facing an illness or injury without that coverage would be infinitely more devastating. (See also: The One Question You Need to Answer to Choose the Best Health Care Plan)

It's also critical that you build an emergency fund. This savings cushion should ideally cover six months' to a year's worth of your living expenses. If the worst happens, you'll at least have something to fall back on. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

2. Loss of income

Losing a primary source of income can severely hurt your bottom line. Maybe you were laid off or fired, or had a sudden decline in revenue for your business. Maybe you needed to stop working to care for a child or older relative. Or perhaps your health took a turn, and you were forced to retire early or drop to part-time employment. When something like this happens, it's easy to find yourself overwhelmed by bills and expenses. Debt can quickly follow.

One of the biggest safeguards you can establish for yourself, again, is an emergency fund. Ideally, this fund can sustain you while you try to replace your lost income. Is your emergency fund as big as it should be?

It's also key that you try to live well below your means at all times, even when money is good. This means spending more on "needs" and less on "wants." This way, even if your income drops unexpectedly, you'll find it easier to get by at your current lifestyle without dipping into that emergency fund or creating new debt.

3. College costs

Going to college can be very expensive, and many young people find themselves saddled with debt early on in their lives. The average class of 2016 graduate left school with $37,172 in student loan debt. Those student loans can force a new graduate into even more borrowing, which only furthers the debt cycle.

Parents can help young people with college costs by saving up, often with the help of 529 college savings plans and similar programs that offer tax advantages. If you are a student who is not fortunate enough to get help from family, you can reduce or even eliminate your student loan burden up front in a number of ways.

It helps to select schools based on overall value, rather than prestige. It's generally cheaper to go to school in state, and public schools are often less expensive than private ones. Spending two years at a community college and transferring to a four-year college is often a great way to save. (See also: 7 Things Employers Care About More Than Your Degree)

Working while in school can help offset costs. Many schools will help students find on-campus jobs. And there's usually no harm in deferring the start of college for a year or two while you save money. (See also: 8 Money-Saving Hacks Every College Student Should Try)

There is also new information being published about the "return on investment" of college degrees that can guide students to available and well-paying jobs. (See also: 8 Great Jobs for the Next 10 Years)

Avoiding college debt may force students and their families to make difficult choices, but they are choices that will help a young person start their adult lives off on the right financial foot.

4. An unexpected emergency

Many people find themselves in debt because they aren't prepared when big, bad, expensive things happened to them. Your entire HVAC system may go haywire and need to be replaced. You may crash your car. Or you may get really sick, and find your insurance will only cover a portion of your bills. To keep these scenarios from wiping out your savings and leading to debt, you once again need to bolster that emergency fund. A sizable emergency fund can help cover big one-time expenses so you're not tapping into credit cards or taking out loans.

You may have to anticipate possible big expenses to some degree. How old is the roof on your house? How old is your car? How's your health, in general? It's impossible to know the future, but you can prepare yourself for certain outcomes. (See also: 4 New Reasons You Need an Emergency Fund)

5. Being poorly insured

Insurance is a funny thing. It can seem like a waste of money … until you need it. Many people find themselves in serious debt or even bankruptcy when a bad event hits and they are uninsured or underinsured. Imagine having your house burn down without homeowners insurance. Imagine purchasing a bare-bones health insurance plan and getting into a serious car accident requiring a lengthy hospital stay.

Insurance is a very important part of financial planning. Every person should periodically conduct a thorough review of their insurance policies to ensure they have plans that cover them in case of a bad event. No one wants to think about bad things happening to them, but without insurance, those bad things can really sting you financially. (See also: 5 Reasons Why Life Insurance Isn't Just for Old People)

6. Keeping up with the Joneses

Your neighbor just bought a new sports car. Your Facebook friends are sharing photos of their latest tropical vacation. Your brother-in-law just purchased a home twice the size of yours. It can really sting when you feel like you have to go without. And like many people, you may feel pressure to "keep up" with your friends' lavish lifestyles.

This is a recipe for financial disaster.

Chasing a lifestyle you can't afford will have you turning to credit cards to fund your frivolous buys. The spiral into debt can be quick and overwhelming. Showing off isn't worth your financial wellbeing. No one is implying you don't deserve to treat yourself to nice things or vacations once in a while; but if you can't actually afford those things, what favors are you doing yourself?

Keeping up with the Joneses is an effort in vain, and chances are, many of your flashy familiars aren't living as fun and fancy free as they'd have you believe. Not only do they have their own Joneses they're trying to keep up with, but odds are that many of them are also in debt. (See also: 4 Money Lessons You Can Learn From the Joneses)

7. Divorce

When a marriage ends, it can be financially disastrous for both people. Divorce often means that each person is going from two combined incomes to one, and it's even worse for the person who earns less. One person may end up responsible for child support or alimony payments. A divorce might mean you have to sell a home or other assets at an inopportune time. Plus, there can be massive legal costs.

Sometimes divorce is necessary. But couples who are separating can reduce the financial impact by continuing to offer financial support for each other, if they are willing. They can also keep legal costs low by keeping the divorce proceedings as amicable as possible, and by using a mediator or arbitrator instead of going through the court system. (See also: How to Protect Yourself Financially During a Divorce or Separation)

8. Gambling

As many as 4 million people in the U.S. have a gambling disorder, according to industry groups. And Debt.org reports that 23 million people in the U.S. have gone into debt due to gambling, with an average loss of $55,000. If you have a gambling disorder — or even if you only gamble casually — you may be putting yourself at great financial risk.

There are a number of ways to tell if you have a gambling disorder. The American Psychiatric Association lists the following indicators: lying about gambling to friends and family; following up losses with immediate new bets; and turning to others for financial help due to gambling losses.

A gambling addiction is treatable through counseling, and even some medication. If you are finding yourself facing debt caused by gambling, seek help before your financial problems worsen.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How I Successfully Gambled in Las Vegas Without Losing My Shirt

Dr Penny Pincher — Tue, 16 Jan 2018 09:30:11 +0000

When I learned that I would be going to Las Vegas for my sister-in-law's birthday, I was concerned that the trip would turn out to be an expensive adventure. So, before I left, I did some research and ended up writing about ways to enjoy Las Vegas without spending a lot of money.

While in Las Vegas, I found that some strategies to limit expenses worked well, but I did run into some spending pitfalls. Here is a summary of what worked, what didn’t, and what I would do differently on my next trip to Las Vegas.

Money successes in Las Vegas

Here's where I cashed in on the Vegas experience.

No shopping

Las Vegas features some expensive shopping opportunities at high-end stores and shopping malls that seem to cater to high rollers and provide an outlet for people to impulsively spend their gambling winnings. Fortunately, we managed to do some window shopping without buying anything.

Steering clear of buffets

We got in line for a breakfast buffet that was $30 per person. We came to our senses, got out of line, and found a less expensive diner nearby.

Walking instead of taxis

We used the inexpensive Las Vegas city bus to get from the strip to Fremont Street near downtown and back. On the strip, we walked everywhere. Bring comfortable shoes on your next trip to Vegas, because things on the strip are spread out and you will need to do a lot of walking if you don’t want to pay for transportation.

Saving on snacks

We brought a supply of inexpensive drinks and snacks to our hotel room that helped us avoid more expensive options on the strip and at the hotel. There was a CVS near our hotel that had some cheap drinks and snacks as well for when we needed more.

Scoring free souvenirs

On our excursion from the strip to Fremont Street, we got an awesome free souvenir: a photo at Binion's Gambling Hall and Hotel standing next to pile of $1 million cash! After the photo was taken, we came back after an hour to pick up our free printed copy. Taking pictures next to the other famous landmarks on the strip also made for great free souvenirs.

Leaving the kids at home

There were some sights in Las Vegas that were not exactly kid-friendly. I am glad we left our teenage kids at home. This saved us money on airfare and food, plus the kids were able to take care of the dogs so we could avoid pet boarding expenses.

Finding free attractions on the strip

We did end up going to an one expensive show featuring music and acrobatics, but it was a fun part of what Vegas is famous for. Other than that, we found a number of entertaining free attractions on the strip including the volcano light, fire, and sound show outside the Mirage hotel; the fountain light show at the Bellagio; lounging by pool at the hotel; and walking the strip to explore the sights during the day and at night.

Fremont Street

After staying at a hotel on the strip and spending some time there, we were ready to try something different. The Fremont Street experience is a 20-minute bus ride from the strip and features a huge overhead LED screen light show, plus live music and a variety of street performers. I got the cheapest dinner of the trip here.

Money lessons in Las Vegas

Now that I've been to Las Vegas, and can recognize the money traps, here's what I'll do next time.

Find cheaper airfare

We paid more for airfare by booking a flight to arrive earlier in the day on Thursday. We wanted to have more time to explore on our first day there. Taking a later flight would have been less expensive, and since Vegas never sleeps, there's plenty of time to explore even if we arrive later in the day. (See also: 8 Costly Flight Booking Mistakes You Make All the Time)

Engage in smarter gambling

I didn’t have time to study up and practice, so I stayed with video blackjack, video poker, and betting on a college-football game for my first time gambling. I lost $50 on all of these combined, which is OK. I chalked it up to entertainment.

But next time, I’d like to improve. I'll practice, take some blackjack lessons at a casino, and try playing against a dealer at a blackjack table before I go back. It would be great to win my $50 back!

Stay off the strip

Next time, I would consider staying at a hotel in the Fremont Street area instead of staying on the strip. For one thing, the odds at the casinos are better. For example, many casinos off the strip have low bet blackjack tables with 3:2 payout vs. the 6:5 payout that is typical on the strip. Another advantage of staying off the strip is that hotel rooms and dining can be less expensive.

Try unique dining opportunities

We ended up eating out for dinner every night. It's hard to avoid spending a lot on food when you're walking around the strip at night. You get hungry and everything is so far apart that you tend to give in and eat somewhere expensive nearby instead of hunting for a less expensive place. Some of the restaurants weren’t even that interesting. They seemed like upscale chain restaurants that you could find anywhere.

Next time, I would seek out unique local places. Someone recommended Battista’s Hole in the Wall, which has affordable dinner specials that include free house wine. The Ellis Island Cafe is another affordable local dining experience on my list to check out next time.

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This article is from Dr Penny Pincher of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Enjoy Las Vegas Without Losing Your Shirt

Dr Penny Pincher — Thu, 24 Aug 2017 08:00:06 +0000

We are planning a surprise trip to Las Vegas for my sister-in-law's birthday (if you see her, don't tell her!). Of course, this means that I am looking into ways to make the most of this experience for the least amount of money … or at least make sure that I don't end up blowing way more than I planned.

Traveling to Las Vegas has a couple of unique budget hazards that can result in a lot of unplanned spending. Before you go, make sure you have a game plan for accommodations, gambling, and entertainment "opportunities" that you will encounter in Las Vegas, because these, in particular, can cause you to leave all your money behind in Sin City.

Book strategically

You can get great deals on accommodations in Las Vegas, especially if you avoid dates when major conventions are scheduled and a high proportion of rooms are booked. Check Vegas Means Business for details about conventions and try to pick dates with the smallest number of convention visitors scheduled for the best chance to find a cheap, high-quality room. Also avoid dates of major sporting events that bring out sports gamblers and can spike up hotel rates. (See also: 9 Simple Ways to Save on Hotel Stays)

Gamble smarter

The smartest move is to simply decide not to gamble and avoid losing money. But I decided if I'm going all the way to Las Vegas, I would at least try gambling since it's such a core part of the Vegas experience. Going to Las Vegas without gambling would be like traveling to Napa Valley only to avoid anything that has to do with wine or vineyards.

If you're going to gamble in Las Vegas, there are some things you can do to improve your chances, or at least reduce the amount you are likely to lose and how fast you are likely to lose it.

The math on slots

Slot machines are easy to play, but casinos make most of their money from these machines, not just because of their popularity, but because of the edge to the house on odds of winning. The payback from a slot machine typically ranges from 99 percent of the money that is put in down to 90 percent or less. Looking at this in terms of entertainment value, playing a 25-cent slot machine with a 90 percent payback costs the gambler about $12 per hour on average. Playing a $5 slot machine with the same odds costs about $240 per hour. Slot machines that cost more to play tend to have a better payback than less expensive machines, so you may be able to find a $5 machine that does better than 90 percent payback.

Tables odds

If you want a better chance to win than slot machines, table games have much better odds. If you learn to play, these games have a lower edge to the house of down to around 1 percent:

Blackjack
Craps
Roulette
Baccarat
Video poker

Looking again at cost per hour to play, let's say you are playing blackjack with $3 bets using a basic strategy with a 1 percent house advantage at 70 bets per hour. That would result in $210 wagered and a loss of $2.10 per hour, on average. This seems much less painful than playing slots!

I plan to practice a little blackjack and try my luck since it has only about a 1 percent edge to the house and is easy to play. Even though I know I'm likely to lose money overall, I want to at least try it for entertainment value. If I win some money, I'll have some great Las Vegas stories to tell.

How to avoid losing your shirt

Practice at home first. Don't approach a table to bet if you are not familiar with the game. It is too expensive to "learn on the job."
If you decide to gamble, sign up for the player's club to get a card you can use to track your time and money spent gambling.
Wear a watch, or at least keep track of the time. Casinos look the same at 2 a.m. or 2 p.m., with no windows and no clocks. They want you to lose track of time and keep gambling.
Set a maximum budget for gambling, keep track of your losses, and stop if you run out of gambling money. It may be tempting to try to win it back, but stop. Walk away.

Seek out free Vegas entertainment

Another big potential money pit in Las Vegas is the expensive shows and amusement park rides. Before you go to Las Vegas, spending $89.99 for a ticket to see the Criss Angel magic and illusion show may not be a priority. But this can seem like a cost-effective alternative to feeding money to the slot machines once you're there. Or looking at the $89.99 magic show ticket can make that $64.99 ticket to see Penn & Teller can seem like a real bargain.

With all of the expensive things to do in Las Vegas, it is refreshing to have some good options that are totally free:

Free volcano eruption nightly at 8 p.m. and 9 p.m. in front of the Mirage on the Strip.
Three trams provide free transportation on the west side of the strip between the Monte Carlo and Bellagio, Mirage to Treasure Island, and Excalibur to Luxor to Mandalay Bay.
Free craps, poker, roulette, and blackjack lessons at the Golden Nugget downtown.
Clark County Wetlands Park has 2,900 acres and 15 miles of paved multiuse trails, plus 18 miles of unpaved trails.
Fremont Street Experience, nicknamed "Glitter Gulch." Enjoy free music and Elvis impersonators, plus a light show on the hour from dusk to midnight.
Pinball Hall of Fame gives you a look at pinball history for free, and you can play for 25 cents to $1 per game.
Silverton Casino's Aquarium has tropical fish and stingrays, plus a mermaid show.
Marjorie Barrick Museum on the University of Nevada, Las Vegas campus has two art galleries with Latin American and pre-Columbian works.

When you have your nightly entertainment planned ahead of time, and it doesn't cost a thing, you'll be less likely to be lured to an expensive show.

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This article is from Dr Penny Pincher of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Are Your Emotions Costing You Money? Take This Quiz

Tim Lemke — Wed, 21 Jun 2017 08:00:16 +0000

Building a strong financial foundation for you and your family requires discipline. It requires patience. It requires a steady mindset. But even the best of us have found ourselves spending and making financial decisions based on emotions, whether that's retail therapy, or holding off on investing due to fear of the markets. We've made decisions based on joy or comfort in the short term instead of satisfaction in the long run.

Are you letting your emotions control your finances? Answer these questions to find out.

Do you spend money when you feel sad, happy, or stressed?

You had a bad day at work, so you go on a shopping spree for new shoes. You got a promotion, so you celebrate by taking friends out to eat at a fancy restaurant. You spend money as a reaction or antidote to whatever feelings you have at a given moment, and this makes it hard to save money at a healthy rate. You don't need to treat yourself to a costly reward every time you're happy or sad. This is an easy way to fall into a dangerous emotional spending cycle. (See also: The High Cost of the "Treat Yourself" Mindset)

Have you held off on investing because you are afraid?

Fear is one of the most powerful emotions we have, and many people have never gotten started with retirement planning and investing because they are intimidated. They may find the whole process of investing to be overwhelming, or they may have a fear of asking a dumb question. Additionally, they may fear that their investments will lose money. In reality, it's best to channel fear into investing more, because not having enough money saved for retirement is a truly scary thought. (See also: 3 Steps to Getting Started in the Stock Market With Index Funds)

Have you sold investments when you realized they lost value?

We've probably all found ourselves frustrated with certain investments that have tanked, and sold them at a loss. Of course, then we've kicked ourselves when we've seen those same investments rebound in short order. It's not a good practice to be emotional when investing; the most successful investors practice discipline, patience, and steadfastness over the course of many years.

Have you ever bought something out of jealousy?

One of your closest friends just bought a big house in a nice neighborhood. Another just bought a fancy car. It can seem like other people are making out better than you, but this is no excuse to spend irresponsibly. Keeping up with the joneses is a path to financial hardship if you spend simply because you feel left out or jealous.

Do you get excited about getting a tax return?

It's an often ignored fact that if you are getting a tax refund, you've been lending money to the government interest-free all year. Remember: This was your money that you should have had all along. And yet, most people get a rush of excitement from getting a tax return. What's worse, people often treat their tax return like an unexpected windfall, and spend it frivolously. The sound, unemotional approach to taxes is to adjust your withholding so that you don't get a return at all. In fact, even owing a small amount to the IRS is OK as long as you don't pay a penalty. (See also: 10 Smart Ways I'm Spending My Tax Refund)

Have you ever sought a refund anticipation loan or payday loan?

The same psychology that governs the love of tax returns also applies to those who seek money before it's due to them. If you are seeking cash early, you may end up paying exorbitant fees or interest rates. A typical payday loan might have an annual interest rate of 400 percent, according to the Consumer Financial Protection Bureau. (See also: Six Horrible Financial Products You Should Avoid)

Are you a habitual gambler?

Let's face it: Gambling can be exciting. It's a rush when you place a bet on some ponies and see your horse cross the finish line first. It's a thrill to see your ball land on your number. But gambling is ultimately an emotion-driven experience, and the excitement of winning can be addicting. Betting on a few hands of blackjack or the occasional football game won't kill you, but it's important to not let your emotions guide your betting habits. There's a long list of fine people who have ruined their financial lives through gambling.

Do you give a lot of money to children and other family members?

There's nothing wrong with being generous to those people who you care about most. But it's important to not let people take advantage of that generosity. Often, the decision to support a family member or friend is done not out of basic selflessness, but a feeling of obligation or guilt. It's important to not let your feeling of obligation to others outweigh your obligation to yourself.

Have you lost a job due to your temper?

Jobs can be frustrating. But if you've ever flown off the handle at work, you may be threatening your income and job security. While it's true that hiring managers look for workers with specific skill sets, they also want to make sure employees are able to get along with their colleagues. Workers who don't interact well with their peers, or respond poorly to criticism, often don't last long.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Secrets You Need to Tell Your Financial Adviser

Tim Lemke — Tue, 28 Mar 2017 10:01:05 +0000

So you've made an appointment to sit down with a financial adviser and formulate a plan for your future. Are you prepared to talk about your full money situation? In order to truly help you, your financial adviser needs to look at the big picture. That means there can be no major money secrets.

Financial advisers will often begin each session by asking a lot of questions that may seem personal. But they'd be negligent if they didn't. In fact, it's their fiduciary duty to learn as much about you as they can in order to advise you properly.

Here's a list of secrets you'll need to share with your financial planner if you want the best advice.

1. All of your debt

When you're being crushed under a mountain of debt, you may not want to talk about it. But a financial adviser is perhaps the best person to discuss it with. Your adviser can't craft a sound financial plan for you if they're unaware that a good chunk of your income is going to pay off debt. If you let them know about your full debt situation, however, they may be able to assist you in climbing out of the hole and onto the path toward financial freedom.

2. Any job loss

It's not always easy to admit you are out of work. But a financial adviser can't help you properly if you don't provide a full picture of your income situation. If you're out of work now, let your adviser know. If you were out of work for a long stretch in the past, let them know that as well. Financial advisers can also help you navigate what to do when your income has been cut, as well as advise you on what to do with old 401(k) accounts and pension money. (See also: If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do)

3. Family members you support

Do you pay child support? Do you regularly send money to your brother up in Buffalo? Do you have an elderly parent living with you? Your financial adviser will want to know about any money you spend to support other people, even if it's only occasionally or informally. These are expenses that have an impact on your overall financial picture, and are not the kinds of costs that you can easily eliminate.

4. Sizable gifts

You're fortunate enough to be given $25,000 from your generous Uncle Steve, but you feel like it's really not something you want people to know about. After all, who might come knocking on your door now that you have this extra cash on hand? That's understandable, but it's important to tell your financial adviser, because they can offer advice on what to do with the new funds. An unexpected influx of cash, even if it's just a one-time gift, can have a ripple effect on your overall saving strategy.

5. Tax troubles

Have you been diligent about paying your taxes? If not, this is something you'll want to tell your adviser. This goes for late taxes, tax liens on properties, and past audits. The longer you wait to take care of tax problems, the more you may end up paying in penalties and fees. Your financial adviser can help you clean up your tax issues, and will be in a better position to help you plan your future.

6. The status of your marriage

If you're meeting with an adviser, it helps to let them know if you're about to get married, or if your marriage is about to end. Marriage and divorce have all kinds of financial implications on everything from income to taxes to planning for retirement.

7. Your vices

Gambling. Alcoholism. A shopping addiction. We all have our bad habits, but it's important to be aware of those vices that impact your finances. Are you at risk of incurring debt due to a major gambling binge? Is alcohol preventing you from landing steady work? Your financial adviser can't accurately assess your finances if they don't know the situation.

According to Doug Amis, a CFP with Cardinal Retirement Planning in Cary, NC, even casual marijuana use is something clients should disclose to planners, because many life insurance companies still test for it.

8. Anything that your kids need to know

Hans Scheil, CEO and owner of Cardinal Retirement Planning, says that his most challenging clients are those who have kept important information from family members. This secrecy can create difficulty in later years, when facing important estate decisions.

"What happens with people now is that they develop dementia, or some sort of chronic illness, and they end up needing care," Scheil said. "This is when all of the family scandals come out."

Scheil says it's important to anticipate what your children and grandchildren may need to know about your estate to avoid strife down the road.

9. Charitable giving

It may seem odd to think of this as something you'd hide, but financial advisers say they've met with clients who have quietly been giving to a cause that their spouse or other loved ones might not agree with. Your donations to charity may not seem like anyone's business, but they can impact your overall savings if you give a substantial amount. A financial adviser can also walk you through getting tax deductions for your charitable donations.

10. Your own lack of financial knowledge

Are you the type who doesn't know an IRA from an IPA? Are you mystified by mutual funds and baffled by bonds? It's OK, your financial adviser is not there to judge you and will likely be more annoyed by any attempt to bluff your way through a meeting. Financial advisers can help you understand the ins and outs of investing and estate planning, so it's useless to pretend to know more than you do.

11. All of your side hustles

When your financial adviser asks you about your income, they want to hear about everything. Not just your day job, but your side work giving piano lessons, your freelance writing, your pottery sales, and even your gambling winnings. You may be hiding this income because you don't want to pay taxes. But your adviser needs to know about this extra income, or else any financial plan they create will be flawed. Moreover, your financial adviser can often give you advice on how to turn a quiet side hustle into a legitimate, profitable business.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

35 Bizarre Things You Can Be Taxed On

Carrie Kirby — Mon, 19 Dec 2016 10:00:08 +0000

Once the Yuletide log burns out and the New Year's ball drops, it's soon time for a less-joyful annual tradition: Calculating how much money you owe the Internal Revenue Service.

We all know that Uncle Sam takes a share of our earnings, but have you considered other events in the past year that you may owe taxes on? You might be surprised at all the ways Uncle Sam can lighten your wallet.

Note: I'm not an accountant. Consult a tax professional for advice on your personal situation.

1. You Caught a Baseball

You are the lucky fan who catches a historic home run ball from the outfield bleachers. The not-so-lucky part? The IRS could hold you responsible for the resale value of the ball as soon as it hits your glove — even if you weren't planning to sell it.

2. You Found a Pot of Gold

You finally found the cache at the end of the rainbow. Or maybe you found a stash of rare baseball cards hidden in the wall of your home during a remodel, or a treasure chest while scuba diving in a shipwreck. Under the same regulation that applies to the baseball, the treasure trove rule, that windfall is taxable to you the first year that you find it. Sadly, this means that you may be forced to sell all or part of your find even if you wanted to keep it.

3. You Held Up a Liquor Store

It doesn't matter if you got it illegally: Stolen money or property should be reported, lest a tax evasion charge be added to your legal woes when you get caught. Says the IRS, "If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."

4. You Accepted Hush Money

The IRS is blunt on this one: "If you receive a bribe, include it in your income."

5. You Dealt in Illegal Goods

If you made money dealing drugs or by any other illegal form of self employment, the IRS requires you to report it on Schedule C.

6. You Hit the Jackpot

Yes, you have to pay taxes on your lottery prize. Yes, if you have been buying lottery tickets all year, you can also deduct the expenses. But you have to keep a diary of wins and losses, and the IRS has specific instructions on how to do that.

7. You Stuck the Landing and Won Gold

It's estimated that Michael Phelps will owe $55,000 to the IRS on his Rio winnings — the medals and the cash prizes that come with each are taxable. Many other Rio champions will get off scot free, however. That's because Congress recently passed a law to exempt Olympians from "victory taxes" — but only for athletes who earn a million dollars a year or less. Phelps earned an estimated $12 million in endorsements alone in 2016, so he doesn't get that break.

8. You Got a McArthur Genius Grant

It would feel great to win this $625,000 no-strings stipend, or the approximately $1 million that comes with the Nobel Prize. That good feeling won't protect you from the tax bite, though. You're required to pay taxes on all such awards — unless you have them directly transferred to a recognized charity. That's what President Obama did with his 2009 Nobel Peace Prize winnings.

9. You Are Gifted

Usually, the presents you unwrap over the holidays come to you tax-free, but there are some exceptions. Cash or a gift card from your boss is taxable as a fringe benefit. A hostess gift you receive as a thank-you for having a sales party in your home is taxed as miscellaneous income. Personal gifts, though, are generally safe from the tax man.

10. You Airbnb'd Your Pad

Just like regular rent payments, money you earn by hosting Airbnb guests is counted as part of your gross income. The exception: You don't have to pay if you live in the home and rent it out for two weeks or less per year.

11. You Got Your Social Security Check

It may seem nonsensical that the government pays people and then collects tax money on those payments, but that's how it goes. However, SSI, or disability benefits, are not taxable.

12. You Divorced Well

Alimony you receive from your ex is taxable income, but child support payments are not. For this reason, it's important to know how payments are categorized in your divorce settlement.

13. You Won a Scholarship

If you win a grant that covers your tuition and books, that's tax-free. But if it pays for room and board or travel, pay up.

14. Your Fantasy Football Team Won the Super Bowl

If you win at least $600 worth of cash and prizes from a business operating a fantasy sports league, they'll file a 1099-MISC with the IRS. But even if you win less or your league is informal, you are still supposed to pay on your winnings.

15. Triple 7s Came Up

Just like with the lottery, the IRS gets a cut of your casino winnings once they surpass the amount you document losing. Usually it's a flat 25%.

16. You Spun the Wheel of Fortune

It's simple enough to pay the tax if you win a cash prize, but if you win a car or vacation, you still owe tax on its value — which can be tough to pay if you didn't also win cash. Because of this, it's often wise to take the cash equivalent of a prize if offered.

17. Your Debt Was Forgiven

The IRS is very specific about this: If a debt is cancelled as a gift to you — for example, if Grandpa says, "Merry Christmas, you no longer owe me for that time I bailed you out!" — you don't have to pay taxes. Otherwise, you do.

18. You Traded a Haircut for Cigarettes

This may surprise you, but if you receive goods or services in exchange for services you render, the IRS expects you to include the value of those in your gross taxable income.

19. The Boss Lets You Take the Ice Cream Truck Camping

If you drive your company car to work and home, or use it on weekends, this is a taxable fringe benefit and you should be tracking and reporting your personal miles.

20. Your Bitcoins Doubled in Value

Bitcoin is a virtual currency that is represented by computer code, but it can be used to buy real goods and services. So of course, the IRS considers gains in this or any other virtual currency taxable. It's considered a capital asset like stocks and bonds, so if you buy Bitcoins low and sell them high, the difference is your profit. But it can be even more complicated than that: If you create new Bitcoins by mining, you have to count those as income, too.

21. You Got a Blogger Freebie

If a widget maker sends you their SuperWidget 2000 to review and you get to keep it, you just received a taxable payment. However, you don't owe taxes on the market value of the product — just what the company agrees it's worth. Make sure to put an agreed-upon value in your contract.

22. You Sold Stuff on eBay

If you occasionally sell your kids' outgrown clothes on eBay, you won't owe taxes because you most likely took a loss on the items. But if you create a resale business on eBay, you better believe you have to report your profits.

23. You Had a Yard Sale

Like eBay, most yard sale transactions are not income producers, but if you're one of those people who holds a sale every weekend and resells stuff at a profit, do the right thing.

24. You're a Child Entrepreneur

Starting a small business, whether it's dog walking or selling handmade items, can be a great activity for a tween or teen. But don't expect them to be IRS-exempt just because they're kids. If the business earns more than $400, file a tax return.

25. You Set Up a GoFundMe Campaign

This is one of those tricky gray areas. If you start a crowdfunding benefit for someone in need, the donations should be considered personal gifts. But if the gifts run into the large numbers, the crowdfunding site may file a 1099, reporting the transaction to the IRS. A word to the wise: If you are setting up a crowdfunding campaign for a needy friend, make sure it's in their name so you don't end up wondering if you need to pay taxes on money you handed over to them. And consult an accountant before going down this route.

26. You Asked for Spare Change

There are differing opinions out there over whether quarters dropped in a panhandler's cup are considered earned income or a gift. Since panhandlers tend to live below the poverty line, they probably wouldn't owe any income taxes, either way. A more pressing issue for many would be whether the panhandling counts as earned income, qualifying recipients for the earned income tax credit, which could lead to a cash payment from the IRS even if the panhandler pays no taxes.

27. You Received Punitive Damages

Court settlements vary in their tax treatment. If you get a settlement in court to compensate you for a physical injury or emotional distress stemming from an injury, the money isn't taxable. But if you get paid for emotional distress not tied to an injury, or you receive punitive damages, you have to pay.

28. You Cashed in Your Life Insurance Policy

If you die, your beneficiaries probably won't be taxed on your life insurance payout. But if you cash it in while you're alive? Any profit you made on the policy — that is, the value in excess of premiums paid — is taxable.

29. Your Champion Pug Had a Litter

Whether you breed your dog as a business or a hobby, money made selling puppies is taxable income. However, it's also not cheap to breed and raise puppies, so once you deduct stud fees and all those vet bills, you may not actually show a taxable profit for your prize pups.

30. You Put on the Red Light

Just like dealing drugs, if you sell your body in a jurisdiction where that's illegal, you still have to report the income on Schedule C. In fact, smart high-earning prostitutes declare their income to put themselves into the position to buy a house or get credit.

31. You Couldn't Get Out of Jury Duty

If you got $15 for sitting on a jury, that's taxable income, even if you turn it over to your employer. However, if you did turn it over to your employer, you also put in a deduction for the same amount on your tax form so your gross income will remain the same.

32. You Got a Tax Refund

Last year's state and federal refunds are taxable in some situations.

33. You Exercised Stock Options

This is one that has gotten a lot of tech workers into financial hot water. If your company gives you stock options, that's not a taxable event. But when you exercise the option by purchasing stock in your employer at a discount, that is a taxable event even if you don't sell the stock right away. This can go bad if the stock declines in value after you exercise the option, because now you may owe the IRS more money than you can raise by selling the stock.

34. Your Landlord Is Paying You to Get Out

In rent-controlled areas with high demand, such as San Francisco, it's common for landlords to buy tenants out. This is often referred to as a relocation assistance. This is taxable, but whether to treat it as regular income or a capital gain is dicey, so you may need professional help with that one.

35. You Are an Undocumented Worker

Despite a common belief that undocumented immigrants don't contribute to society with tax dollars, anyone working in the U.S. is legally required to pay taxes, papers or not. And they do pay. Studies show about half of people working illegally are paying income tax, resulting in about $12 billion per year in state and local revenue.

This article is from Carrie Kirby of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Ways Greed Is Keeping You Poor

Paul Michael — Fri, 03 Jun 2016 10:30:05 +0000

Greed is a particularly ugly sin. While there are positive characteristics of pride, or even envy, it's almost impossible to use greed in any way that isn't an insult. It conjures images of fat cat CEOs hoarding millions, while their workers earn minimum wage. But although Ebenezer Scrooge and his ilk are portrayed as misers with serious money, greed can sometimes make you poor. Here are six examples of the way greed can eat away at your pot of gold.

1. Wanting It All

Not content with their lot in life, some people look at all those things they could have that make life even better. Or so they think, anyway. The latest smartphone. The upgraded car. The bigger house. The 80 inch flat screen TV. The huge deck. The patio. The yacht. Sadly, all those expenses have to be paid, and it can lead to crippling credit card debt, loans that cannot be paid back, and the eventual loss of everything to pay back creditors. As Tyler Durden famously said in Fight Club, "the things you own end up owning you." So, be very wary of greed. Happiness from those items is fleeting anyway.

2. Living to Excess

More wine. More beer. More junk food. More everything! When greed manifests as the intense and selfish desire for food and drink, it can lead to a plethora of health problems. And as we all know, health care can be very expensive in the USA. Overeating, leading to obesity, is responsible for as much as $210 billion in healthcare costs in the United States. An obese adult spends 42% more on healthcare than someone with a healthy weight, and obesity can lead to many other illnesses.

Then there's greed that turns to alcoholism, or drug abuse. While there are definitely other factors involved, including depression and other mental health issues, greed can contribute to a whole host of health problems from drug abuse. Recovery can be costly. And then there are the other problems stemming from an excessive lifestyle, including time taken off work, a lack of drive or motivation, and the sheer expense of maintaining that kind of diet.

3. Breaking the Law

Greed can make people do some strange things, which leads to committing unlawful acts. This does not mean they go out and rob banks, or scam people out of their savings online. It's more that they see an opportunity to make a lot of money for doing something they believe is harmless, albeit illegal. And then, they get caught, and face a prison sentence and a career in ruins.

One example is Scott London, a once successful audit partner at a huge accounting firm. He was earning $900,000 a year, but it appears that wasn't enough. London decided to start selling sensitive information about some of his clients to a friend. This is known as insider trading, and it's against the law. Although he made just $70,000 from the deals (a lot for most of us, but for him, a drop in the bucket), he was caught by the FBI and sentenced to 14 months in prison.

However, for others, it may be something smaller that leads to the poor house. Cheating on taxes, even just for a few bucks, is a federal offense. And shoplifting as little as three belts, or a couple of jerseys, has landed people in prison for life.

4. Avoiding Generosity

There is a misnomer that every rich person is greedy, and every poor person is not. This is actually not true, and financial guru Robert Kiyosaki has devoted a one-hour radio show on this subject that is well worth listening to. The basic idea is this: Having a generous spirit, and giving back to the world, will pay dividends. Investing in people, and in projects that have real potential, will reap rewards. On the other hand, hoarding your possessions, never giving to charity, and stockpiling wealth is not a positive way to manage money. Being generous, and doing good, can build much greater wealth than saving every penny and watching it grow a few percent a year in a bank account.

5. Gambling Away Everything

You know the stories. You've seen the movies. Gambling can bring people great wealth in just a few seconds. But, for the vast majority, it's a losing proposition. Couple gambling with greed, and you have a recipe for tragedy just waiting to happen. Every year, millions of people try and get lucky, and for most, it's just a flutter. Win or lose, they walk away. But 2% of people who gamble get seriously addicted, and greed takes over. A win becomes an adrenaline rush. They want more. And more. They want to see the dollar signs multiply. Before they know what's happened, they have lost everything trying to win back the money they once had.

6. Finally… the Impact of Corporate Greed

Sadly, it's not personal greed, but corporate greed that is having an impact on our wallets. And in some instances, it keeps people in poverty. From the greedy politicians who take cash to vote against the public interest, to the outsourcing of jobs to other countries, America has a serious greed problem. Many of us feel it a little, here and there. But for some, it's the cause of great hardships.

One recent example comes from Wendy's. After the recent minimum wage hike, and plans to raise it to $15/hour, the fast food giant responded with automated self-service kiosks. "We continue to look at initiatives and how we work to offset any impacts of future wage inflation through technology initiatives, whether that's customer self-order kiosks, whether that's automating more in the back of the house in the restaurant," said CTO Todd Penegor (who was compensated over $3 million in 2014). The moral of this story — demand a living wage and you're out of a job.

The defenders of this say that these jobs are entry-level, but with so many manufacturing jobs going elsewhere, and the employment of low-wage workers who do it "cash in hand," it's getting harder and harder to find a decent paying job that doesn't require an education and a ton of experience; something many people never had the chance to get.

Of course, the massive financial meltdown in 2008 was also caused by massive greed, and that impacted millions of homeowners and led to bankruptcies. It's safe to say that even if you are the least greedy person on the planet, you will still be affected by greed in your day-to-day life.

Has greed cost you? Tell us about it in comments!

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Save a Surprising Amount by Quitting These 4 Bad Habits

Andrea Cannon — Thu, 12 May 2016 09:30:28 +0000

We all have our bad habits, but do you know how much your vices are costing you? Whether you have the budget for it or not, bad habits are extremely costly — both to your wallet, and your health. Here's how much you could save if you gave up your vices.

Smoking

Yearly cost: $2,321

One pack of cigarettes costs between $5 and $13.50, with the national average being $6.36. Smoking just one pack a day at $6.36 will cost you $2,321 per year. However, the American Cancer Society determined that the real costs of a pack of cigarettes are closer to $35 per pack, when you consider the health-related costs to you.

While this number is already shocking, you will also need to consider the additional costs associated with smoking, such as increased medical expenses and insurance costs. In fact, insurance companies can charge smokers up to 50% more for the same annual coverage as a non-smoker. According to Cigna, smoking may make it difficult for you to qualify for medical insurance at all, with good reason. According to the New England Journal of Medicine, quitting smoking before age 40 can reduce the risk of death associated with continued smoking by up to 90%.

Life insurance policies will also be significantly more expensive for smokers. Non-smokers also receive a range of money-saving benefits, and the costs to smokers can go on and on. If not for your budget, then consider cessation to save your lungs and improve your overall health and wellbeing.

Cigarette smoking is the number one preventable cause of death in America, so break the habit as soon as you can. In fact, smoking can reduce your lifespan by at least 10 years, but if you quit smoking before age 40, you can regain most of that time back. (See also: Here's How Rich You'd Be if You Stopped Smoking)

Drinking

Yearly cost: $1,976

The top 10% of drinkers in America drink an average of 10 drinks per day (or two bottles of wine per night), but let's assume a more modest number like one drink per day, or two bottles of wine per week. The cost of drinks can vary widely, depending on what and where you imbibe. For instance, the average bottle of wine enjoyed at home costs about $9 per bottle, while one fancy cocktail at the bar can set you back $10–$12. Let's assume you drink two bottles of wine per week and two drinks at the bar every weekend; you would be spending at least $38 per week or $1,976 per year.

This is a very modest estimate, as most moderate drinkers will admit to spending far more than $38 per week on alcohol, but you can see how the costs can really add up. For a more accurate estimate, consider using an alcohol spending calculator to determine what your average spending would be.

While these numbers are already shocking, you will also need to consider the additional costs associated with drinking. For instance, consider cab fare, tips for the bartender, hiring a babysitter, and the increased medical costs. Also consider that getting convicted of a DUI or DWI can cost around $10,000 thanks to legal fees, court fines, towing, and treatment. If not for your budget, then consider kicking your drinking habit to save your kidneys and liver, and to improve your overall health.

Gambling

Yearly cost: $400

The average American spends about $400 per year on gambling (Vegas, anyone?). This doesn't factor in online poker, which can be wildly addictive and expensive. If you're spending just $100 per online session, once a week, that's $5,200 spent per year.

If you buy lottery tickets, this is an even bigger waste of money as the odds aren't in your favor. In fact, the chances of winning the Powerball jackpot are one in 292 million. As the saying goes, you're more likely to be struck by lightning. If you're spending just $1 per day on lottery or scratch-off tickets, then you can add an annual cost of $365 to your average gambling debt.

Dining Out

Yearly cost: $432–$4,879

Dining out could break your budget faster than many other vices. Restaurants and bars can mark up drinks by as much as 400%, and both fast food and restaurant options are now more costly than ever. While there are ways to save money at the restaurant (such as taking coupons and sharing a meal), you'll save the most by eating at home. If you're a foodie or simply enjoy eating out, just try to cut back to dining out once a week.

Two-thirds of Americans are overweight or obese and according to George Washington University, the yearly cost of being overweight is $524 for men and $432 for women, while the yearly cost of being obese is $4,879 for women and $2,646 for men. According to the Centers for Disease Control and Prevention, obesity can also lead to a number of related health issues, including diabetes, heart disease, stroke, liver damage, certain types of cancer, and mental illness. It may also make it difficult to apply for health insurance and life insurance coverage.

Why You Should Stop Now

It's important to kick your bad habit now, because every day lost is more costly than the next. Thanks to our old friend, compound interest, the earlier you begin saving the money that you would have normally spent on bad habits, the more you will accrue in accumulated interest over time.

Just imagine everything you could buy — or how much you could save — by kicking your costly habit. It may be difficult in the beginning, but studies have shown that, on average, it takes just over two months to kick a bad habit. Then, you can start watching the money pile up. (See also: How to Break Bad Habits)

Did you kick a costly bad habit? Please share your experience in the comments!

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This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Types of Friends Who Are Costing You Money

Tim Lemke — Wed, 14 Jan 2015 18:00:09 +0000

Our friends are some of the most important people in our lives. But have you ever considered the impact they have on your finances?

Some friends can suck money from your wallet, even if they don't intend to. And because they're your friends, you may not even notice. (See also: 10 Types of Neighbors Who Are Costing You Money)

Consider whether yours fall into any of these categories of friends that cost you money.

1. The Leech

He's more than just cheap. He's a moocher. He's always asking to borrow money. He raids your fridge, and if you go out to eat, he always insists on paying just half the check — even if he ordered more. He wants you to spot him his share of the monthly rent and promises to pay you back — but you know he won't. He'll even "borrow" books and DVDs that you'll never see again. You need to draw a hard line on what you'll do for this friend. Otherwise, you'll both end up suffering financially.

2. The Big Spender

If you go to a baseball game together, they insist on getting tickets behind home plate instead of in the bleachers. When you suggest a weekend of camping, they push for a week of skiing in Aspen. Perhaps this friend is wealthy and has a good chunk of disposable income. Or, perhaps they just love to spend and hate to save. Either way, keeping up with their lifestyle is making you go broke. You like this friend because you enjoy his or her company, but you must politely find a way to spend time with them on more frugal terms.

3. The Bad Association

He's always getting in trouble, and you're often dragged in his wake. He's the guy who shows up with weed at parties, or gets into fights at clubs. You can try your best to be on the straight and narrow, but just being around him can put you at risk for legal trouble. And even if your criminal record stays clean, your social media profile might not. Think you're due for a raise at work? You better hope the boss doesn't see the drunken Instagram pic your friend tagged you in.

4. The Awful Entrepreneur

She always has a new idea for something that will change the world, and all she needs is some money to get it off the ground. Maybe it's a new mobile app to help you brush your teeth, or a new restaurant specializing in gourmet scrambled eggs. You admire her entrepreneurial spirit, but the truth is that she has neither the business sense nor the dedication to get rich from any of these schemes. It may be tempting to lend money to friends for their business ventures, but don't let your friendship skew your assessment of whether the investment makes good financial sense.

5. The Philanthropist

This month, he's running in a marathon to raise money for cancer research. Next month, he's seeking donations for a local homeless shelter. He's a generous soul — and that's great! But it's important that you don't feel pressured to donate every time he comes around. You must find a way to gently tell your friend that you can't pony up cash every time he's supporting something. Keep in mind that it's possible to support his cause without giving money. For instance, consider volunteering your time to the charity in question, instead.

6. The Celebrator

I had an old friend from college who would plan parties and outings for the most innocuous of reasons. While most of us grew older and let our birthdays pass with little fanfare, he was still planning annual trips to Las Vegas well into his 30s. His over-celebrating was often excessive, but the truth is that this is something many of us fall prey to. We celebrate the new job, the promotion, the graduation from pre-school. We reward ourselves with a dinner out just because "we've had a tough week." Resist the urge to celebrate every single life event, and politely beg out of those outings to which you've been invited.

7. The Extravagant Gift Giver

It's Christmas Day and you bought gifts for all of the people on your list. But then a friend arrives with expensive items for you and your entire family. Now you're on the hook to reciprocate, even if you feel like you're not close enough with this person to be exchanging gifts every year. This is a tricky situation, as it hardly seems civil to complain about a friend's generosity. But there are polite ways to nudge the person away from giving gifts. If they still insist on giving, reciprocate by inviting them to dinner or finding a tasteful but inexpensive item.

8. The Spending Enabler

So you're on the fence about whether to buy the 45-inch flat screen TV or the 70-inch monster. On one shoulder is the little Frugal Angel, telling you to buy the smaller one, or even pass on buying altogether. One the other is your friend, telling you how much you deserve the behemoth. She may mean well, but she's always pushing you to spend more. "Go for it," she'll say. "You work hard. Don't be afraid to spoil yourself." Never listen to the Enabling Devil.

9. The Early Adopter

This is the guy who stands in line at the Apple Store every time a new phone is released. He's the first to get every new gadget or technology out there. Hanging out with this friend can make you feel pressured to keep up. But keep in mind that Early Adopters rarely get the best deals. Don't let your friend's love of the shiny new thing influence your own buying decisions.

10. The Gambler

With this friend, a casual game of poker always seems to turn into a scene from Rounders. His "friendly" fantasy football league just offers another chance for big chunks of money to change hands. He's always betting on something, and all too often you find yourself opening up your wallet to join the fun. Resist the urge to bet big bucks on things every time you hang out with this friend. You'll be better off financially (and your blood pressure may improve as well).

Do you have any "friends" like these? How do you deal with friends that are costing you money?

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

You Can Guarantee a Win and 9 Other Bizarre Facts About the Lottery

Paul Michael — Mon, 09 Jun 2014 09:00:42 +0000

It's something many of us dream about, but few will ever experience: Winning the lottery. The idea of buying a ticket for a few bucks and turning it into hundreds of millions of dollars overnight is tempting to say the least. We all know it's not very likely to happen. Still, that doesn't stop millions of us playing it every week. And you'd be amazed by some of the stories and facts that the lottery produces. Here are the top 10 bizarre facts about lotteries, in no particular order. (See also: Playing the Lottery Is a Bad Gamble)

1. Non-Winning Tickets Can Be Used Again

Don't just trash your losing tickets. Whether scratch cards, quick picks, or personal numbers, those tickets can be used again to enter second-chance drawings. This is something done by the different lotteries to help with customer loyalty and ease those feelings of loss. However, you probably never heard about this because they rarely advertise the fact. Some states require you to mail in your ticket, others want you to register the serial number. But it's a free entry, so why not? Check your state's second-chance lottery after every draw, and you might get lucky.

2. Good Manners Cost One Powerball Player $590 million

When Mindy Crandell went to buy her ticket from the local Publix supermarket, she let an 84-year old woman step ahead of her in line. It was a nice, polite thing to do. And it cost Mindy a fortune. That old woman who went ahead of her purchased a Quick Pick ticket, the one Mindy was supposed to get. Gloria C. Mackenzie, the Florida retiree, collected over $370 million before taxes, the lump sum option. Mindy got nothing, except perhaps the chance to reevaluate her politeness.

3. You're More Likely to Be Killed By a Vending Machine Than Win a Lottery

Sad, but true. Most lotteries have insurmountable odds. The Mega Millions lottery, for instance, has odds of 176 million to 1. That means you have a greater chance of being killed by a vending machine (112 million to 1), becoming president (10 million to 1), dying from being left-handed (4.4 million to 1), or dying in the bathtub (840,000 to 1). In fact, if you decide to leave the house now to buy a lottery ticket, the odds favor you dying before you ever buy the ticket than actually winning the jackpot.

4. You Can Guarantee a Lottery Win, but It's a Logistical Nightmare

Usually, buying up almost every combination of lottery tickets is self-defeating. For a jackpot of only $20 million dollars, you'd have to spend many times more to put the odds in your favor. However, when the jackpot becomes huge, over $400 million, then the math starts to make sense. However, organizing such an endeavor would take a syndicate of massive proportions. The venture has all kinds of problems, including severe trust issues, and the settlement of the winnings would take a small firm of accountants. The other option would be for a single multi-millionaire to corner the market, but anyone with such funding behind them would have far better ways to guarantee a return.

5. Many Lottery Winners Blow Their Fortunes Quickly

The problem with coming into a lot of money very quickly is that it took no discipline to get it. It's free money, and because of that, it's not always shown the respect of earned money. Another problem is a lack of knowledge of basic financial principles by the winners. $15 million seems like an unspendable amount of money, but these days it's not. It should last a lifetime with careful investment, but start buying houses, cars, yachts, and party nights, and you could see that fortune crumble in just a few years. Michael Carroll, a garbage man in the UK, did just that. He won around $15 million at the tender age of 19, and eight years later he'd blown it all and was back on the garbage truck again. (See also: People Who Became Millionaires Overnight and What They Did With the Money)

6. Fortune Cookies Can Predict Winners

Well, of course they can. The random selection of numbers printed in fortune cookies have the same chance of winning as any other random set of numbers. And that's just what happened in 2005. A random group of 110 people played the same fortune cookie numbers and each one thought they had won the whole $19.4 million jackpot. Instead, 89 winners received $100,000, and 21 got $500,000 as they had opted for the Power Play. It's not a bad haul, but it's not the fortune they were expecting. There was even a fraud investigation looking into the strange result.

7. The "1,2,3,4,5,6" Combo Is as Likely as Any, but You Should Never Play It

Statistically, that selection of numbers is not ridiculous to play. If you replace the numbers with symbols, it's easier to see why. However, there are several reasons not to play that sequence.

First, there are thousands of people who play it, because they believe the same thing. Hey, it has to happen some time. So if it ever does come up, you'll be sharing the jackpot with a lot of people.

Second, despite the odds being the same, the sequence has never yet been chosen, suggesting that although the numbers alone have the same chances, the combination may not. I'm no mathematician, but this person has done some extensive research on it. It seems you're better off with a bunch of random numbers.

8. Some Lives Are Ruined by Winning the Lottery

Be careful what you wish for. What we think we need to be happy is not always what will actually bring us happiness. And money, well, that's the biggest red herring of them all. While it's true that a lack of money can make you unhappy for obvious reasons, drowning in it will only bring short-term pleasure. From breaking up families and friendships to death threats and prison time, the lottery has been an ironic windfall for many people over the years.

9. You Better Know Where You Bought That Ticket

When the million-dollar jackpot comes up, lottery officials don't just hand over the cash if you have the winning ticket. They do checks to make sure you were the one who bought it, and where you purchased it. A case in 2010 puzzled Iowa lottery officials when no one came forward to claim the $14.3 million prize. Then, one year later, two hours before the deadline, a New York man named Crawford Shaw presented the ticket via two attorneys. The story from Crawford is suspect, evidence is sketchy, and as of December 2013, the mystery has still not been solved. And as such, the money has never been handed over.

10. Scammers Use the Names of Lottery Winners

Perhaps the most famous case of philanthropy from lottery winnings, in recent years at least, was the story of Violet and Allen Large. The elderly Canadian couple won over $11 million in July 2010. They gave over 98% of it away, saying that they were comfortable and had each other, which was the most important part of life. That was an open invitation to scammers though. They used the names of Violet and Allen in an email scam, claiming to be giving away millions. It works like any Nigerian email scam, so if you ever get one from them, know that it's completely bogus.

What would you do with your lottery winnings? Please share in comments! [Buy a Zeppelin and travel the world in it. — Ed.]

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Playing the Lottery Is a Bad Gamble

Aaron Crowe — Mon, 02 Apr 2012 09:48:10 +0000

Whenever a big lottery payout is available, it seems like everyone you talk to is suddenly fantasizing about what they'll do with the money and wants to tell you about it. It's almost as boring as hearing about someone's fantasy baseball team.

"You can't win if you don't play" and "someone has to win" are two of the cliches I've heard recently from giddy gamblers at the grocery store checkout line. Non-gamblers trying to buy a six-pack of beer must be having a long wait at their neighborhood liquor stores as every passerby with a spare dollar stops in for a chance at being a millionaire many times over.

Yet get them talking about the lottery, and despite the crazy odds against winning (you're more likely to get into a deadly accident), they'll happily fantasize about how they'll quit their jobs and spend their winnings living the lush life they've always dreamed about. They'll talk your ear off if you let them. I used to work with a guy who talked about his post-winning plans nonstop, and it got boring fast. (See also: How to Win the Lottery Without Paying a Penny for the Ticket)

Day-dreaming and a little talk of fantasy can be a good thing, but combine it with spending hard-earned money each week gambling on a game that doesn't pay off that well, and you might as well be throwing your money away. Unless you find joy in handing over your money to a liquor store clerk so you can dream for a few hours about the vacations you'll take, your money will do a lot more work for you if you contribute to simple investments regularly.

The odds of winning the recent Mega Millions lottery and its jackpot of more than half a billion dollars were about 1 in 175 million. The chances of a pedestrian being hit and killed by a car are 1 in 588 in a lifetime. You're also more likely to drown in a swimming pool (1 in 6,711) or the big favorite — be struck by lightning (1 in 55,578).

But the long odds are just one of the reasons why playing the lottery is stupid. Despite the big prize of millions of dollars, the payouts are a lot less per dollar than you'd get in a casino. For entertainment value alone, gambling at a grocery store has to be a lot less exciting than Las Vegas or your local Indian casino. And like all gambling, there's the false hope that you'll walk out a winner and the letdown when you don't.

If you've played the simple game of bingo for money, you know how fast your money can disappear. I tried to use it as a lesson to my 7-year-old daughter recently when we had a few hours to spend on a leisurely breakfast before going to a family event. We were in a state that allows payout bingo games at restaurants, and while it's illegal for children to play the game, my daughter was excited about playing, and the waitress looked the other way while my daughter played a few rounds.

I told her I would spend $5 for us to play two games of bingo, but when that money was gone, we'd either take our winnings and leave or quit anyway because our gambling money was gone. Each game lasted less than five minutes, and when our cards didn't win and our two games were done, she of course asked what every kid asks when the fun ends — "Can we play one more time?"

Sometimes I give in as a parent, though I know it's not a great lesson. But this time I didn't, partly because I didn't want to throw away another $5 bill, but mainly because I wanted her to realize how fast money can leave your fingers if you let it. She gets about $5 each week in allowance for doing chores, and a week's worth of work was gone in minutes with nothing to show for it except a few old bingo cards.

I don't know what the payout amount was for the bingo games we played, since some of the money was going to a charity. State-run lotteries have the worst odds and lowest paybacks of any legal form of gambling, according to a Bloomberg story. Georgia has the most suckers, spending an average of $470.73 on the lottery in 2010, or 1% of their personal income, while getting back 63 cents in prize payouts for every dollar they spent playing.

Roulette is heavily favored toward the casino, but even at the worst odds of 37 to 1 of hitting a single number, the payout is 35 to 1. Whether you win or lose, the house always wins. It's the same with playing the state lottery, which unfortunately is a lot easier to do than taking a trip to Las Vegas.

This article is from Aaron Crowe of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

SIX cool bar tricks that anyone can master.

Paul Michael — Tue, 04 Dec 2007 23:40:54 +0000

As some of you regular Wise Bread readers know, I’m a big fan of bar tricks, friendly hustles and harmless wagers. Well, as we’re approaching the peak of partying season I thought it would be a good idea to share some of the newest, coolest bar tricks I’ve picked up. And these ones are really easy to learn, even my dear old mom could do them.

I found a site called easybartricks.com quite by accident and I was glued to it for over half an hour. I watched some of these videos over and over again to get the trick down cold.

Remember, no-one likes to be completely conned but these are all just a harmless bit of fun. Do it with your friends and co-workers and then let them in on the trick afterwards. They’ll be just as happy to learn the secret. You don’t even have to do any of these as a bet, they’re also great talking points when the conversation stalls.

What’s more, for you guys (and girls) looking for a way to break the ice with someone who catches your eye, magic tricks and bar bets are a nice easy way to get the conversation started. Enjoy.

1: Bill beneath the bottle (link )
Find out how to remove a bank note from beneath an empty beer bottle with tipping it over.

2: Magnetic Match (link )
How does the match move? The answer is static.

3: The hold & hit coin trick (link )
There are a few ground rules, but the answer is agonizingly simple.

4: The trapped bill (link )
How do you remove the trapped bill with letting the bottles fall? It’s a snap.

5: Lighter below the bottle (link )
Several ways to get the lighter out from under the bottle without letting it fall. Genius.

6: The coin memory bet (link )
My favorite of all, because it seems completely easy but is actually almost impossible in the time.

As always folks, drink responsibly. And don't go drinking and driving, either.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: