Creating an artificial windfall generator

Photo: ThunderChild5

Everybody enjoys getting a windfall. One of the attractions of the lottery (besides the infinitesimal chance that you might win a life-changingly huge amount) is that the smaller winning tickets bring little, irregularly spaced windfalls. In fact, some lotteries are deliberately set up to work like this.

Back in the mid-1980s I spent a few weeks working in Germany. At the office where I worked, most of the employees kicked a little money into a pool and bought a ticket in their state lottery. Because my familiarity was with the sort of lotteries most US states have, this seemed like a terrible idea to me, but according to them, this lottery was different from what I was used to.

One difference, they explained, was that a single ticket has a lifetime of several weeks. Each week there was a drawing with bigger and bigger prizes. Winning one of the early prizes was nice, but a mixed blessing because once you won a prize your ticket was out of the running for later prizes.

A bigger difference, though, was that the sum of the prizes was nearly as large as the price of all the tickets--the lottery agent made its money on the interest earned between the ticket sale and the awarding of the big prizes a few weeks later. Unlike the US state lotteries, where you're lucky if the payoff reaches 50 cents on the dollar, this lottery paid out very nearly 100 cents on the dollar.

Another difference was that the tickets cost quite a bit--enough that an ordinary person wouldn't likely buy one. For someone who wasn't wealthy it pretty much had to be a group purchase or a very occasional fling (not a weekly--or daily--expense the way it is for some pitiable people in the US). My coworkers each chipped in one mark a week (today's US equivalent might be fifty cents or a bit more), there were ten or fifteen of them, and I think they only bought one or two tickets every six weeks.

The tickets were not purchased with an eye to winning the big prize. (The odds of that were no bigger than in a US lottery). However, they won one of the smaller prizes pretty often--every eight or ten months on average. Whenever they won, they had a party. If they won one of the small prizes it was a small party--the winnings paid for beer and snacks. If they won one of the bigger prizes it was a fancy party with catered food and good wine.

Once they explained it to me, I realized that they were describing an artificial windfall generator. They could have done almost the same thing by each putting a mark a week into a common fund and then having a party every year, but that wouldn't have been as much fun. This way the party was different every time--sometimes bigger, sometimes smaller; sometimes in the spring, sometimes in the fall; sometimes one right after another, other times with a year-long gap.

You could, in fact, do exactly the same thing, with a little discipline. Create your artificial windfall generator this way:

  1. Open a bank account
  2. Every week deposit $1 (or $10 or $100, depending on the sort of windfall you want)
  3. Ever week roll two dice one time. If they come up double-sixes, you win! Throw a party with the money in the account! (Or do whatever it is you like to do with a windfall.)

On average, two dice will come up double-sixes once out of every 36 rolls, so you'll be throwing your party every eight or nine months on average and you'll have $36 (or $360, or $3600) to throw it with. (A bit more than that, actually, because you get to keep the interest instead of letting the lottery agent keep it.)

Of course you can tweak all these variables. Do you think something closer to $100 would let you throw a much better party than $36? Then put in $2.78 instead of a dollar every week. Do you think your windfall would be more special if it only came every couple of years? Then roll three dice and call it a win if they come up triple-fives or triple-sixes. (There are 216 ways for three dice to come up. If two of those ways are wins then you'll get a win every 108 weeks on average.)

As I explained in my post last week "It's all your money," I don't vary my spending according to windfalls. If I want to throw a big party every couple of years I just budget for it and then decide when I want to throw it. But if windfalls work for you--and if you can discipline yourself to keep your hands off the money in the meantime--you can arrange to have windfalls just like an occasional small win in the lottery at whatever rate suites you. (Arranging to have a payoff like a big win in the lottery takes investing a large fraction of your income for most of your life, but is also generally doable, if you live frugally enough--and live long enough.)

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Nora Dunn's picture

Great idea, Philip! What an interesting way to surprise yourself and view money in a different way psychologically.

I too, am a budgeter, but I can appreciate the fun aspect in an idea like this. It keeps things interesting!  

Philip Brewer's picture

Yep. If you take great pleasure in a windfall, then this is a way to treat yourself to one now and again.

Guest's picture

Too bad we don't do things this way here in the U.S. (lotteries done the European way)! Also your money saving/dice idea is brilliant and even more so when it reminds us (me) that every LITTLE bit counts! Why wait for the big chunks when the little ones build so nicely, too :)

Guest's picture

That's a lovely idea, but the lottery people currently keep about half the money. So they get the money AND the interest. Why would they change?

The difference is that Europeans have free college education, so they are smarter than Americans.

Americans have free education up until grade 12, and then they have to pay massive amounts of money or go into massive debt, because that helps keep the people poor and stupid and it's how you get Bush and Cheney elected.

The European lotteries are probably forced to pay out 100% of the money paid into them, or the Europeans just wouldn't buy any tickets.

Guest's picture

I believe lotteries are more attractive to individuals from lower socio economic backgrounds. I think people would definitely benefit from taking this approach, providing they can get an interest bearing account with such small initial deposits

Guest's picture

Just hanging out on your blog this morning, and noted the comment

"I believe lotteries are more attractive to individuals from lower socio economic backgrounds."

I beg to differ... I think it is the thrill of CHANCE that appeals to everyone that makes these types of situations attractive. If that were the case (lower socio), casinos and the like would be out of business in a heartbeat. How long would "lower class" people's money last? Not looking for a fight, but/and that comment just hit me wrong...

Philip Brewer's picture

Just now I poked around on the web to see if anyone had studied the income profiles of lottery players. It turns out to be a question that can be answered however you like, if you get to decide just what the question is, but one Terry Sanford Institute of Public Policy study does have this to say:

... average sales do not vary systematically by income. That is, taking averages over all adults, both players and nonplayers, those in lower income brackets tend to spend roughly the same number of dollars a year as those in middle and upper income brackets

but also have this to say:

... in virtually every case we have examined, one conclusion is constant: lower-income individuals spend a higher percentage of their income than those in middle and upper income brackets.

So, it seems pretty clear that people in lower socio-economic classes suffer more from lotteries, in the sense that they can ill afford to lose even a few dollars a week.

All the more reason to generate your own windfall.

Brooke Kaelin's picture

What a great idea! This is too fun. I don't play the lottery, but this is right up my alley. A little bit of fun and chance, and you know you are going to get your money back. Thanks Philip, I am going to try this.