Lottery offers slim chance:‘Save and invest’ mindset can make one a millionaire

CEBU, Philippines — If you look around the long queues at lottery outlets, it would seem that a lot of Filipinos really want to become millionaires, but who doesn’t anyway?

Many want instant money success even if the chances of winning in lottery are very thin.

While betting on lottery isn’t a bad thing at all, math experts and analysts have said there are over 40 million possible number combinations in the 6/58 Ultra Lotto and a bettor who places one bet only has 0.00000274-percent chance of guessing the right number combination.

Personal finance blogger and self-made millionaire Tyrone Solee says people would have bigger chances of becoming millionaires if they develop a saving and investing mindset.

“That’s how small the chance of winning (in lottery). In fact, you would have a higher chance of becoming a millionaire by saving and investing than by betting in the lotto,” the millionaireacts.com author told The FREEMAN in an online conversation.

“Instead of spending your money to buy lotto tickets of which you have a very small chance of winning, why not use it to save and invest instead?” Solee said.

Becoming a millionaire takes time, he pointed out. “It is not an overnight success. Saving and investing for long term is a surer way to become a millionaire than by betting to lotto with very slim chances of winning.”

The financial blogger shared to us his personal advices on what it takes to become a millionaire and achieve financial freedom in life.

Pay Yourself First

As most of us are employees who rely on our salaries for living, you should use the equation Income less Savings equals Expenses. That is, every time you get your income, save first before you spend. This is the reverse of what we are accustomed to, that is we usually spend first before we save.

As to the percentage of what you need to save, my advice is to save at least 20 percent of your income. This is based on Pareto’s Principle of 80/20 which states that for many events, roughly 80 percent of the effects come from 20 percent of the causes.

Live Below Your Means

Once you set aside at least 20 percent of your incomes for savings, then you are left to budget the remaining 80 percent. In spending the remaining 80 percent, you should prioritize your needs versus wants. A good way is to use the envelope method where you have envelopes that have names on it for every need that you have such as your bills.

After saving the 20 percent of your income, then fill these envelopes with the amount of money required to pay these bills. In that way, you are assured that these bills will get paid. Of course, you should also make a way to cut costs on these bills. For electricity, a good way to reduce it is to use LED lights instead of CFL and bulbs.

Don’t Be Trapped By Your Income

Many people are trapped by their income. Usually, what happens is when their income increases, their expenses follow and it also increases. This is because they usually upgrade their lifestyle too by upgrading their cars and smart phones, buying new clothes and go on with luxury vacations.

Little did they know that these are all liabilities piling up on their bank mortgages and credit card debts. The result is, even if they have larger income, they still end up with little or no savings at all. They are trapped by their income.

How many stories of lotto winners have you read that instead of becoming prosperous, they ended up having a miserable life with a lot of debts?

Have Multiple Sources Of Income

One of the greatest secrets of millionaires is that they have multiple sources of income. When one income stream fails, then there are still others that would give you income. Having multiple sources of income is similar to a driver driving his car on the road with a spare tire. When he gets a flat tire, he can use his spare tire to continue his journey.

Invest In Assets And Not In Liabilities

Millionaires also invest in assets that produce passive income for them. Passive income is the secret of the rich. It allows their money to work for them. Their assets produce passive income for them so they earn money without working.

Once they built enough passive income that is higher than their expenses, then they can be considered as having achieved financial freedom.

A simple way to distinguish between assets and liabilities is to ask yourself: ‘If I lost my job, will this eat me or will it feed me?’ Assets will feed you while liabilities will eat you. (FREEMAN)