Phil's Personal Finance Tip of the Day:
5 Better Investments Than the Lottery
By Cameron Huddleston | Kiplinger
Bought your Powerball ticket yet? There was no winner for the $350 million Powerball jackpot on May 15, so the prize has climbed to a whopping $550 million for the May 18 lottery drawing.
I've never bought a lottery ticket, but my husband spends $5 each month on Mega Millions, a multi-state lottery similar to Powerball. Unfortunately, he's never won. But -- fortunately -- he's not counting on the lottery to cover his retirement. Buying a lottery ticket isn't an investment, he says, it's buying a dream. And who doesn't dream of winning big some day?
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I don't worry about the fact that my husband spends $5 a month on lottery tickets. It's a nominal amount, and I know he's actively saving for retirement. However, if he were shelling out, say, $20 a week on lottery tickets, I would suggest better uses for the $1,040 it would amount to in a year. In fact, here are five ways to spend $1,040 with much better odds of getting a return than the 1 in 175,223,510 odds of winning the Powerball jackpot.
Pay down credit-card debt. Paying off a balance with an 13% interest rate (the average on fixed-rate cards now) is like earning 13% on your investments -- an incredibly valuable use of the money. And once you pay off your credit-card debt, you can start using that money to build your retirement savings.
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Boost your 401(k) contributions. If you have an extra $1,040 to spare, then put that money to work for you in your retirement account. You'll really benefit if your employer matches your contributions. 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. And that's with no company match. After factoring in the 25% tax savings, since the investment was with pretax dollars, the real cost to you is just $15,601. So you effectively triple your money in 20 years. Use our Power of Boosting 401(k) Contributions calculator to see how additional contributions to your account can add up over time.
To read the entire article from Cameron Huddleston | Kiplinger :
http://finance.yahoo.com/news/5-better-investments-than-the-lottery-182440502.html
If you're bored with life, if you don't get up every morning with a burning desire to do things - you don't have enough goals. -Lou Holtz
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