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Where Does Lottery Money Come From? – Inner Workings Of The Lottery

The lottery is a type of legal gambling done by drawing numbers at random, and one series of numbers gets a price. 

Some governments outlaw it, but it is legal and endorsed by the management of 44 States in the US.

You could have a friend that won a large sum of money on the lottery, and you are wondering how that money can get produced and sustained for future winners. 

A lottery ticket costs around $2, so where does enough money to pay winners of up to $ 100000000 come from? Let us unveil this mystery;

Where Does Lottery Money Come From?

The primary source of lottery money is the people that buy lottery tickets. A ticket costs around 2 dollars, and it gets purchased about 12 million times for a single drawing. 

So, this will collect up to 12 million, which might or might not be won on that draw. But, it will get accumulated and transferred to a huge jackpot.

Where Does The Lottery Money Go?

You must have realized that the lottery makes a lot more money than it gives to the winners. Since the lottery works alongside the Government, you might wonder what happens with the money these companies make. Here is the answer;

  1. Winnings. Most of the money collected by the lottery goes to the winners for both big jackpots and other prizes. This accounts for between 50% and 60% of the capital, depending on the State and lottery company.
  2. Running the company. Some funds are needed to run lottery companies. Therefore, 10% of the money made is taken by the respective companies to be used for printing more tickets, paying their employees, legal fees, and other payments to run the company.
  3. Retailers’ bonus. Retailers get more customers in their stores because of selling lottery tickets. However, this is not the end of the benefits; the company gives 5% of its sales to the retailer selling their tickets.
  4. The States that participate. Forty-four states have embraced lottery companies, but some are hesitant since they have other gambling franchises or religious and social inclinations. 

The States of Alaska, Alabama, Mississippi, Hawaii, Utah, and Nevada don’t have the lottery. However, the rest of the States get around 35% of the Lottery money used to fund development projects that benefit the citizens and the state.

Some Good Causes Lottery Money Has Been Used For By States

The question about the morality of lotteries and gambling has been the subject of many discussions since people are allowed to have opinions. 

We cannot argue about the good things that lottery money has done in the States that use them. Here are a few known projects;

  • Pennsylvania uses over $900 million that is created from lottery tickets to start programs for the elderly. This includes rent reductions, health care services, free transportation, and many others.
  • The Texas lottery started a scratch game whose earnings were all targeted at helping veterans. It has generated over $80 million, which has been used to help many veterans and their families. This success caused the creation of more lottery games to help veterans.
  • The Environment and Natural Resources Trust Fund get a quarter of Minnesota’s lottery money. This fund is responsible for protecting native animals and fish, ensuring water quality, and regulating environmental pollution by septic waste.
  • The State of Georgia spends the lottery money on the HOPE Scholarship Program that helps outstanding students get degrees. It pays for four years of Education in a Georgia-based University or College, which has helped over 1 million students.
  • Most states invest lottery money in schools to allow for improvement in infrastructure without raising the taxes. Wisconsin uses the money to pay some of the taxes for residences which takes a load off the respective owners.
  • The lottery feeds the Build Indiana Fund. It is responsible for upgrading infrastructure, preserving historic sites, funding projects to help the seniors and minors alongside other charitable projects beneficial to the State.

What To Do If You Win The Lottery

Winning a jackpot or any significant amount of money in the lottery can be overwhelming and damaging if you don’t have the right idea of how to use the money. So if you win the lottery, you need to have a clear plan for the money to benefit you.

Making irrational decisions is a problem in such a situation due to the pressure and excitement of getting so much money all at once. 

To secure your cash, ensure you sign your ticket soon as you can so that it does not get claimed by another person.

Give yourself some time to calm down before you reach out to the company for your price. You don’t have to rush since some states will allow you up to a year to claim the money. Here is a guide on what you should do when you have the lottery money to benefit the most;

1. The first thing to do is nothing

Getting a sum of six or seven figures at once, you will be tempted to take a significant step into the posh lifestyle, make a donation, or invest a chunk of it in the stock exchange or a business.

Before making any important financial decision, you need to take some time to think and make a solid plan of how you will spend the money. 

Do not spend more than 10% of the money on frivolous expenses. Of course, you can spend some, but it has to be moderated.

2. Enjoy Yourself Reasonably

Winning a lottery is a good thing, and you should celebrate it, but spending extravagantly is strongly discouraged. 

It would help if you let the money sit in your bank account for a few months before you start consuming it. 

Please do not quit your job because of the money, and it is essential to maintain your normal lifestyle for a few months. 

However, you can start by taking small portions of 3 or 4% depending on the amount of money to give your family and yourself a taste of what the money will bring in the future. 

Do not spend too much on parties or vacations since it will waste all the cash, and you will be where you started in a few years or months.

3. Get a proper channel of investment

After having had some fun with the small portion of the money, you need to put the rest of it into perspective. 

In simpler terms, you should put the money into things that make more money. It is a good idea to think about your retirement and how much money you and your family need to live a comfortable life.

Looking at the bigger picture and distant future will make a big difference in dealing with the money. 

You should not live off the money you won; instead, you should use the funds generated by your winnings monthly. The only way to get a continuous stream of income is to make investments.

4. What you should do vs. what you want to do

Carefully consider what the money you won can do for you and your family. Can it pay your mortgage? 

Finance a vacation or pay for your Kid’s education? If you fight the impulse to spend all the money and invest it correctly, you will have enough money for you and your family for a long time.

It should be able to maintain your current lifestyle even if you stop working when correctly invested.

5. Open a separate account

This is a move to make money harder to access, and it is used by many people that get a lot of money. 

Having a separate account will ensure that you don’t have the urge to take out money for unnecessary reasons. Some banks will offer wealth management programs to help you see more returns from your money. 

In addition, you should learn more about offshore accounts and tax havens if you plan to keep your money. Ensure you get professional tax and financial advice. 

Some financial complexities will come up when you receive a large sum of money, such as estate issues and income tax. 

Get a professional to ensure you are on the right side of the law and your finances are on the right track.

Conclusion

The lottery has made many Americans change their lives for the better when they correctly invested in the winnings. The money given to the players is collected from the tickets bought by all the other players.

The states that participate in the lottery make a lot of money, and it is used for many good causes. These include the development of educational facilities and the running of charitable organizations.

If you win a lottery, it is crucial to get professional advice on dealing with taxes and managing a large sum of money.  If you extravagantly spend the money, you will return to your starting point in a few years.

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