Ermahgerd, Powerball!

How you can achieve financial security with just $2 day without winning the Powerball

Photo credit: Lisa Brewster on Flickr.

After no one won in Saturday’s drawing, analysts now predict that the Powerball jackpot could break $1.3 billion dollars — the largest in U.S. history! According to Powerball’s official website, that would mean a lump sum haul of over $800 million.

Financial speaking, the lottery is a bad idea. You have a 1 in 292 million chance of winning (or 1 in 292,201,388 to be specific). Think about it this way: you have a higher chance of getting struck by lightning — twice, than you have of winning Powerball!

With those odds, there is good reason to believe that you won’t win Powerball on Wednesday. (Maybe no one wins. Although that is become unlikely as the number of tickets purchased continue to increase exponentially). Even if you don’t win, you can still have financial security starting at just $2 a day — the price of the Powerball ticket. That’s pretty amazing, considering you cannot get much these days with $2.

But wait, did I just say financial security? Let’s take a look at how this works. At $2 a day, you’re depositing $14 a week. With 52 weeks a year, that comes out to $728 a year. Not bad! In order to build wealth over the long-term, you decide to invest in a passive portfolio of low-cost index ETFs instead. (ETFs are exchange traded funds, which are similar to mutual funds).

If you had started depositing $14 a week ($2 a day) in a hypothetical, passive diversified ETF portfolio 10 years ago, you could have nearly $9,400. By doing this, you would have deposited $7,280 (congrats!) and earned over $2,100 from compound returns (hooray!).

Say you did the same thing — with the same portfolio — and started 10 years ago. But after the first year you were so excited about the power of saving just $2 a day that in the following year you increased it to $4/day! And then to $6/day the following year, $8/day the following year after that, and so on and so forth. In the last year, you were putting in $20 a day.

At the end of 10 years, your hypothetical, diversified passive portfolio of index ETFs now has over $47,000!* That’s pretty cool.

Of course, Powerball will continue making headlines and who knows who the lucky winner (or winners) will be on Wednesday! When you buy your $2 Powerball ticket this week, just put another $2 aside and start investing for the future. By the end of Wednesday’s drawing you’ll either be: A) super-mega-wealthy or B) on your way to financial security. Not too shabby.