Thank You, Friends

Bilbo: "Alas, eleventy-one years is far too short a time to live among such excellent and admirable hobbits. I don't know half of you half as well as I should like, and I like less than half of you half as well as you deserve."

Thank you friends for all the birthday wishes, they have really been overwhelming, but I have to ask:

A birthday is just another day in another year, right? I’ve simply completed another ride around the sun, right? Am I really to count out the years and days and hours from my birth, to my death? Am I to measure out my life with coffee spoons?

Birthdays feel like they stopped being fun years ago – the parties usually occur on the weekends around the birthday, and I’m on a strict spending diet so I’m not about to start my own celebration after I finish the day’s work; I’m an adult now – or at least I’m trying.

When you get to middle age, it’s hard not to look around at your former classmates and friends and then use their progress as a measuring-stick for your own. I have pangs of regret that I have no children, that I do not own my own house, that I haven’t gotten a master’s degree, that I left my home town and started anew as an adult.

Hell, if I had made a few decisions differently, my life could be measurably better or worse than it is now, and I’m the kind of analyst who would obsess over the hypotheticals if I fail to exercise some self-control. My list of regrets would take up a year’s worth of blog entries.

I really wish I had taken more pictures of my life from 18 years old to today. Recently, an old friend of mine started uploading some vintage pictures of us and our circle of friends, and it opened my eyes. These pictures were of me between age 14 and 22. This was a time period where most of my outward confidence and joy was masking depression, uncertainty, confusion, fear, doubt, anger – the usual adolescent emotions exacerbated by my own unique brain chemistry and recreational substance use.

I used to feel like I was ugly. I have a facial deformity that has always affected my self-confidence –because of a birth defect, my face, my nose and lips especially, is asymmetrical.

I look at those decade-plus old pictures now and I think that I looked like a million bucks. If only I was as attuned to myself and as able to recognize beauty then as I am now, my life might be totally different.

But would I want it to be? 

I've done well for a guy with low self esteem. I feel like I have a lot to celebrate at 35 years old.

I am so lucky to be loved. I have a wonderful wife who has put up with my awful jokes and curmudgeonliness for 13 years (10 of them married). I have parents who have sacrificed and fought for me at every stage of my life. I have a close family held together by fidelity and affection, despite being sundered by great distances.

I have friends that I haven’t seen in years who still personalize their birthday messages to me – because they haven’t forgotten me. I don’t know how they’ve managed it, some of them are from the ‘scene missing’ portion of my past. While my circle of local friends has remained small, to some extent purposefully, they are the kind of friends that I would keep around for 20 or more years if I could.

I have a chinchilla that steals kisses – it started as a trick, she’d give Mrs. Chris or myself a kiss on the lips in exchange for a treat, a sliced almond. Now she just scurries up to us and steals kisses, probably hoping to be rewarded with a treat. How bad can life be when one has an affectionate chinchilla as one of your companions?

I live a life of abundance – I’m not rich, I don’t have a ton of shit, I don’t even do that much with my spare time, but I feel fulfilled, and also grateful that I’m lucky enough to be that way. In 35 years, I don’t think I’ve seriously wanted for much – though I’ve been poor, sick, tired, disabled, lonely, cold and unemployed at times through those years, overall the balance of my life has been fantastic.

At any given time, I can look around and find that I am surrounded by good music, good art, good company and/or good food.

I enjoy the work I do and the people I work for. I am successful, and I am responsible for that success. My coworkers are funny, helpful and down-to-earth.

The industry we serve, the financial services/advice industry, is one of the most misrepresented industries on the planet. People in the business tend to be humble but confident, friendly but competitive. It’s an environment that generally brings out the best of the best of people, but can occasionally bring out the worst of the worst in people. For a journalist, that’s grist for the writing mill.

I live in one of the safest, wealthiest and healthiest places in the world. I can’t say enough about how awesome it is to live on the Jersey Shore. I feel sorry for everyone who doesn’t.

The Cats won last night.

Most importantly, while I live in the now and I embrace today, I have a lot of hope that the future will be even better. I don’t need to live the dream, I just need to live my life.

And right now, at 35 years old, that life isn’t bad.

Eat the bear.

The Stranger: Sometimes you eat the bear, sometimes the bear eats you. The Dude: What is that, some sort of Eastern thing? The Stranger: Far from it, dude.

A bear market occurs when the major indexes post a decline of 20 percent or more. Statistically speaking, U.S. stock markets and many markets globally, including those in the Middle East and southeast Asia, are in bear market territory.

Now I think back to my outdoorsman training and what to do in the case of a bear attack. As a fat, fleshy human who normally doesn’t carry around a gun, bow, or large blade, my first instinct upon seeing something like a huge grizzly would be to turn around and run – but that’s not what you’re supposed to do. The first and easiest correct response to an aggressive bear is to play dead – in the investing world, this would mean to not do anything — If you’re under 40, that’s not necessarily terrible advice in a bear market.

The second thing you can do is to fight back – specifically, hit and kick the bear in the face as hard as you possibly can. In the markets, this would mean buying more stocks and funds, and buying aggressively.

As a relatively young investor whose accounts are more impacted by my regular contributions than the temperament of stock market investors, I love a bear market. I love it so much that I’m going to punch the bear in the face. In fact, I’ll do one better: I’m going to eat the damn bear.

How often do these opportunities come about? Since 1945, there have been 20 market corrections and 12 bear markets, not counting the current one. This happens once out of every six or seven years. This isn’t time to panic.

See, for long-term investors, the typical advice during bear markets and market corrections (market declines between 10 and 20 percent) is to bargain hunt, because stocks are cheap, and to rebalance your portfolio, because a decline in stocks will by necessity cause the fixed income, or bond, portion of a person’s portfolio to take up a larger portion.

For example, if my portfolio is 60 percent stocks and 40 percent bonds and stock markets decline by 20 percent, the stock portion of my portfolio also declines by 20 percent. If, for the sake of simplicity, we say that the bond portion is static, my portfolio is now 48 percent stocks and 52 percent bonds. Rebalancing means selling off 12 percent of those bonds and re-investing in stocks. That way, if-and-when the market turns around, I have repositioned capital to take advantage of the recovery.

But my super-aggressive passive-growth philosophy has me 100 percent in stocks, and it has declined about 20 percent since the beginning of the year. Time to panic, right?

Not really. Instead, it’s time to bargain hunt – and even though I’m a passive index fund investor, I can still take advantage of ‘bargains.’ In fact, it’s a perfect time for me to consider buying while the prices are low. For example, my core investment, Vanguard’s S&P 500 index ETF, dipped down below $168.00 a share last week, triggering a ‘limit order’ I placed with my brokerage to buy some shares. Now, share prices are back over $173 as stocks have enjoyed a mini-bounce over the past few days.

I call it a bounce, and not a recovery, because most market analysts predict more downward momentum before the market begins to recover as the impacts of interest rate hikes, a sputtering Chinese economy, and low oil resonate globally.

For those of us working with a brokerage or a discount brokerage directly as retail investors, a limit order sets up a contract to buy shares of a particular stock or fund when the share price goes below a certain level, or to sell shares when the price goes above a certain level.

If I set limit orders at regular increments, I can average into my favorite stocks and funds as market panics cause other investors and traders to sell at increasingly lower prices without the worry of timing the market.

Example: During the first week in January, I had a little bit of extra cash in a money market settlement account with my broker, and that was enough to buy shares of the Vanguard 500 index ETF, or VOO, when they reached $168. So, acknowledging that the market was heading downward, I set a limit order at $168. My brokerage will honor a limit order up to 90 days after it is established, so on Wednesday when the markets continued their plunge and VOO’s price sank below $168, my order executed and I became the proud owner of additional shares.

Now if my guess moving forward is that economic data won’t help the markets moving forward, I can set additional limit orders, preferably at lower prices – so I could order to buy when VOO shares pass below $166, or $160, or $120 (while there are some prognosticators who believe the S&P 500 could lose enough of its market capital to push VOO shares that low, I think that’s pessimistic), and if the price goes that low in the next three months, I own more of the fund.

Keep in mind that at the beginning of November, I bought eight shares of VOO at a price of $193 a share, so if the market corrects back to that level this year, I’ll have made $25 per share in unrealized gains on the VOO I bought earlier this month, and even more from shares bought while VOO was lower.

For young investors, then, bear markets are an opportunity. I’m considering increasing my 401(k) contributions and taking a little money out of my cash reserves to buy in while the buying is good.

How long, on average, does a bear market last? Around 14 months. I hold that the market decline really started at the end of Aug. 2015, when the markets were down significantly on bad news from China. That gives me until the beginning of November this year to buy in.

Thanks to having some hunters in my group of family and friends, I’m no stranger to game meat, but I’ve never eaten bear.

But from an investing perspective, bear markets are pretty delicious.

My Investment Philosophy

Slow and steady wins the race.

Last week I wrote about how the lottery is for suckers. As it turns out, almost every ‘get rich quick’ scheme is like playing the lottery. Sure, if you buy the ticket, your numbers might come up and you might get rich, but for the most part you’re going to lose some or all of your initial investment.

Investing in stocks is no different. In stocks, the lottery tickets might be small companies or bargain value buys that on their surface have the potential to be more lucrative than the Apples, Exxons and Wal-Marts of the world — but in reality, you’re gambling that your number — your stock picks — are going to be called in the next drawing (or the next trading day, week, quarter, year or decade).

I am going to be writing a lot more about personal finance in this blog as I undo many of my past mistakes and put myself on better footing. It’s not a ‘get-yourself-out-of-debt-and-get-rich’ plan, it’s a measured process of paying down debts, saving in cash and investments, and planning for a better future. Hand-in-hand with those strategies goes my investment philosophy, which in general is best described by the moral to the age-old fable of “The Tortoise and the Hare.”

Keep in mind that I’m a 35-year-old journalist, not a financial advisor, and that the universe of possibilities when it comes to investments is huge. I am also married with no kids. There is no one-size-fits-all solution for my financial situation, or for anyone else’s. This is a matter of personal preference.

If you read my previous post about my poor financial planning and debt, you already know the core holdings of my retirement portfolio – index funds based on the S&P 500. I consider the S&P 500 my portfolio’s benchmark, too, and there’s a good reason: I believe the S&P 500 is the most accurate index of overall U.S. stock market performance. In the past, economists and investors have looked to the Dow Jones Industrial Average, or as we transitioned to the high-tech information economy, the Nasdaq – but these indices are smaller and less comprehensive than the S&P 500.

I am a passive investor. My balances are still too low to start picking stocks, even if I felt like I had enough knowledge and skill to beat the market. While my risk tolerance is extremely high, I’m not at the point where I can take any chances with my money.

I am seeking beta – to match the growth and performance of the market. Until 2015, the S&P 500 was growing at an average rate of around 10.5 percent per year. I would be incredibly happy to match that performance, as my assumptions for retirement are only 7 or 8 percent a year of asset growth depending on which scenario I’m using.

Why, with all my investment knowledge, my access to advanced financial products and my ability to call some of the greatest living financial minds from my desk at work, would I settle for matching a stock index? Because I don’t really believe in active strategies. Because in general, I subscribe to the efficient markets theory.

The efficient markets theory holds that stock markets, where thousands or millions of trades can occur at the blink of an eye, already price in information about their constituent investment products. That’s important because believers in active management must have faith that they or their investment managers have some kind of knowledge about an investment, a class of investments, or a sector of investments that the market as a whole has not anticipated and factored into its pricing of investments.

For example, a good active investor may feel like the market is underestimating the volume of retail sales or the price of oil in the coming year, and therefore they would buy retail sale stocks, energy companies or oil on the commodities market, believing that their fellow traders are paying too low a price for the investments and that they could turn it around for a profit in the future.

Some of the most successful investors, including Warren Buffet, Vanguard founder Jack Bogle and Princeton University economics professor Burton Malkiel, argue that the market is now moving faster than these active managers can, making it impossible for them to time the optimal moments to buy an investment when it is undervalued or at a low and to sell when it is high. The markets, in other words, know more about the price of an investment as a unified entity than any of the experts could possibly know as individuals or firms.

Furthermore, in the rare cases where an active fund manager or investment advisor is beating the markets, their investment fees tend to diminish or destroy their ability to outperform. In investment lingo, outperformance, or beating the market, is often referred to as ‘alpha.’ Alpha happens, but whether it can occur consistently due to an investors intention is still a raging debate among those in academic finance. I personally believe that on a long enough timeline, even the best educated and best informed active manager's chances of beating the market will approach zero. Slow and steady, folks.

My belief is that by investing in broad indexes, even though I might experience down years or flat years (2015 was a flat year – the S&P ended in pretty much the same place it began), I can pick up that 8 to 10 percent per year average gain in the market, and by averaging into the market at a steady rate, I don’t risk buying mass quantities of stocks when the market is at a peak and about to decline 20-40 percent.

Despite my passive, long-term tack, I also prefer exchange traded funds, or ETFs, to mutual funds for a few reasons. One, ETFs are traded in real time on stock exchanges with prices that are allowed to fluctuate throughout the day. If I’m trying to buy a fund off its bottom, its lowest level, the ETF format is superior to mutual funds. Because they’re traded on exchanges during the day, ETFs are more liquid – meaning if I ever wanted to convert my investments to cash, I would have an easier time doing so with most ETFs than I would with most mutual funds. Furthermore, ETF shares can be 'built' by buying the constituent investments and trading them for their equivalent in fund shares - which contributes to their liquidity. Finally, ETFs are very transparent. While most mutual funds are also transparent – meaning that information about their management, fees and underlying components are widely available – they often aren’t transparent in real time. With ETFs, if I was to start making more active moves in the markets, I could easily compare the value of a fund’s underlying components with its share price and trade accordingly. Not so simple with mutual funds.

Keep in mind that I self-describe as an aggressive investor with a high risk tolerance. I consider myself 30 to 35 years out from retirement – I’m targeting 2051 as my retirement year, I’ll be turning 70. I’m willing to experience severe market fluctuations this far out from my retirement date. Furthermore, when I figure in some of my personal information – fair health, married, childless, moving up in my career (even though I work in a not-so-stable industry), living in an area with a strong economy – I (mostly) fit the profile of an aggressive investor. Thus, I’m not really worried about investing in bonds at this point in my life, I want to capture the growth potential of the stock market.

We can split my personal investing into two areas, with two different philosophies and concerns: a portfolio solely for retirement, consisting of my 401(k) accounts and IRAs, and a portfolio for other savings, which does not yet exist (and won’t for some time, as any income it generates would be taxable).

While I count around $12,000 from my wife in a T. Rowe Price large-cap growth mutual fund as part of what I manage, I won’t be discussing it here. I also have around $5,000 in old employer 401(k)s that is allocated to target date funds. That will remain untouched for the time being, and won’t be counted for the purposes of this discussion. What’s left is my current 401(k), a rollover IRA and a Roth IRA.

My Roth IRA account is currently in cash — with less than $100 in it, I haven’t bought an investment with it yet. When the account reaches the minimum price for the Vanguard S&P 500 ETF (VOO), which is around $175 today, I’ll start buying.

My rollover IRA – a traditional IRA – has eight shares, around $1,500, of VOO in it. I will diversify this IRA as a roll over more of my former 401(k)s into it, but for now VOO is my base investment.

Which leaves my workplace 401(k). I have a love-hate relationship with 401(k)s. For one thing, if you  are offered one with an employer match, I don’t think I’m going against the grain telling you to get the free money in your employer match. That’s what I’m doing, my employer will match me up to 3 percent, and will match me half a percent for every percentage point I contribute between 3 and 5 percent. So if I contribute 5 percent, I can get my employer’s maximum match of 4 percent, which as it turns out is what I am currently doing. I love that. I also love that, like a traditional IRA, the money can be deducted right out of my paycheck before taxes, and I won’t pay any taxes on it until I start taking distributions from the account in retirement.

However, like most workplace 401(k)s, my investment options are limited, in this case to some of mutual funds. I would much rather be able to select from an unlimited range of ETFs, but instead I have to chose from 20 or so mutual funds. Luckily, there are some great options in the list.

Out of the gate, I chose to begin contributing to this new account 90 percent stocks, 10 percent bonds. This is still considered a very aggressive portfolio allocation, but when I first set up my contributions I hadn’t considered how aggressive I really am. As a result, I’m now slowly averaging out of contributing to the two bond funds I chose.

Here’s a list of my investments:

91.7% in EQUITY (or stocks)

40.3% in SWPPX – The Schwab S&P 500 Index Fund $560

10.7% in BEGQX – The American Century Equity Growth Fund, Investor Shares $149

10.6% in VIMAX – The Vanguard Mid Cap Index Fund, Admiral Shares $148

10.1 % in GSSIX –The Goldman Sachs Small Cap Value Fund, Institutional Shares $141

10.1% in OIDYX – The Oppenheimer International Diversified Fund $141

9.9% in EKJYX –The Wells Fargo Premier Large Company Growth Fund, Institutional Shares $139

8.3% in FIXED INCOME (or bonds)

5.1% in PHYZX – The Prudential High Yield Z fund $71

3.2% in VSGDX – the Vanguard Short Term Federal Bond Fund, Admiral shares $45

The Schwab S&P 500 fund is a mutual fund similar in composition and goals to the VOO ETF. With an expense ration of 9 basis points, it costs almost twice as much to buy and hold as its Vanugard ETF cousin, but 9 basis points comes out to .09 percent per year. I think we can afford that. The other funds range from 9 basis points for VIMAX to 94 basis points for GSSIX and 101 basis points for OIDYX.

Originally, when the account was opened around four months ago, the portfolio was 40 percent in SWPPX, 10 percent in each of the other equity holdings (for 90 percent equity total) and 5 percent in each of the fixed income holdings (for 10 percent equity total). Since then, equity markets have had a bumpy ride and the value of the fixed income investments has sagged.

Currently, I’ve set my my future contributions to look like this:

94% Equity:

40% SWPPX

11% BEGQX

11% GSSIX

11% VIMAX

11% EKJYX

10% OIDYX

6% Fixed Income:

4% PHYZX

2% VSGDX

By the end of 2016, I will average out of contributing to fixed income altogether, and begin averaging out of my other equity contributions and into SWPPX, the lowest cost investment in this portfolio. Eventually, contributions to this account will be 100 percent SWPPX – at which point I will have to decide how I want to diversify. I believe I will start averaging out of contributing to GSSIX and OIDYX first among the equity funds, as they come with a 1 percent sandbag to whatever alpha they might  happen to generate.

And that’s really how I’ve arrived at my current allocation and contribution levels — I’m slowly reducing contribnutions to PHYZX and VSGDX and raising my contributions to whichever equity mutual fund has had the worst year-over-year performance on that particular day.

So why not just sell my bond funds and my non-S&P equity funds and buy into SWPPX? For one thing, a little diversity is a good thing, in investments and in life.

For another, when you’re a passive, long-term investor, you want to avoid selling as much as possible. Selling and buying stocks repeatedly is costly, you being to rack up commission expenses, you risk selling at a trough or buying at a peak, and in general it doesn’t work. Instead, I’m going to balance my portfolio through future contributions – I’m young enough and my account balances are low enough for that to be an effective tactic. Again, slow and steady wins the race.

As it turns out, Mrs. Chris and I are going to be enjoying a slight bump in household income this year, and our expenses for debt, fuel and food are probably going to decline. I strongly believe that I’m best off saving and investing this additional revenue. I’m waiting until the end of the month – just after my 35^th birthday – to figure out whether I want to put the bulk of this money towards my growing emergency savings, or either or both of my retirement accounts.

What I do know is that I want to invest aggressively, in index funds, with responsible management at a low expense ratio — and unless a young person sitting on a pile of money, or your blood pressure rises at the thought of a market downturn, that’s probably the ideal way for the millennial generation to invest.

So coming up on the financial side of things, I’ll reveal a little more about how I am budgeting and saving for the future, and I’ll also expand upon the benefits and detriments of adhering to the efficient market theory through index investing.

Also, long live David Bowie and Alan Rickman. I hate cancer.

Tamping Down the Lottery Pipe Dream

“I think we should buy a Powerball ticket,”- Mrs. Chris on Wednesday, Jan 6.

As much as I disdain social media, I’m as addicted as most other people in my generation, so I know there are a lot of people buzzing about tomorrow (Saturday, Jan. 9, 2016), when a drawing will be made for a record $800 million Powerball jackpot.

In my younger years, I occasionally bought a Powerball ticket when the jackpots surged upwards and hit gaudy new records, entertaining fantasies of helping family and friends pay off their debts, travelling the world, and buying one of those miniature giraffes from the old DirecTV commercials.

I never won a dime off of those tickets.

As it turns out, Mrs. Chris and I did not buy a lotto ticket for Wednesday’s drawing – and nobody won. That means there’s a tiny, tiny chance that our numbers, usually chosen at random, could have won for us.

How tiny was that chance? One-in-292 million tiny. If every person in the U.S. bought one ticket, there’s a pretty good chance one of us would win the jackpot. So on Saturday, there will probably be millions of Americans huddled around their television sets at 10:59 PM, and one of them will end up a very happy and rich person at 11:01.

I won’t be among them.

My wife might be. And good for her. A two dollar investment to allow her to dream of a 9-digit windfall, even for a day or a few hours, isn’t terrible.

But I don’t have any faith in that investment personally, and I no longer dream of catching lottery lightening in the bottle.

Statistically, you’re more likely to remain in relative wealth and comfort if you avoid the lottery altogether. In fact, there’s economic research from economists at the University of Pittsburgh, Vanderbilt University and the University of Kentucky (my alma mater, go Cats!) that suggests lottery winners are more likely to declare bankruptcy than the general population – twice as likely as it turns out.

According to more recent statistics, a survey published last year by the Camelot Group, 44 percent of lottery winners spend all of their winnings with five years. These survey results may understate the problem, which is shared by entertainers, sports stars, and heirs to family fortunes – according to research by the National Endowment for Financial Education, 70 percent of people who suddenly receive a large fund of money lose it within a few years.

Let’s talk about how. For one thing, if my wife’s numbers are called on Saturday, she doesn’t get $800 million. She can choose to receive $800 million in annuitized payments over 29 years (subject to state and federal taxation), or she can take a substantially lower lump-sum payment of around $500 million.  This happens because the $800 million announced jackpot is not actually what you win – it’s the total nominal dollar payout of the annuity over the 29 year period adjusted to inflation – so the lottery is selling players a false bill of goods and misrepresenting the size of its jackpots to begin with. Not exactly a deal I want to get involved in.

The federal government takes 25 percent of that $500 million off the top, so it become $375 million. Unless you live in Delaware or Florida or another state that doesn’t have an income tax, you end up paying both state and federal income taxes on that money. In my state, federal income tax at the top bracket – so you’re paying the top federal rate of 39.6 percent, plus a 2 percent pseudo-surtax that high income earners are subjected to through the PEP and Pease provisions (these actually phase out exemptions and reduce deductions, but for all intents and purposes they’re an additional tax on wealth). We’re now down to $219 million.

Social Security and Medicare want their share, a little over 7 percent, which brings us down to around $203 million. Then my home state, New Jersey, wants to tax me another 9 percent, which brings us down to $184.7 million (it would be nice if, like California and Pennsylvania residents, New Jersey lottery winners were exempted from the state income tax). We’re not even considering how schools and municipalities are taking their share of the winnings.

So when all is said and done, if Mrs. Chris won on Saturday, she would take home at best 23 percent of the announced jackpot, and around 37 percent of the lump sum payment as figured before taxes. She can, of course, mitigate some of the tax bite by donating part of her winnings to charity or by making a gift to a family member (hear that, honey?).

But it is still true that when an individual wins the lottery, the government is always the biggest winner.

Still, $184 million after taxes is plenty of money — with my journeyman financial knowledge, I could easily make that money last my entire lifetime and probably build on the principle for my descendants. Why, then, do so many lottery winners go broke? Why are they declaring bankruptcy at twice the rate of the general population?

Because poor people play the lottery and rich people do not.  Lottery players tend to already have a lot of debt (Mrs. Chris should note that we have a pretty heavy debt-to-income burden). If $184 million doesn’t take care of your debts, you either suck at managing your finances or you’re a small island republic. But these folks aren’t using their windfall to pay off their debts.

In fact, lottery players tend to have below-average incomes and little-to-no financial literacy. In many cases, that’s why they’re playing the lottery in the first place – buying these $2 chances, twice a week, is their retirement fantasy (we can’t really call it a plan, plans have a better than 1-in-292 million chance of success).

But those who follow the weird syncretic study of behavioral finance, a chimera of economics, personal finance, psychology and sociology, also cite the impact of a sudden windfall like a lottery jackpot on people’s behaviors.

Those of us who have entered adulthood keep a ledger somewhere – in our heads, in our checkbooks, in our online account portals – somewhere – that reassures us that our income exceeds our expenses over a period of time – from days or weeks to years and lifetimes. This is because we’ve worked for our earnings – this money represents time we’ve invested.

When income is from winnings, not earnings, most people toss that careful accounting out the window for something behavioral accountants call ‘mental accounting.’ They develop a taste for luxury. They become impulsive spenders. They become the life of the party (as it turns out, winning the lottery has a negative impact on life expectancy, too).

For at least half of us, this behavior is difficult to avoid. It’s like finding out you’re prone to addiction, things start to happen when the conditions are right and you become a different person.

I can parse this for you. Think about candy, your favorite candy, in my case it’s Reeces mini peanut butter cups. Think about bringing in a little bag of 5-to-10 of them from home every day to your desk at work, and eating them throughout your workday. You’re probably not going to have any problem dusting off 5-to-10 Reeces minis in a day, but you ration them, eating one an hour or every 40 minutes, to maximize your enjoyment. Then, one day, your extremely nice boss (and I do work for great people) drops a bag of 50 Reeces minis on your desk. What happens?

Do you still ration-out your Reeces minis on an hourly basis? Do you start giving Reeces minis to your co-workers around the office? Behaviorally, chances are you end up with the same amount of Reeces at the end of the day that you did on any other day when you just brought 5-to-10 from home. You lost your incentive to budget and plan. This happens to lottery winners all the time.

There are real-life examples to back all this up – Jack Whittaker won a $315 million Powerball jackpot in 2002. He made good decisions at first – he gave to charity and started a family foundation. Then he started having problems – some drunk driving convictions, an incident where $545,000 in cash was stolen from him on the property of a strip club, and the suspicious death of a granddaughter. By 2007, he had burned through his winnings.

Whittaker is not at all an outside case – lists of lottery riches-to-rags stories abound on the internet, and are probably more prevalent than the rags-to-riches narrative lotteries and players are counting on.

Mrs. Chris should also know that the four-year divorce rate for lottery winners is also higher. Also, only around half of lottery winners claim to be happier after their windfall than they were before it.

As it turns out, lottery players, who on average spend around $700 a year on tickets, are gambling just as much for a chance at misery and ruin as they are for the chance to achieve their dreams.

That doesn’t mean you shouldn’t entertain a get-rich-quick fantasy and buy a ticket for Saturday’s drawing – just understand that, if your numbers are drawn, you might be in for more than $184 million worth of troubles.

I’m not playing. I prefer for my future to depend more on good, rational decision making, careful planning and skill than a stroke of nearly impossible good luck.