lotterypowerballA US couple recovered a lottery ticket from their trash can and realized that they won $1million!  The prize could be taken in a $650k lump sum or $1million in 20 instalments.  Which would you pick??

Of course, being the financial planner that I am, I got my financial calculator out to do the math!  The net present value of the 20 payment option is worth $766k using a 3% inflation.  The $650k lump sum invested at 6% would pay $42k per year indexed at 3%. So, option 1 appears to be better but personally, every time I can get money now instead of a promise for the money, “maybe” later, I run with the money now!! And do something smart with it.

This couple planned to pay off their mortgage and go on a vacation. While paying off the mortgage might feel really good, and the vacation even better, investing would likely beat it if the mortgage rate is really low.  Lottery is also taxable in the US while it is tax free in Canada.  Yay!  So you would have to factor that in for US residents. This is not advertisement to buy lottery tickets by the way. Lottery is never a good investment unless you win of course.  But you only need one ticket for that.  So play small and invest BIG!