Make Financial Independence a probable probability

At university we would often chirp away to about winning the lottery.  There were lots of superb ideas floating about.  Travelling.  Starting up a business.  Seeing how good you could get at a single pursuit, say snowboarding.  Trying to find out where your friends moral limits were, for example would they marry a cat and keep up the pretense for £100,000?  No?  How about £250,000?

But the one that appealed to me the most was putting it all into an ISA and living off the interest.  This was back in 2001 and ISA rates were about 5%.  I fantasized about living of the £50k that £1million invested in an ISA would provide me, all while doing nothing!  So close to being an early Financial Independent convert.  Too bad it took until the summer of 2014 for me to come across this concept.

[I stumbled across this article while looking up old ISA rates.  This paragraph in particular – “One of the worst offenders is Smile, the internet arm of Co-op Bank. At the beginning of 2001, its cash Isa paid the highest rates on the market: 7.25 per cent on balances below £3,000. On the same balance, it now pays just 4.25 per cent.”  Oh how times have changed.]

Ignoring the fact that you couldn’t just plow £1million into an ISA (especially when the annual limit was about £3,500 back in 2001).  Ignoring that you’d be aggressively exposed to interest rate risk and inflation risk.  Ignoring the fact that you wouldn’t be diversified in the slightest.  I was onto something.  If only I had followed through with that line of thinking!  After all, it is nearing the basis of Financial Independence.

Some FI cufflinks

The lottery is a lottery
The lottery has been described as “a tax on stupid people”.  While your chances of winning are tiny, this is a bit unfair.  They do fund a lot of good projects and support a lot of athletes that would otherwise be left to their own devices.

But I can kind of see the point.  The chances of winning the lottery in the UK are about 1 in 14 million, or 0.000007%.  That is not a big number.  It is the same probability as rolling a 6 on a dice somewhere between 9 and 10 times in a row.  Doesn’t feel the same, but it is.

We know those aren’t good odds.  Yet for some, it does appear to be their only retirement strategy.  A whimsical, tiny, shimmering hope on a distant horizon.

And it’s exactly that, just a hope.  A prayer.  A longing that something so fucking unlikely, something of your choosing, will happen to you.  The thing is, it’s out of your control.  You can’t get any better at the lottery.  There is no skill in it.  You won’t see the answer in tea leaves or by sacrificing a goat.  There are, sadly, no 10 week lottery training camps on remote islands in Thailand.  Every combination of numbers is just as probable as another. 1, 2, 3, 4, 5 & 6 are just as probable as 3, 6, 19, 33, 35 & 43.  There is no formula, no analysis of historic data, no momentum effects that will help you here.  It is just pure luck.

As an aside, winning the lottery twice is improbable, but it is not impossible.  The couple that won the lottery twice in a row didn’t have some secret formula, they were just lucky.  Why was someone who had already won millions was spending part of this trying to win the same again?  Perhaps because winning that much money isn’t that satisfying.

Start your own Financial Independence lottery, and set the odds in your favour
If the odds were more in my favour would the lottery have seemed more appealing?  Of course it would.  What if the chances of winning the lottery were 1%, 5%, 50% or 90%?  I would have chucked every £1 I had at it.

I quickly discarded the idea of living off the income generated by some lottery winnings because I knew just how unlikely a lottery win is.  But I also thought that I would never be able to generate that kind of capital myself.

So I have set up The Financial Zombie’s Financial Independence Lottery.  All you need to do is commit to living off significantly less than you earn and saving the excess.  But in The Financial Zombie’s Financial Independence Lottery, the probabilities of winning are, to some extent, within your control.

Spend less and you are increasing the amount you can save.

Save more, then you are increasing the chances of you building up a pile of assets that can provide you an income that you can live off.

Investing the excess in a diversified intelligent way and not burying it in the garden should increase the chances of success in the long run.

The probability isn’t going to be 100%, as we can be certain of anything.  But we can certainly try to make financial independence more probably that improbable.

If someone said that your chance of winning the lottery was 95% you’d buy a ticket.  Who’s to say that your chance of achieving financial independence isn’t 95% if you commit to it.

I’m making my chances of financial independence a probable probability.

Spend Less, Save More & Escape the Horde
Mr Z

20 thoughts on “Make Financial Independence a probable probability

  1. weenie

    Great post Mr Z!

    Despite the overwhelming odds, I still spend £2 a week on the lotto! Why? Because I still talk about winning the big one with friends and colleagues. The difference now (compared to many years ago when I used to throw stupid amounts at the lottery, yes, especially when there were rollovers…) is that I know that winning is just a 'hope' and a 'prayer' and unlikely to ever happen. And £2 is less than a Starbucks latte! 😉

    Hence I'm not counting on winning the lotto to fund my early retirement, although a win would obviously be a nice bonus!

    We got four numbers the other day and won £158 but shared between 16 people, it doesn't go very far haha!

    Good luck with your FI lottery!

  2. Mr Zombie

    Haha, I agree! I play the lottery every now and then as well, just on the off chance. It's not impossible, right.

    I don't think I have ever won anything!

  3. Dividend Drive

    Nice post, Mr Z. I think that is the key point. The odds (over the long-run) are in your favour with FI. As you say, they are not 100% but they are more in your favour than most things and–certainly–than the Lottery.

    Even without that, you get into good habits with FI that serve you well in general. Not a bad thing at all.

    I recently bumped into an newspaper article on interest rates in ISAs from years back. It is amazing how quickly you forget such numbers existed for ISA accounts!

    PS: I don't play the lottery often. Only occasionally when there is a rollover and I think of it. But I do have £200 in premium bonds. Had them about a decade now. Nothing so far. But at least that is a lottery I don't have to keep paying to enter–except inflation, I suppose!

  4. Mr Zombie

    Hi DD,

    I wonder what the probabilities are… pretty complicated to ascertain I imagine!

    I think you are right, even if things change and FI is delayed. Good habits will have been set in, which is only a good thing!

    Imagine 5% on an ISA now, it would be sweet.

    Mrs Z occasionally gets a £25 win on the premium bonds. I say occasionally, I think twice in as long as I've known her!

    Mr Z

  5. Cerridwen

    Hum …is that Mrs Z as in "Tiddles"?? 🙂

    You have it exactly right – the problem is we're too inclined to yearn after quick fixes and less inclined to commit to the long haul, even though it will get us there far more reliably.

    I don't do the lottery apart from when there is a syndicate effort at work but I do buy a couple of scratch cards most weekend which have a 3.8 chance of winning – not big wins but it's still pretty "feel good" when they happen. A couple of weekends ago I won £40 🙂

  6. theFIREstarter

    Haha. I have been gently teasing Mrs TFS about her lottery habit for years now but there is still no sign she will give up. She got locked in to the "my numbers" thing years ago and so now superstitiously plays on in case she stopped one week and the next week her numbers came up.

    Funny thing is I don't even know if I'd want to win the jackpot. If we did I would do my best to keep it a secret but let's face it, it would be pretty damn near impossible! It would change so many relationship dynamics with friends and family I just think it could end up being a curse rather than a blessing.

    With regards to the "no skill" and subsequent paragraphs: Well you wouldn't think that if you googled lottery systems. You can actually pay money to someone for their guaranteed lottery winning system! Amazing isn't it?! Why aren't we all millionaires by now!? 🙂

    Setting the odds in your favour… very "hunger games" – I like it. You are the king of the catchphrase! 😉

  7. Mr Zombie

    Tiddles? I'm lost 🙂

    Sad that people will still pin their hopes on things so unlikely.

    I always found with scratch cards that for £1 winnings I would always forget about them and leave them to expire. £40 though…that's a big win on the cards.

    Mr Z

  8. Mr Zombie

    Noooo, not the 'my number' syndrome!

    It would be pretty cool to win, but I think you are right. It would change things in an instant. Even if people knew that you had saved £X amount, they wouldn't expect some of it or you to pay for things or what ever else. But lottery winnings… people would be after a slice of the pie!

    'Guaranteed'? Amazing how these people have mastered uncertainty! (I see what you mean – )

    Mr Z

  9. Kurt

    I like the odds of the lottery you propose. 🙂 Did you know some lottery players actually pay money for 'systems' or guidance on choosing numbers? Sort of a first derivative of the 'tax on the stupid' one could say.

  10. Tawcan

    Great post Mr Z! Creating your own lottery and creating your own odds is way better than the crappy odds that you get with the regular lottery.

  11. Mr Zombie

    Hi Kurt,

    I can't believe there are actually systems out there that pertain to control uncertainty, and people fall for it. Amazing!

    Mr Z

  12. Australian lotto results

    There are the odds of winning of the Australians Lottos:
    Oz Lotto: 1 in 45,379,620
    Powerball: 1 in 76,767,600
    Monday Lotto: 1 in 8,145,060
    Saturday Lotto: 1 in 8,145,060
    Wednesday Lotto: 1 in 8,145,060
    I play it all!!!! I prefer to regret what I did and not about what I not made!

  13. Curt Olson

    This is what the essence of lottery suggest, as for me: "being extremely lucky to hit the pot". Everything is possible


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