Gambling by other names

One thing that I find amusing about this time of year is that some folks, who rarely go out for coffee, suddenly need a daily coffee. If you're spending more money on coffee than you normally do, it seems as though you're effectively gambling, as you apparently value a cup of coffee less than they normally charge.

This also is planned to be the start of the week in which Dave delves into mutual funds. (Given the current state of the financial markets, this seems like a good way to lose money rather than make it).

So, in what cases should one not be spending money on a lotto? Is it if the expected return is negative? (i.e. the motivation for "the lottery is a tax on people who flunked math" quote). In that case what about savings accounts, where the interest rate is often less than the inflation rate? Should a person be forbidden to spend money to (e.g.) enter a poker tournament, when they might instead spend the same amount of money to watch professional sports, to go to the theatre, to see a musical performance, etc.?

(Note for those who might be thinking "Dave missed the RRSP deadline": There are actually a couple of reasons I chose to stick to non-registered mutual funds. In the first place, as a student, the vast majority of my income is non-taxable... and thus dumping money in an RRSP doesn't save me money at tax time. Secondly, the mostly likely reason that I'd be tapping into savings in the next few years would be to plunk down some money on real estate. There's a provision for withdrawing money from an RRSP for buying a house, but this does not apply to the purchase of a house outside Canada. I think that there's a large enough chance that I'll be relocating outside the country following the end of my studies that I don't want to limit myself in that way).

Comments

Buying coffee just because of the contest is a little facetious, but I wouldn't go so far as to call it gambling. The price of the cup is the same as always; you're buying a cup of coffee and whatever is under the rim is bonus. In a lottery, you're buying a chance to win and getting nothing for it.

So, in what cases should one not be spending money on a lotto? Is it if the expected return is negative?

Just before that you were complaining about gambling, so I think these related questions are stemming from your misunderstanding of what a lottery is. One should never spend money on a lotto.

Putting money into a savings account with an interest rate below the inflation rate is not gambling. The return on investment is guaranteed; more stable than mutual funds. To get a higher interest rate means taking more risk. Things like mutual funds are diverisified, so they're fairly safe. AFAIK, the closest thing to gambling in investment is playing directly in the stock market.

Should a person be forbidden to spend money to (e.g.) enter a poker tournament, when they might instead spend the same amount of money to watch professional sports, to go to the theatre, to see a musical performance, etc.?

Playing poker for money is gambling. Watching professional sports is entertainment; betting on the outcome of professional sports is gambling. Going to the theater or a musical performance is entertainment.

I'm also staying away from RRSPs. It's not worth it when you're in the lower tax brackets because when you go to take the money out you'll be in the same tax bracket or higher. It's better to wait until you're in the higher tax brackets. The amount you're allowed to contribute compounds on itself.

There's an interesting new type of investment coming thanks to the federal government that's like a hybrid between RRSP and term deposit. I can't remember the full details, but I heard somebody say that the interest is tax-free. I'm definitely going to look into it when it becomes available.

There's an interesting new type of investment coming thanks to the federal government that's like a hybrid between RRSP and term deposit. I can't remember the full details, but I heard somebody say that the interest is tax-free. I'm definitely going to look into it when it becomes available.

It's a tax-free savings account. Can deposit a max of $5k per year, starting next year. Deposits are not tax-deductable, but income on the investment is tax-free. Would have been ideal, but doesn't yet exist.

Playing poker for money is gambling.

Why can't it also be classified as entertainment? (at least as long as you're playing for relatively small amounts)

AFAIK, the closest thing to gambling in investment is playing directly in the stock market.

Or investing money in starting a new business. Do you realize the failure rate of such things?

I suspect most gamblers enjoy gambling, so they would probably all classify gambling as entertainment. I've certainly talked to people who consider it as such. That doesn't change the fact that it is gambling and poor stewardship.

I'd tend to agree that in many cases it's not great stewardship, but I think that it seems to be one of those things that people overemphasize. (And in the case of something like poker - although not in the case of a slot machine - there's definite skill required).

Where someone to tell me, e.g. that they spent $10000 on buying rims for their car and then next guy told me that he spent $10000 on something like this, I tend to think that the latter guy made the better investment (although if you were to spend $10000 on something like a lotto, it seems a likely sign that you're addicted).

So what is the difference between paying to play poker, and, say, paying to play WOW online? Both are entertainment. Does the possibility of winning money make it gambling?

You're close, but there's a little more to it.

Here's a definition of gambling directly from a casino web site:
The voluntary risking of a sum of money on the outcome of a game or other event.

Paying to play WOW is an entry fee. If for some reason Blizzard decided to award cash prizes to WOW players, that would be more like a door prize.

So if I charged an entry fee for a poker tournament and then offered some door prizes, then that would be OK?

Can you really draw a straight line between particular games and the motives for which people play them?

So if I charged an entry fee for a poker tournament and then offered some door prizes, then that would be OK?

Provided that the door prizes were the only means of winning anything, possibly. There should be some money left over, part of which would go to cover expenses (food and drinks) and the majority of which would go towards some sort of worthy cause, like a missions trip.

However, it would be better to do something different for a tournament, like Settlers of Catan, because poker might be a bit of a stumbling block for some people.

Can you really draw a straight line between particular games and the motives for which people play them?

The more important question here is, are you so weak in your beliefs that you can't tell the difference?