One more day...then WEEKEND time!

Good Evening Ladies and Gents! I really can't seem to understand why time is going by so fast! SLOW DOWN PLEASE! It's been another hectic week for me and the excitement isn't over just yet! Shaw Festival....2 days away!! I have been reserving quite a few seats so I am looking forward to seeing everyone!

I wanted to bring up a topic that we are discussing on my discussion board for Principles of Finance. It's in regards to the lottery and whether or not we would take the lump sum or invest it into an annuity. Now, some of you may be like, an annuity? What? So let me first fill you in with a brief description that I used in my post! Annuity, as defined in the text, is a series of equal dollar payments for a specified number of years. Annuities make frequent occurrences in finance and the two basic types are ordinary annuity and annuity due. A specific example that I know of is life insurance since I work part time at State Farm. The two most common types of life insurance policies are term life policies, either 10 yr term, 20 yr term, or 30 yr term. Depending on which one you select, and also some other little details your insurer will ask you, you will need to make monthly payments. Let’s say you chose the 30 yr term, depending on what your monthly payment is, you would have paid however much into the annuity. Once you stop payment, I believe you have to live more than 30 months, in which you would then start receiving the benefits of a good investment on your behalf. 401K’s are another example of a beneficial annuity.





Now that you have background and example to support it, let's think about the lottery. Honestly, it's a lot more involved than you think. In terms of winning the lottery: What it comes down to is the interest rate that you will get on the annuity. You will either be able to make more money on your own or make more on the annuity. As far as the taxing goes, you are going to be taxed either way so you can take the lump sum and then pay the taxes off right off the bat, instead of paying them over the course of however many years in the annuity. I really feel that it depends on the state’s laws for the lottery winner, and also what type of financial position the person who won the lottery is in. It seems like it could be an easy decision, but it’s really not since there is lots that you need to consider.

With that being said, how would you approach your lottery winnings? Take the lump sum or put it into an annuity and hope that you don't lose any money?

My professor responded to me and said, well if you do win the lottery don't forget about your professor and supply me $1 for my knowledge, I'm cheap! So I responded and say hey I'll give you the dollar and maybe even $2 if you give me an A! Of course I'm not really bribing her, but if she did take $2 for an A, I would take it! Haha!

I hope everyone had a terrific week! Remember to schedule for next quarter and don't forget to prepare yourselves for mid-term week! I know it came up so fast, but just be prepared! Good luck and I hope to see you all at the Shaw Festival that is beginning this Saturday!!!