The Reverse Lottery Test
by Doc G · March 2, 2019
The Reverse Lottery Test
We tend to look at financial independence as a numbers game. We calculate some version of enough, and than make life decisions based on it. Enough, however, is a fairly slippery principal. What is adequate for one might be inadequate for another. The definitions and acronyms abound. fatFIRE, lean FIRE, barista FIRE. I sometimes wonder whether we are missing the point. True definitions are probably less steeped in words and calculations, and more in behavior. With this in mind, I came up with the idea of the reverse lottery test.
The Lottery Test
The lottery test is the simple supposition that if one were to win an outrageous some of money, what parts of their life would still be worth doing. This especially comes into play when we are talking about our jobs:
Your thinking about quitting. Should you stay or should you go? Well, if you won the lottery, what would you do?
Although this only seems tangentially related to financial independence, I beg to point out that they are very closely linked. The lottery test is the behavioral equivalent of the mathematical formula of financial independence. Drop the words and math, and just look at a person’s actions. People who follow this litmus test act like those who have reached financial freedom regardless of the sums of money in their bank accounts.
The problem, however, lies in the fact that even those with gobs of money often have trouble turning down an easy payday. Billionaire or not.
So what the heck is the reverse lottery test?
Flip It and Reverse It
The reverse lottery test asks a slightly different question.:
What in your life would you keep doing even if you weren’t being paid for it?
By changing the wording a little bit, we get to the heart of the behavioral aspects of financial independence. Why? Because many people who have reached financial freedom choose to continue working. Many will not pass up a chance to make a few extra bucks if the task is enjoyable or at least not onerous.
And many of those who claim financial independence are stuck managing not so “passive” income streams, real estate, and online businesses. The reverse lottery test actually narrows our behavior down to those who really have found true freedom and have subtracted out all the activities in life that they are not so fond of.
Am I financially Independent?
Looking at the reverse lottery test and assessing my behavior, I believe that I am. Although I continue to work as a hospice medical director, I believe I would do this even if it didn’t come with a paycheck. I just feel like it is part of my purpose in life.
The same goes for podcasting and blogging. I make a small trickle of money off the blog, but would continue to do it even if I didn’t.
My other daily activities. Reading. Exercising. Public speaking. Again, things that I continue to do even though I make no money on them or the amount is poorly compensated for the hassle.
I can think of one small consulting activity that maybe fails this litmus test. But it is very tiny and takes up almost no time. Real estate is another question mark. But I truly enjoy owning, renovating, and renting out property. I suspect I would stick with it.
When we talk about financial independence we often focus on numbers and calculations. Yet it is difficult to compare apples to apples when everyone’s idea of enough is slightly different.
Instead I have decided to shine a light on the behavioral aspects of the phenomenon. Regardless of what they say, who acts like they are financially free?
The reverse lottery test is a good measuring stick to assess why people do what they do. Those who would keep doing all the same things they do today even if they weren’t being paid a cent for it are likely financially independent.
The reverse lottery test is a good measuring stick to assess why people do what they do. Those who would keep doing all the same things they do today even if they weren't being paid a cent for it, are likely financially independent.