The expression that titles this blog has at least two different meanings. First, it could mean you have some sort of a cash windfall, so losing it would be less painful than if you earned the money doing hard labor. Second, it could mean that you have already exceeded expectations, so even if you don’t win in the current situation, it’s not so bad. An example of the second meaning was heard in the first round of the football playoffs between the Tampa Bay Buccaneers and the Philadelphia Eagles. It was said that nobody expected the Bucs to even make the playoffs, so they were playing with house money.
In both meanings, the word “house” refers to a casino — at least originally.
Although the phrase is fairly common and is understood by most adults, I think it is based on an entirely false understanding of what “house money” really is. The fact that this expression is used so frequently means that most people think of “house money” incorrectly.
Let’s say there’s a casino drawing and the winner receives $50,000 in cash. Lo and behold, this time you are the lucky winner! Congratulations!
Now, after you’ve won the drawing, does the fifty grand belong to you or the casino? I think it belongs to you. Whatever your wealth/bankroll was before the drawing, it’s now $50,000 greater.
If you’re a multimillionaire, the extra money is nice, but doesn’t change your fiscal priorities very much. If you are struggling financially, that much money can literally be life-changing.
Of those for whom the money is life-changing, it’s prudent to think twice on what you wish to do with these funds. Seeking advice from an advisor might be a good idea.
There are tax considerations to this win. If you want to think of this as $35,000 after taxes, it’s probably smarter than thinking of it as $50,000. It’s easy to spend however much you have in front of you, but next April 15, Uncle Sam will still be waiting with his hand out. Not preparing for that is an expensive mistake.
It may well be that a new car is highest on your list of current needs, but just because you have $50,000 in your pocket doesn’t mean you need to get a vehicle with all the bells and whistles. This $50,000 windfall is usually a one-time event. Helping yourself solve two or three financial problems is usually better than just solving one.
Calling the windfall “house money” takes away from recognizing the importance of making the correct decision. It’s your money and you only have one life. Make the most of it!
I heard a funny story recently — supposedly true. It’s not exactly in line with what this column is about — but I have some extra space so here goes:
A famous poker player won a $1,000,000 prize at a tournament. He was asked what he was going to do with the money.
“Well, I have some people I owe money to. I’ll pay them off.”
“But what about the rest?”
“They’ll just have to wait.”
