What If I Had A Million Dollars

It’s kind of a cool idea, isn’t it?  To think about someone walking up and handing over a bundle of cash.  What would you do?  How would it change your life?  Here’s some things I would do if I had a million dollars all of a sudden.

The Goal: Less Worry

I would have a goal if I got a big pile of money.  That goal would be to use the money to provide financial security.  A million dollars would be awesome.  It wouldn’t be enough to retire at the age of 43.  Yet, it would be enough to provide security in many ways.  I would also want to take away as much of the day to day worry that money can bring.

The Spend

I would send away some of the money on a few things.

  • Pay off all debts.  The mortgage and student loans would be gone.  There’s hardly any better security I can think of than to have all assets and no debts!
  • Splurge.  I would probably look at a few items.  We’d definitely get a new camper.  I would upgrade some things around the house.  I’m thinking flooring, and some light kitchen and bath work.  I’d probably have the inside professionally painted.
  • Take care of college.  I’d make sure that the kids college funds were fully funded.  We contribute now, but I don’t think what we’re setting aside will fully cover the costs.  It would be a goal to close that gap.
  • I’d treat immediate family.  I’d make sure to splurge on family who have helped us along the way.  Maybe a luxury vacation or something along those lines.
  • Donate.  I would want to use the money to give something back.  Right now we give, but not enough to where it makes a direct difference.  Instead, the money helps when it’s combined with that of others.  I’d like to use some money to know that we’re directly making a difference in some way.

The Save

Most of the money would probably be saved. I’d look at funneling as much as possible toward our retirement accounts.  I’d work with a financial adviser to invest a chunk.

It’s funny because this section is noticeably shorter than the section above.  That’s for a reason.  Saving isn’t sexy.  Spending is fun to think about.  But, in the end, more of the $1 million would be saved than spent.  Once you get it to the right accounts, it just sits there.  And takes care of you.  Which is the cool part, no?

The bottom line is that I’d want to make sure that the money provided a foundation for years to come.  Five years. Ten years. Twenty years. However long it is, I’d want to be able to see that money working.  This is possible if done right.

Dreaming

Most people will never receive a million dollars in their lifetime.  Still, it’s fun to dream, isn’t it?

What would you do with a million dollars?  Share your ideas and dreams in the comments below.

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14 thoughts on “What If I Had A Million Dollars

  1. Do you know me? I’m your future self here, and I want to give you some feedback on the plans you sketched out. It’s great you understand how money that is spent is gone and will no longer have the opportunity to earn on your behalf, sadly this is an epiphany that few truly grasp. I think it’s because of this that you did reach your million, but it wasn’t all at once, it took many years. You’ve been on the right path, what I offer are some ideas to accelerate your journey.

    First let me critique your spending plans. Yes paying off debts whose interest rates exceed what you can earn from risk-free investments is a good idea. Just as earnings from savings is the gift that keeps on giving, debts are a perpetual drain on your wallet until they’re paid off. On the splurge it’s great you’re thinking of things that will improve your day to day living, but you have to know your spending limit– this would be 4% of the net balance per year. If your home remodel ideas add up to more than 4%, stage them out over a few years.

    You’re spot on to set aside funding for your kids’ college expenses. You don’t want them starting out in the hole by six figures before their very first paycheck– if you think about it their financial independence is a priority for you as well, and there’s no better way than giving them a head start so they can start maxing their 401ks from day one. BTW do keep reminding them about your financial philosophy, don’t assume they’ll pick up these concepts from their schoolmates or co-workers.

    That splurge treating immediate family sounds like a nice idea, but look carefully at what their needs are first. After all “you” wouldn’t splash out on a fancy holiday while paying 30% credit card interest, would you? If this describes their situation why would you do this on their behalf? It might be better to help pay their high rate debt balances– but make sure they understand this is a once-in-a-lifetime jubilee and if they dig themselves back in they’re on their own next time. Otherwise if they are financially sound, feel free to go for it, but I’d still advise against doing anything over the top as it could set a bad precedent.

    It’s great you’re planning to give back, but again be mindful of your limits. That 4% per year applies to everything you spend, including donations. I’d also suggest reading more about how charitable organizations work, it might seem that a direct investment from donor to beneficiary has more impact, but this can be an illusion due to limited perspective; the well-run larger organizations can be more efficient and will know where the needs and opportunities are greatest. Think of what can be accomplished with your contributions as teamwork!

    Now on to the save, it’s almost always a good idea to maximize your contributions to your retirement accounts. As for investment selection, you can probably manage your own more efficiently than a financial advisor– simply by dollar cost averaging into low-cost equity index mutual funds or ETFs. The reason it’s more efficient to do it yourself is, first, done right you’d always know where you stand with very little work, and second you save the extra fees an FA would charge, juicing your return rates.

    You may be thinking “I’m not ready to make these decisions” but you’ll get there. Maybe spend some weekend reading time to bone up on personal finance. Lots of good material out there between publications, social media, blogs, and videos. It’s like learning how to play a new videogame, as you grow more comfortable and gain expertise, you’ll start to enjoy the save more than the spend! And once you cross this watershed moment, your priorities will shift in a way that makes a growing surplus even more likely.

    • Thanks for the comment.

      To address a few things:
      1) The family that I would splurge are all financially secure. I’m 100% sure that this would not be the start of any potential repeated requests. My wife and I are very blessed in this capacity.

      2) I understand your point about a 4% drawdown. With this being a potentially unexpected windfall, I would consider taking a fraction off the top and then basing the 4% after that. I would look at probably 10-20% as the range to ‘take off the top’ so to speak, which would address the short term desires, and that would in my mind give plenty of foundation to suit the longer term goals I have in mind.

  2. I did receive a million and spent 3.5% of it on replacing totally worn out toys and invested the rest. I was already financially independent and debt free and so it just increased my safety margin a little but didn’t really move the needle much for me. I agree with freebird’s comments 100%.

  3. Interesting post MoneyBeagle. You have a good mix of living for today, saving for tomorrow and sharing your good fortune with those you feel strongly about.

    @Freebird’s epic financial planning consultation offers a good critique of your plan, and raises some worthy questions.

    I challenge whether this is what you would actually do, versus what you think you are expected to do. There is no passion, no drive, and no indulging ego projects in there. Live a little, somebody just gave you a pretend million dollars!

    • You’re right, and I think that those things you mentioned would show themselves and then be part of what I could look at longer term. Bottom line, I don’t have yearnings right now that are far out of reach, because I think that creates frustration for many in life. But this would definitely give the opportunity to explore newer passions that would make themselves more known.

      I know, probably a bit boring compared to most posts along these lines.

  4. I think the 1st thing you should do is get a fee-only financial advisor. That way when people call asking for money you direct them to the advisor and they will say no for you. After, that I say pay off all your debts and start investing from there.

    Thanks,
    GBM

  5. Oh man, this is one of my favorite daydreams! Although, to be honest, mine is usually for $50 million. 🙂 $1 mil is nice, but it’s not a lot of money in the grand scheme of things.

    Regardless, I’d be thrilled if a big sack of money fell out of the sky. 🙂

    I would pay off all of my debts, including my mortgage. I would admittedly spend some for frivolous things, like finishing the remodel of our house. After that, I would put a good chunk aside in savings for a rainy day, and slam the rest into investment/retirement accounts to fund FIRE. 🙂 Ahhh, the dream.
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  6. I’d give half to my mom! =) I’d also make sure to hire a great financial adviser to advise us, then hire a second adviser to watch the first one. LMBO. 😉

  7. Y’know… I think if I had more than one child, I would put the money in trust and assign a proven, reliable trustee to manage it. THEN I would decide what to invest and where.

    To date, I’ve now encountered not one but TWO situations where an incapacitated parent gave an adult child access to funds intended to be distributed to all the siblings. In one case, the money had been put into a trust by the deceased father, but the surviving mother, as she was sliding into Alzheimer’s, was persuaded to give a truly evil daughter access to the trust. This is apparently not an uncommon event.

    In one case, the adult daughter was prosecuted and ended up in jail. In the other, the last I heard the other two siblings were still pursuing her in court but (even though what she did was identical to what happened in the first case) so far she has not been charged with criminally looting the mother’s assets. I probably would set up trusts for each child and try to make sure the other kids couldn’t break into them. And as for myself: my son is not a crook and so I feel no need to do this, but if I had a kid who posed even the slightest question, I would put my own assets in a trust, too. The lawyer’s fees to accomplish this could be the best investment you ever make.
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