What would you do if someone handed you a million dollars (after taxes to keep it simple)? Would you go crazy with the money? Would you help out all of your friends and family? Would you give the money to charity? It’s interesting to sit down and think of what to do with that lump sum of money.
I completed this what-if last year and it was a lot of fun. A few things have changed with my perspective and our finances, so I’ll share my updated plan for this money.
Pay Off Debt
Yeah, one of the first thoughts on my mind was paying off the last two debts on the books for us. Between the house and the student loan, we’re looking at around $120,000. Taking care of our debts would reduce our monthly expenses by around $1,200. While quitting our jobs wouldn’t be on the agenda (we love what we do), changing our working situation would be. We would like to both work part-time, sharing parenting duties during the day ins some shape or fashion.
Just because we have a million dollars means we want to spend all of it. We’d like to an income stream that would pay for our monthly expenses (quite low once the debts are paid off) for the next few decades. Since we’re planning on still working to some degree that further decreases the amount needed. While I don’t know how we’d exactly break down the money, I’d wager that a portion would go to rental property (limited to only what we could manage) and investing. There’s also the possibility of starting another business since we would have some more flexibility with our time. For this game, I’m going to estimate $400,000.
Take Care of Family
As a way of saying thank you to our parents we’d pay off their mortgages. That would give each of them room in their monthly budget that they could redirect to their retirement funds if needed or for fun. (They’re our parents, we wouldn’t tell them what to do 🙂 )
For our brothers and sisters, I’m thinking of having a fund where they could take limited interest free loans for emergencies or perhaps starting a business. If they pay back the money, that will then go back into the pot. However if they waste the money or don’t pay us back the money then it’s gone. We’d have some system in place so one person doesn’t abuse the fund. For the most part though, our siblings would probably use the money wisely. We’d probably offer this line of credit eventually to a few dear relatives and friends who may have hit a financial snag.
I’m estimating as a total for helping our family to be around $200,000.
Set Up a Charity Fund
I think part would be the fun project – setting a charity that funds projects for others. Seeing as I’d prefer not to hand out a huge amount of money to a few people, I’d instead look at doing some smaller projects for more people. I’d also like this fund to continue in some fashion, so I’d have to look at perhaps doing something similar to organizations like Kiva.
I’d allocated the rest of the million dollar windfall into this, so it would be around $280,000.
Thoughts on What You Would Do with a Million Dollars
Please share how you’d like to spend a million dollars (tax free)?