One million Dollar


I don’t know about you but I like thought experiments. I like thinking about different kinds of questions, dreaming about what you would do about them, and then how could you get there to make those questions occur. Earlier, I opined about what would you do with $100,000?

I also like asking questions about how we define things. For example, questions such as what does it mean to be richbroke? how much money should you save, etc, are all fascinating questions for me and the answers can vary depending on your situation.

Since I talked about what would you do with $100,000? I figured why not do a thought piece on what you would do with $1,000,000?

Now I have already talked about a million dollars before, but more as a status symbol in our culture. And I really do believe that if you do some saving over enough period of time that everyone can be a millionaire.

That said, a million dollars 40 years from now is, while a wonderful number, not going to be worth all that much in today’s dollars. According to this calculator, with a 2.5% inflation rate, it is only going to be about $375k. That is still nothing to sneeze at, but certainly probably not enough money to retire on or at least not early.

However, what happened if you got $1,000,000 right now? What would you do? How would you spend it? Would you stop working?

On the surface, it seems like you hit the jackpot. Hey, I am rich. I can retire. I can do all kinds of things. But when we dig a little deeper a million dollars, while nice, isn’t all that it is cracked up to be, at least with what we think it can get us.

What Would I Do With 1 Million Dollars?

So if I had a million dollars free and clear what would I do?

First, I would take immediately $500k off the top and invest it. Putting that in good mutual funds should pay excellent dividends done the road.

Second, I would pay off our student loan debt. I mean I would have to do so anyway. With a million dollar income I couldn’t just stay on an income based repayment plan and I feel almost an obligation to pay off the student loans Mrs. ROB and I have racked up.

That would take that 500k down to about 300k. Then I think I would want to pay off our house and car. That would take it down another $150k. So that leaves us with under $150,000 left.

If we took another $50k-100k to fix up the house the way we want it. That would include redoing the attic and basement, as well as updating the floors and possibly the kitchen. That would leave us with probably only about 50k to 75k left?

I might divide this small portion into shoring up our emergency fund a bit more, taking a couple of nice vacations, and maybe starting a college fund for kids. Even if we don’t have some of our own I think helping my nephews and niece out would be fine with me.

And that would then take me to about $0.

What Would Happen After the Million Dollars?

So with that million dollars I would basically pay off all my debt, invest at least half of it, and have a little fun with it. With that investment that I make could I retire?

The short answer is NO!

I mean if I combined that 500k with our current investment savings and I used the 4% rule to withdraw those investments that would cover our monthly expenses, but not much more than that.

In fact, I wouldn’t even consider myself financially independent. I would need a bit more money than that.

Yet I would be much closer than ever before and it would make my financial independence day occur much sooner.

Moreover, what would we do for health insurance? Mrs. ROB has some medical ailments that require good health insurance. That is one of the reasons I probably won’t stop working even with I reach FI. Good health insurance or at least working to cover that health insurance is important to me and my family.

Yet I would have more options of what I could or would want to do. I wouldn’t feel compelled to stay in my current position. I would still love to teach, but my golden handcuffs would be somewhat removed. I would have more freedom, which might allow us to move somewhere that is less expensive, afford a vacation home, not have to teach extra courses, and other items.

So a million dollars for me would not allow me to retire, but it would give us a lot more financial flexibility. As of right now that flexibility for me probably is another 7-10 years away.

The Bottom Line: A million dollars would be a blessing to many of us, but I doubt many of us could just take that money and retire unless you moved to a place that had an extremely low cost of living, your living expenses were fairly small, and/or you had additional monies to go with it.

What would you do with $1,000,000?

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