It isn’t just a great barenaked ladies song or a preposterously small blackmail demand for not destroying the world, it is also a Blogger Challenge from Slow Dad on the Rockstar Forum. Write a post about what you’d do if you won a cool million in US dollars. Ok, I can do that. Game on….
What would you do if one million dollars just fell into your lap, no strings attached? That is a common question asked to stimulate people’s imagination. It is a gut check on your inner FIRE self-control muscle. Really, what would you do? If you know me then you know I’m a hugely annoying “know it all”, or at least a know it all wannabee. And this is a perfect opportunity for me to shine in this role because while you have to guess at the answer I know the answer. That’s right, I KNOW!
Three years ago I received an unearned, undeserved windfall of one million dollars. It wasn’t by writing a hit song or selling my blog (let me get off the floor because I fell out of my chair laughing trying to type that!) It was just free money inherited from a relative’s estate. It was two million dollars in cash and stock investments divided equally between my brother and me.
Of course there was grief over losing a loved one and also relief that years of suffering had ended for them. But once those emotions receded and the legal processes were complete then with a few taps on a keyboard and a few signatures my net worth went up by seven figures instantly. So while you may think you know what you would do with a million dollar gift you are just guessing, I know what I did because it is a part of my past.
At the time I received the money it was in two investment accounts with fairly high fee managers, plus balances in a couple of bank accounts, proceeds from a small life insurance policy and 500 shares of Walmart stock. Curiously the Walmart stock was in the real paper certificates (my dad was old school!) My wife and I initially decided to do nothing with the investment accounts, I told both managers that because they had dealt fairly and ethically with my father that out of respect I would leave the accounts as they were for at least one year, which I did. Big mistake!
Here is a tip, if you have two money managers never tell them that they are competing with another manager. In retrospect I realize that was fairly stupid because it inspired one of the two to make a high risk bet on oil company stocks about two weeks before oil fell from $100 per barrel to $40 per barrel. And no, I’m not buying any bitcoin right now because I know what it feels like to see speculation go medieval on me. Fortunately he only had about a fourth of the money so he only lost about $50,000 overnight, ouch!
I sold the Walmart stock immediately because I don’t like owning individual stocks. And yes, I know it is over $100 a share now and I sold it at $75 which is exactly why I hate owning individual stocks. I also hate managing my own money so after the year was up I liquidated all the investments and moved the money over to Personal Capital. Since the account was over $ one million I got a fee reduction down to 0.79%. I know that is way high versus Betterment or Vanguard but I have pretty big accounts with those companies too and I want to see if the Personal Capital smart beta approach would beat the pure robo investors with their lower fees.
When I retired slightly early I initially planned on DIY investing because I have helped manage two eight figure funds for nonprofits. But I found out knowing how and actually managing my own money are two different things. It is hard to explain why except to compare it to the way blood affects me. Even though I am an engineer I have medical responder training and experience and have been first on the scene to badly injured, dying and dead people. Never rattled me, others people’s blood might as well be special effects dye. The import of the crisis focused my thinking and made me razor sharp in my decision making. However, when I’ve been badly cut or injured myself I lose my objectivity because it isn’t someone else’s pain to manage. It is my pain and my blood and all I can think about is “make it stop!” That is not helpful when it comes to first aid and it is death when it comes to managing your own money, so I don’t.
Sure seems like I am leaving something out? Oh yes, buying stuff! Let me say first I was already a self-made multimillionaire, already FI, already debt free with a paid off house and with paid for cars. So was nothing to do with the money other than save it or spend it, and we did a little of both. My wife and I are extreme hikers and we do a lot of bushwhacking. Bushwhacking is just like hiking a trail except there is no trail. You just make your way the best you can across cliffs, swamps, briar patches and creeks in the search for a set of coordinates on your gps that mark the location of waterfalls or some other natural wonder.
Extreme hiking is strenuous and compares to marathoning in some ways and often on our bushwhacking adventures we would take a day or two off and rent an all-terrain vehicle. If you haven’t seen them they look like little dune buggies (see the pic above) and they are a lot of fun. We had wanted one of our own for years and we spent $15,000 of the million and bought a brand new Polaris Trail RZR 900. That was 1.5% of the inheritance. We also spent $20,000 on a new bass boat/motor/trailer to replace our ancient wreck of a boat after several fishing trips were spoiled by a motor that would not run reliably.
$35 thousand is a lot of money to spend on toys! That kind of thing can get you kicked out of the FIRE community or at least damage your frugal credibility. We have always gotten by with cheap and unreliable playthings in the past but we splurged this time and replaced our two toys with state of the art brand new ones and two years later we don’t regret it at all. We use them both frequently and they’ve added joy to our lives especially because we use them as a couple. We are also getting a little older and more risk adverse and some of the fast waters we fish can kill you if you cannot count on your boat performing reliably. P.O.S. ATV’s can also get you stranded beyond cell coverage in very remote locations. Those were risks we were willing to take during our accumulation phase. However, once we were past fat-FI it didn’t make sense because $35 thousand is only 3.5% of the windfall. 96.5% is still invested and earning money! We also bought an emergency beacon that will get help via satellite anywhere in the world but that was very inexpensive.
What about giving it away? We have always given over 10% of our gross income to church and nonprofit charities. Hundreds of thousands of dollars over our careers and we do the same with side gig income now. My dad did that as well his entire working life so I did not view the inheritance as an increase but as a family transfer. We are still trying to figure out the giving thing in regards to investment passive income and what to give away versus what to leave for our three kids someday. We expect to have a long time to figure that one out.
The million dollar windfall changed my mind about work forever. If there was one huge change that the windfall brought with it that was it. Precisely because we stuck 96.5% of it in savings and investments without spending much. That convinced me that we had way more than we needed. I knew we had plenty before the inheritance but I did not feel it. If one million dollars, many people’s crazy fantasy figure, did not move the needle on my lifestyle or net worth enough to matter then why in the world was I working at a job I no longer enjoyed? So two years ago I walked away from my corporate job and my life got so much better. The million didn’t cause me to retire but it started the thought process that only had one possible outcome. It was reality slapping me in the face, and I finally got it. It was time to do what we wanted and leave the 9 to 5 world behind. So maybe in my case it was worth far more than money.
So what would you do with one million dollars?
How would it change your life?