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?
I would retire early too! As to your spending on toys and the FIRE community I think that it’s more about responsible and purposed spending. If you have the money and need something or want something that will bring happiness then it should be cool to anyone. I own a sports car and a convertible truck that serves no purpose other than I enjoy my automotive hobby. I also agree on your statement about the difference between knowing how to manage your investments and actually doing it yourself. I hate doing it and so the fee I pay my CFP is worth it to me. Life is too short doing stuff I hate doing. I prefer to just keep an eye on things and hold his feet to the fire on lowering fees and bounce things off him instead of just relying on myself. He obviously has much more education about investing than I do.
I find it is hard to spend based on my ability to afford things. A lifetime of frugal living creates some deeply ingrained habbits like making do without expensive toys. I know the strict minimalist crowd may disapprove but some hobbies are both fun and on the expensive side. One thing that adjusted my attitude a little was the realization that my dad and mom saved frugally but when they retired he got Parkinson’s and she got Alzheimer’s and their hopes to travel in retirement became unattainable.
Great story Steveark.
Well done on finding a happy medium between being comfortable, splurging a little, and respecting the generous gift your loved one left you.
Thanks Slow Dad. It is a terrible way to get a windfall but it is something the FIRE community may need to think about. Most of them will be handing down sizeable estates to their kids someday and those kids need to be prepared or the money could destroy them.
I think most in the FIRE community don’t place a high value on leaving a legacy. If one is using the 4% rule, one is prepared to draw down the entire nest egg during a long retirement…
Those around me who are FI but choose not to retire will be the ones who leave huge legacies.
I think you are right but way over 50% of the Monte Carlo computer runs show that the money remaining even at a 4% withdrawal rate doubles in 30 years. I did work past FI because I was having fun and really also hadn’t run the numbers so I’ll be leaving a pretty big chunk to my kids, hopefully when they are 95 and I’m 120!
It’s a great question, I always ask it to get a feeling for people and their thought processes. If they just want to buy, buy, buy after winning a million, I’m scared…but if they want to invest, I’m impressed.
I think it is partly a metric on how happy you are with your live, a contentment meter. If someone is consumed with desire for something shiny and new it is revealing a lack of contentment. If your happiness isn’t centered on what you don’t have but is based on things you already have, your spouse, your friends, your missions in life then there is no big urge to spend.
I’m sorry for your loss Steve. Reading your perspective not as a hypothetical but as a history of how you spent/invested a $1M windfall is eye opening. I’d probably have a very similar approach as you did if I end up with the same windfall.
Thank you, my dad was one of the greatest generation who found himself at sea in a tiny aircraft carrier in the greatest military conflict in history. He was proof that even with a modest income it is possible to become a millionaire and live a fulfilling life on your way there. I credit him for showing me how to live without prejudice, love your partner well(for 63 years!) and to face adversity and pain with unimaginable courage. I count those lessons as being worth billions and the inheritance of only marginal value in comparison.
This is a really cool post. Few people have received the dream money like you have. It is interesting that it made you realize you already had plenty of money. That’s a great conclusion and even better that you decided to leave work. Nice.
Thank you, I had not really thought about the idea of FIRE until then. You just had to work to Social Security age like everyone else plus after working up to a top highly paid job it seemed wrong to leave it. I might have left a couple of years earlier if I could do it over again. But adding a million all at once, that finally made me stop and look at my life differently.
I don’t think my life would change at all. The million would bump our net worth a little, but not so much that it would change our habits.
Thanks Doc, I think for high earners who were also strong savers, which I think includes both you and me, that is the case. In fact I worry for anyone who gets a windfall that they think is truly game changing, they are in real danger!
Steveark – thanks for sharing this story with us. Great to hear a real-life version of “What would you do with a million dollars?” I think I’d follow a similar path as you did. I’d definitely retire from work. I’d pay off our mortgages, buy some new fly rods, and then bank the rest. After that I’d take time to figure out what I wanted to do next.
My condolences on the loss of your father. I’ve spent the night on a WWII era aircraft carrier and toured a sub and a destroyer. It’s humbling to think about what it was like for those men and to ponder the question of whether or not we could’ve done what they did.
Brian,Thank you so much for those kind words. I’ve wondered how I would respond too but surely hope I will never have to find out. I really think that like you and me most in this community are resistant to impulse spending and they would use a relatively small amount for fun but devote most of it to accelerate their FIRE journey. As an aside my dad was on an escort aircraft carrier. They were tiny little carriers more in the size class of a light cruiser or destroyer. They had no catapult and only very slow planes that could take off at low speeds unassisted from the flight deck were onboard. They mostly were used for anti-submarine warfare.
Steveark, First, my sympathies for a loss of a loved one. It is an interesting question. I would probably just go on doing what I’m doing. Teaching part time, blogging, trying to stay healthy and hanging out with my wife. I would incorporate the money into our investments with the goals in priority order of income, income growth and capital appreciation.
Tom
Tom, It is interesting that this community seems to fall in line with you, using the money to enhance your existing plans, while the general population sees a windfall like this as a way of escaping from the life they are currently leading. It makes it pretty obvious why this community is wining in life and with their finances!
What a great story! Mr. Grumby and I will not be inheriting $1M, so it’s very interesting to read about your experience. I’d like to think that we would do something similar … spend a small amount to add to the joy in our lives and leave the majority to continue growing.
Your comment back to Slow Dad about kids needing to be prepared for a large inheritance is very interesting. Are your children prepared? Maybe a future blog post?
I think our three grown kids are pretty solid when it comes to finances and they know what our net worth is. However they also know their mother is a poster child for fitness so they know they won’t be getting anything until they are old!