In case you missed it, this week’s Oz Lotto was offering a whopping jackpot of $80 million. Although I didn’t buy a ticket (and never do), it got me thinking. What would we actually do with this kind of money?
I think everyone’s played this ‘what if’ game before. To sit back and dream what you’d do with all that cash (after swimming around in it for fun, of course!). And while it seems a little silly, I think this game can actually offer some great insights.
Today, for your entertainment (and mine!), I’ll share what we’d do with such a giant sum of money. And afterwards, I also want you to play the ‘what if’ game with your own household, and see what you come up with.
Other than it being fun to think about, it can also reveal more about our true underlying values, and our philosophy around wealth. These underlying thoughts are things we might not be fully conscious of in our daily lives.
So it’s the ultimate thought experiment! What would you do with $80 million? After talking it over, here’s what we’d do…
After moving, we’ve now been renting for almost 2 years. And while there’s nothing really wrong with it, owning is preferable from a simplicity point of view.
No inspections. No (repeated) emails to chase up maintenance and repairs. And no issues with modifying the gardens, hanging pictures etc.
And unless we start hearing gunshots or see junkies brawling at the local shops, we’re very happy to stay in this location much longer.
I love the nature aspect of our suburb, and especially the pocket we’re in, being connected to a massive regional park, with wetlands, lake and bush areas. Also, it’s quiet and not congested, while being in walking distance to local shops and public transport, and riding distance to what is effectively Perth’s second CBD.
So with $80m, and no major reason to optimise our wealth, we’d buy a house. The reason we don’t do it now is that much of our cash is tied up for the time being. And mostly, we think it makes sense to rent for many years before deciding where we want to settle.
Anyway, we have zero desire to move to the upmarket suburbs of Perth, to rub shoulders with the elite. Our area is a long way from fancy. But it meets our needs really well, with a nice balance between nature, space and proximity to things.
We’d either purchase or build a place on a large block (700-1000 sqm). This way we can have lots of food growing and also create little habitat areas for local frogs, lizards and other creatures.
Of course, we’d plaster the roof with solar panels and have battery storage, as well as a rainwater tank. This could be done with less, but hey, we’re going nuts here.
Total cost = $500,000 to $1 million.
This was a tricky one. Part of me thinks we could do just fine with no car, but the status quo wins in the end. With almost unlimited money in this scenario, we’d likely buy an electric car.
Maybe a Tesla, because they’re sexy cars and have great reviews. Or maybe a smaller electric vehicle, for practicality. Either way, it’s hard to justify because we don’t drive very much, but I’d definitely want to support the industry and lead by example.
Obviously, this would be environmentally friendly in the long run, as we’d charge the car at home and aim to own it for an incredibly long time, saving tons and tons of emissions.
The act of buying an electric car would be our way of voting for the technology. When we buy anything, we’re essentially voting. We’re saying “I like what you’re doing, and your business practices, so keep it up.”
It’s good to regularly remind ourselves of this. Each dollar spent is a vote for something.
Total cost = $50,000 to $100,000.
After discussing it, we wouldn’t do anything differently here. Mrs Strong Money would continue her part-time job.
She enjoys the social aspect, the friendly work environment, and being productive outside the house for a couple of days each week.
And of course, I’d continue doing my best to stay mostly ‘retired’ and simply work on this blog. At first I thought this answer seemed strange. But the more I think about it, having reached Financial Independence, this shows we’ve chosen to be productive for its own sake, not for money.
So that serves as a good reminder that we’re probably on the right track.
What about travel? Well, to be honest, nothing would change in the short term. We’ll continue to take local trips to lovely places in WA, where we can bring our dog with us. We don’t want to leave him behind so we can travel overseas.
Comparing travelling overseas before we had a dog, and only local travel after getting our dog, we’re happier with the second one. I guess like having kids, having a dog brings us tons of joy on a daily basis.
And as unpopular as it is, my view is that travel has just become another form of consumption. Sure it makes for a few good photos and memories, but as with most consumption, the high fades over time.
That’s usually when people start planning their next holiday! Somehow international travel has made its way into that ever-growing bucket of ‘needs’.
Don’t get me wrong, there’s nothing wrong with travelling. But it’s definitely not a requirement for a happy life. In fact, I’ve noticed the more satisfied we are with our day to day lives, the less desire there is to travel.
We enjoy our lives much more than before, without visiting exotic places. And the more local places we visit, the more we appreciate Australia, further reducing the urge to visit international locations.
I’m not saying we’ll never leave the country again. There are lots of places I’d like to visit at some point, later on. But it’s certainly not an ongoing itch we need to scratch.
And it’s likely we could fund this from part-time work earnings, leaving our savings and Lotto winnings untouched.
Certainly, a shopping spree would be on the cards to create a style that matches our new swollen bank account?
Haha, nope! For environmental reasons we’re content with the clothes we have. And if we do need new stuff, we’ll try and get it from an op shop.
While Mrs Strong Money is pretty good at this, I’m too lazy and hate clothes shopping in general. But I plan to make more of an effort and buy second-hand to reduce our footprint a bit further. And like most people, we have more than enough clothes already!
As for fine-dining, it’s generally more satisfying and healthy to continue with home cooked meals. Especially when a couple of ingredients are from your backyard! We could always get a butler and chef to take care of this for us. But why the hell would we do that?
So we can watch TV and drool into a cup while everything is done for us? No thanks. I don’t fancy dying young from an illness created by extreme inactivity. If you don’t use your brain or your body, both will deteriorate. Simple as that. The best life is in maintaining a certain level of self-sufficiency!
This part is a little tricky. While it’s nice to help other people, especially family and friends, I firmly believe that middle class people don’t need more money.
It’s just not going to solve their problems (even though they think it will). It’s like giving someone who is overweight, yet always hungry, more food.
Rich Western folks like us already have plenty of dollars, but not enough sense (see what I did there?). One way which I’d be comfortable helping out is by helping to pay off or provide modest housing for relatives.
Reducing personal debt and having paid-for housing would be a great benefit. It means less stress and also reduces the need for work, creating more freedom and a better quality of life.
Any more than this though, and extra money is likely to translate into more consumption and lifestyle inflation. So beyond this level of help, I believe the benefits of handouts could even turn negative overall.
We would allocate a couple of million dollars to this, at the most.
Total cost = $2 million.
So far, we’re struggling to make a dent in this money, in a way that makes sense to us. At this point we’re left with around $77 million! What would we do next?
A logical thing to do with such a giant sum of money is to invest it. Not to get richer and richer. But because idle money does little good for anyone.
So investing this cash keeps it working productively, and will throw off more money through dividends.
Let’s say we go with a conservative and very diversified 50-50 split between Aussie and international shares. This would generate a dividend stream of around 3% to 3.5%, ignoring franking and tax for simplicity. All up, this $77 million portfolio would throw off something like $2.5 million in dividends each year.
Side note: At the time of writing, if this was setup as a charitable foundation, there would be zero tax to pay and all franking credits would be refunded, resulting in a net yield of 4%.
Anyway, our personal spending would fall because we’d no longer be paying rent. Our non-housing spending of around $20,000-$25,000 is likely to be similar.
Higher costs would include council rates, water rates and property maintenance. Lower costs would be electricity (solar + battery setup) and car costs.
Overall, our non-housing spending is likely to be the same at around $25,000 per year. So from our $2.5m in dividends, we’d be spending just 1% of that, for a savings rate of 99%. Haha, how comical is that!?
And if you count our investments and part-time income (which I’ve completely ignored), then we’d never touch that $2.5m in cashflow at all.
Later, of course, we may spend more on travel, but it won’t even make a dent. So getting serious for a minute, what would we do with it?
Now, some people might say we should donate most of this money straight away. And there’s a good argument for that. But for a couple of reasons I wouldn’t feel comfortable doing so. Here’s why.
In anyone’s language, this is a giant amount of money. So even if we’re giving it away, we should carefully consider where it’s going and the effect it will have. This is no easy task!
Giving away massive chunks all at once from our wealth might feel great initially. But our charity preferences might change over time. And it’d likely be a better idea if we first spend more time learning about giving, before jumping right in.
As we learn more, we can then allocate to different areas and charities we feel strongly about, which are getting results. These are arguments in favour of donating the income our wealth spits out. So this is where the $2.5m of dividends would go each year, in the near-term.
Later on, once we’re well read on the subject and have nailed down what impact we’d like to make, then I’d be more comfortable to start donating larger chunks from the portfolio.
Ideally, this way, the wealth is used more efficiently and achieves better outcomes.
Wait. What’s going on here? Is something wrong with us, that we would so minimally upgrade our lifestyle and instead invest the money to be given away?
Have we just forgotten what money is for?
Actually, I believe it’s the opposite. We’ve learned exactly what money is for. Money is not a toy. Money is a tool.
Our life is perfectly fine the way it is. We’ve realised that adding more luxury and niceties does not add more happiness or meaning.
This is something many people don’t learn until a life of consumerism leaves them broke and directionless.
Our wealth will be spent in line with our values. On more sustainable living. On a nice (but not excessive) place to live. And directed to causes we care about.
If we had to choose today, that’d be animal welfare and environmental issues. But also global health and poverty is an ever-present issue.
Our other option, is to start playing the unwinnable game. That is, continuing to ratchet our lifestyle upwards in various ways, in an attempt to achieve permanent Level 10 Happiness. But it doesn’t work that way.
If we move to into a riverside mansion , we’d likely find out that after a while, we feel the same as before. In fact, it could make us more anxious, as we notice our neighbours have better manicured gardens than we do.
They have a tennis court, while we only have a basketball hoop. They have 2 Lamborghini’s and a yacht, while we only have a basic model 3 Tesla.
Many past lottery winners who used their winnings to fulfil their consumer dreams ended up broke and unhappy. The lifestyle and stuff they bought didn’t make them happy, so they continued to chase more until they were left disappointed and out of money – and often in debt!
The more we opt-in to the consumption game, the more trapped and anxious we become. So it’s far easier, smarter and simpler to opt out.
Realising we can be happy with, or without, being part of the big consumerism machine. And since we don’t need it, by opting out we can focus our time, energy and money towards more meaningful pursuits, where there are real benefits!
The trick is to opt out of this game before we have large sums of money. Otherwise, when we do have the cash, we’ll simply keep chasing our tails and wonder why we’re not any happier with all the rich-people perks.
What a fun experiment! This was harder than I thought it’d be. But maybe that’s just my habit of making considered financial decisions. This exercise forced me to really nail down what’s important and what’s just a distraction.
Look, I enjoy a modern Western life as much as the next guy, so we would allow ourselves a small sliver of the winnings!
But I personally feel most excess wealth should be put to a higher purpose than increasing opulence, which also provides more meaning and a sense of legacy to one’s life.
But everyone’s different, so you allocate your winnings however you please! If you haven’t already, I highly encourage you to do this at home.
What would you do with $80 million? Let me know in the comments…
Why deliberate spending is my favourite money management style. What it really means and how you can use it as your situation and priorities change over time.
My thoughts on ‘The Great Taking’. An idea that the masses will lose untold amounts of wealth in the next financial crash, due to a deliberate plan by mysterious figures.
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I am in the fortunate position of having an investment income that more than satisfies my modest requirements.
So, if I were to win $80 million, I would set up a charitable foundation. This foundation would have the entire $80 million invested in the share market, and all of its dividend income would go to various charities.
It is a bit of a fun experiment, and I think my buying would be not incredibly different to yours – travel and experiences would be high on my list though.
I think one thing I would do is actually establish my own charitable foundation, and donate the yeild rather than the capital. I would probably spend more time volunteering at my kids school, and with the other community groups I already support when I can.
Great to hear Grant – sounds like we’ve got lots of kind hearted readers in the FI community!
Love it Robert – awesome plan! For some reason I mostly ignored our savings/investment income in this experiment, but we’re thinking along the same lines 🙂
Hi Dave
Great article. I was interested in your comment that if you were to hold your $80 million winnings inside a charitable foundation, there would be no tax and franking credits would be refunded. This sounds like a sweet deal. My question to you is why wouldn’t all of us hold our investable assets inside a charitable foundation for increased yield from the portfolio due to tax benefits? Then as office holders of the charitable foundation we can naturally have a lot of our expenses paid for via the increased yield. Interested in your thoughts.
Thanks Ken!
Well, what you’re saying is likely very possible. But it’s questionable how much personal expenses could be paid from the charity, and then it kind of starts becoming a little less ethical and a little more about what we can extract from the tax free foundation, which I’d feel a little funny about. Personally, I’d rather keep my own expenses and the charity completely separate to avoid any ATO scrutiny and I’d also feel much better about it. This is especially true given we don’t really need the money or to have things paid for us. So to me, giving up the extra tax efficiency is worth the peace of mind and being able to maintain an unquestionable level of ethics. Personal choice, probably.
Oh fun game! I think I shall give it a go on my own blog.
I don’t think mine will be that dissimilar to yours anyhow, except travel would be much higher on my list. I’d still be faced with my eternal struggle of to IVF or not to IVF, but it’d at least take the money worry out of that problem.
For me, I hardly ever take photos of myself while travelling. I travel, I see, I gain memories, and I might take a few photos of the scenary or the architecture. But photographing myself at a significant spot has never been something that I do. I think personally, I travel to fill my senses, to marvel at mother nature, to be impressed by humans that have gone before us. To remember how small we are, in the very grand scheme of things, and how my existence right at this moment is so insignificant, but perhaps really very meaningful in the very far future, much like how the egyptians were with their pyramids.
Thanks for this comment Pia, and I appreciate your thoughts on travel! All good points!
Look forward to seeing what you come up with 🙂
Instead of spending the 3 million on a house & family. Why not invest it all first and pay for those things from the dividends? That’s what I would do anyway.
That’s not a bad idea Ben, I didn’t even think of that lol. Only issue is the dividends would be taxable before you could spend on house etc. So a bit cleaner to spend $X first, then chuck the majority in the charitable foundation.
The $80M represents a substantial money ‘farm’ that I would never sell, but rather live off the bountiful harvest that the ‘farm’ provides. Can you just imagine the juicy divvies that $80M would generate if you invested it in a few of our favourite LICs and ETFs…?? Far out…
Haha sounds pretty good to me Jeff… the tax man would love it too!
I’ve thought about this on and off – would I quit work, etc etc. I think, to give myself a bit of time to digest the idea of being that rich, I’d pay out my mortgage, then throw all the rest into a term deposit for at least six months, maybe a year, to force me to keep my hands off it and not go nuts straight away, and to give myself plenty of time to think about the possibilities. I don’t really care about the tax man taking his share, because I have strong beliefs around the fact that we’re a society, and taxation provides a lot of good social services (health, education, pensions, etc etc). There but for fortune, and all that…
There are probably two main things I’d do, after making sure my family and close friends have paid-off homes:
1) because I’m a crazy cat lady, I’d love to set up a facility similar to The Cat House on the Kings (https://www.cathouseonthekings.com/whatwedo.php), not only for the cats, but also because it would provide jobs for several people. I’d like to have a permanent vet on staff that specialises in cats, and provide vet students with the opportunity for practical placements as well.
2) support charities and other entities that assist women suffering domestic violence and abuse, or maybe set one up of my own. I can’t begin to describe how tired and sad and angry it makes me to know that a woman is killed every week in this country by a current or former partner. Our government seems to be clueless about what is really needed to help stem this particular tide (but I won’t get any more political in your comments than this).
Thanks for sharing that FireforOne. Sounds like a pretty good approach to me. Haha you cracked me up with crazy cat lady 🙂
I’d buy an island or European football club
Haha you wouldn’t be the only one!
I loved reading this, thanks for the article. I mainly loved it because it matches so well with what I’d do myself.
I often have conversations like this with my partner. When I ask her what she’d do, she usually says something along the lines of “give a million to my parents, a million to my sister, etc”. But my argument is that investing it would be a much better result in the long run. Quite often giving people money outright isn’t the best result, especially if they’re not used to managing it.
If you’re going to give some to your family, wouldn’t you rather invest it on their behalf instead and give them a guaranteed income for life?
I love the idea of creating a charitable vehicle like you’ve described. Everything invested via a trust that donates the earnings each year, perpetually, never running out of money. What a legacy to leave behind, long after you’re gone.
Thanks Nick 🙂
Totally agree. I think of it this way; if they can manage money well, they don’t need any help as they’ll typically grow wealthy by themselves. And if they are terrible with money, then giving them more money is a terrible idea.
Generally not a fan of giving money to people who don’t really need it (middle class Aussies), whether family or not – I just think it’ll be squandered and leave them wondering why you didn’t give them more. But my partner wouldn’t be happy with giving zero to family so it’s a compromise. Such a tricky and likely stressful scenario to work through.
Donating the growing dividends to charity is an idea I credit to Peter Thornhill. I hadn’t thought of it before he mentioned it, but there’s something magical about it!
Easy to say,but lots of people after winning big prices are slowly and surely changing themselves,meaning for some people only can’t predict what they going to do with the money,they may think,the money is there just spend it,they will do it even if they prepared a saving or spending plan????
Yes good point Gerard. We can make all the plans in the world, but when it actually happens, the emotions and excitement might take over!
All I could think reading this article was “what a massive responsibility / hassle having all that money would be”. I’m glad I probably won’t ever have to deal with it. More money, more worries in my book!
I can remember reading a post on the MMM website where he gave away $100k or something, and a lot of the comments were critical of how he’d decided to spend it. The guy was genuinely doing something nice and copped flak for it… that’s the nonsense of the whole thing. No matter what you do, it’ll be wrong on some level.
That’s a shame, and you make a good point – there’s always going to be people who like to poke holes and find things to complain about, unfortunately.
It is a lot of responsibility, but I suppose you can have a real feeling of being able to do some good with the money and know it’s not going to be wasted.
Don’t think I’d do too much different Dave – the vast majority invested for charity would definitely be the bulk of it. We’d definitely keep travelling plenty, maybe even spoil ourselves with a business class upgrade on an international flight, but can’t see much else changing. I’d first work out what we’d want to spend each year, then set up a Fully Franked Fund where the dividends pay for that annually, then the rest would go in the charitable fund.
Funny we should be talking about charitable funds, as I’ve been working on something similar (but on a vastly smaller scale!) which I’ll be sharing on the site soon.
Cheers, Frankie
Sounds fantastic mate! It’s awesome that so many of us would go the charity route – I think it shows some pretty healthy values and that we’ve broken the connection between happiness and spending.
Look forward to reading about your project 🙂
I’d move straight outta Australia to a country with little or no tax, THEN invest all the money and start to execute stuff with the dividends.. Giving would be pretty high on my list. Scholarships and whatnot, as well as paying off people’s Mortgages (Within Reason) – Mostly people who have helped me in one way or the other throughout my life… However, i’m not doing any of this with the capital… Only the dividends.
Sorry mate but I don’t spend my time thinking about this BIG problem 😀 as I have a few smaller ones at my hand already. I earn more than enough for a good lifestyle for my family of four, my wife is not working currently but planning to take a short course soon to start a job as my little kid getting older, she is now almost 2.
I recently have found your weblog and learning to invest in shares. But to be honest, I don’t know really what should I do with my additional income, don’t get me wrong I am not really at a very high income, but we comfortably managed to keep our spending budget including the mortgage repayments under 60k yearly.
I don’t want to get retired early, I completely enjoy my job. Why should I invest? why should I pay off my mortgage sooner rather than later? should I start spending the surplus somehow? I was made redundant recently but easily got another job in a few weeks so I don’t need to worry about my income unless something very exceptional happens.
I am not good at giving away and helping others financially maybe that’s a sign that I am not rich enough, I am going to invest my money into shares but I am not sure really why as I don’t have a goal in that regard. That’s why I don’t think about winning $80M and how to spend it.
Interesting comment. Why should you invest?
Because you never know what’s around the corner. You might love your job now but in a few years things might change and all of a sudden you want to head in a different direction. It’s amazing how much a workplace or a person can change in just a couple of years, so don’t expect to always feel like that. Or maybe you’ll just want more time to spend with your family. Would you rather spend more time with them? Or at work?
Why should you pay off your house? Because it serves as a solid foundation of security for your family. And it permanently lowers your expenses, reducing the need to work allowing more time for family or hobbies. It also means if you lose your job there is much less risk and pressure on finding a new one quickly because of paid-off housing – your family will not be forced to move, should things get tough.
Having savings/investments gives you the ultimate flexibility to scale up or down work and spend your time EXACTLY as you see fit – not just fit things around work. So being Financially Independent serves as about the best backup plan in life there is.
M8421 raises a very good question but he also answers it as well, at least from my point of view.
“Why should I invest? I don’t need to worry about my income unless something very exceptional happens.” You’ve hit the nail on the head. We must Expect the Unexpected. The time you least want to worry about your income is precisely when something very exceptional (and bad) happens. Mike Tyson summed it up best when he said “Everybody’s got a plan until you get punched in the mouth”. Chapter 1 of The Barefoot Investor’s book is also good with the description of the time a bush fire destroyed his house one afternoon. The beauty of the FI movement for me at least is the freedom from money worries for me and my family. That’s why I invest.
Well said Jeff!
To be honest, I am not convinced that is a good reason for me. Do you mean seeing investment as a high cost insurance? What is the exceptional scenario, financial crisis? The share investment may not be the best insurance against it.
I consider paying off the mortgage early to be the best investment against a financial crisis.. followed by investing in property. Shares are a distant 3rd for me, and the reasons are pretty straightforward. Paying off my mortgage PERMANENTLY lowers my living expenses. When you subtract rent and what I give in donations, I currently live on about 10 – 11k a year… if everything went sideways, i’d make that amount working once a week at practically minimum wage….
Next, property… in a financial crisis, values go down, but rents hardly budge. sounds pretty safe to me. Shares come last cos they are the first to nosedive, and companies might lower dividends.
Another good point by M8421. I see investment as a way of building wealth in order to gain financial freedom to do things I want to do. I don’t view investment as an insurance policy, but the thought of juicy dividend payments coming my way if I lost my job unexpectedly definitely takes the pressure off. Or if I wanted to quit my job and do something else, I’d need a (growing) dividend income stream for a period of time. If investing in the share market doesn’t quite ‘float your boat’ and you are really happy in your job,then I recommend the Barefoot Investor’s Steps; Get out of (bad) debt and stay out of debt, Buy your house (within your means), Build up 3-6 months of emergency funds in cash (Mojo), Max out your Superannuation contributions, Pay off your house, Retire, Leave a Legacy. Done. Personally, I think you have to want to invest and maintain at least a passing interest in the share market.
I would buy a house in a nice place in southern Germany. Then I would buy one from each Lego sets ever released. That would probably eat up all the money. So I would then continue my labour life. 😉 I’m stupid for money and investments…
Being a strongminded individual, who are careful with money, I’m sure I wouldn’t squander the loot. But the article is almost word for word what I have in mind, maybe except for feeding the poorer countries. Just keep in mind, everybody has to have at least two meals each day, so that’ll be a forever ongoing thing.