No!?
Me neither.
It looks like there are two winners, one from Texas and one from Missouri, who will split the massive payout.
It’s simply an astonishing amount of money. Congratulations to the winners!
I can’t be the only one thinking that money like that could easily be a blessing and a curse, right?
Hopefully, the winners take their time and come up with a plan to not only make sure the money lasts, but that they use it in a meaningful way.
Well, just because we didn’t win doesn’t mean we can’t take advantage of this opportunity.
In the spirit of the massive jackpot, I started thinking about what I would do in a more realistic scenario.
Specifically, I asked myself:
What would I do if I woke up tomorrow with $178,000 in my checking account?
I know it’s not as exciting as thinking about what you would do with $1 billion, but I think it’s more important because it is actually realistic.
Yes, I said realistic.
I truly believe that if you are a high-earning professional, like a lawyer, consultant, or real estate investor, it will happen.
There will come a point in your career (hopefully multiple points) where you earn a one-time windfall of $178,000.
For example, it may come in the form of a bonus, a commission, or profits from a sale.
When that time comes in your life, you want to be ready.
The last thing you want to do is waste that golden opportunity. You may never get another chance to materially impact your life so much in one shot.
So, let’s have some fun and plan out what we would do if we wake up tomorrow with an extra $178,000 in our bank accounts.
Here’s exactly what I would do.
The first thing I would do with $178,000 is pay off high interest debt.
I think of a bonus like this as a one-time “Get Out of Jail Free” card.
With $178,000, the first thing I would do is pay off any high interest debt that I have. High interest debt includes credit card debt, personal loans, and any lines of credit.
My main financial goal this year was to pay off the rest of the HELOC we used to buy our last rental property. That’s my first move with this windfall.
Once the debt is eliminated, I’ll be free to pursue more fun life goals. And, I’ll feel better without having that debt hanging over my head.
Next, I would set aside $15,000 to $20,000 for fun money.
I would use about 10% of the money for fun right now. That comes out to approximately $15,000 to $20,000.
That is the equivalent of a really nice vacation or two. Or, it could be new furniture for the house, new gadgets or toys (like a bike or golf clubs), or anything else that brings me joy.
I’m a firm believer that we have to enjoy the journey while we’re on it. Having eliminated all high interest debt, I’ve earned the privilege to have some fun with a responsible portion of this money.
The strange thing is that for people who are dedicated to achieving financial freedom, spending money can be very difficult.
The temptation is to save and invest every possible dollar. As tempting as that may be, I encourage you to resist the urge to “live in the spreadsheet.”
This is a chance to do something for yourself that brings joy and happiness. Whatever that is for you, take advantage.
Otherwise, what’s the point in working so hard in the first place?
Next, I would revisit my Tiara Goals for financial freedom.
Let’s say after paying off high-interest debt and setting some money aside for fun, I have $100,000 remaining.
What you do with the remaining $100,000 will vary depending on where you currently are in life and what your main priorities are.
This is why I always talk about the importance of having your ultimate life goals written down and consulting them regularly.
I refer to my ultimate life goals as my Tiara Goals. Before I save and invest the remaining $100,000, I’m going to look at my Tiara Goals for inspiration.
With my Tiara Goals in mind, my top priorities right now are to eliminate HELOC debt, pay for my three kids’ college, and build my emergency fund.
Each one of these priorities align with my Tiara Goals and help me get closer and closer to true financial independence.
Because I have been aggressively acquiring real estate for the past seven years, college savings and emergency savings have been secondary goals.
Now that I’m not presently in the market for more rental properties, I can prioritize saving for college and emergencies.
With this windfall, I can make significant headway to satisfy both of those goals.
I would then use $67,000 to fund my son’s college education.
I recently used an online calculator to figure out how much money I would need to invest right now in my son’s 529 savings account to fully fund his college.
For my calculations, I targeted the premier in-state university where I live (the University of Illinois). I assumed a 10% average annual rate of return on my investment and a 5% annual increase in tuition.
I learned that with an investment today of $67,000, I could fully fund my son’s in-state tuition.
The key is to let that money grow for the next 15 years to take advantage of compound interest.
What an accomplishment that would be to not have to worry about his future college. I could cross that item off the “to-do” list once and for all.
So, with the next $67,000 of my windfall, I would fully fund my kid’s in-state tuition.
Disclaimer: if you’re doing this math for your own three-year-old, keep in mind that I’ve already begun to fund my son’s 529 account. The $67,000 is the difference that I need to add today in order to hit my goal. If you do the calculations yourself, you might come up with a different number.
With my son’s college tuition taken care of, I would move onto my next goal, which is to fund my emergency savings account.
Before we get to that, you may be wondering why I targeted the in-state school for my projections instead of aiming for a more expensive private school.
Why did I target in-state tuition?
It’s not that I don’t want my kids to have the option to attend a more expensive private school.
It’s that I have other goals that I want to accomplish in my life at the same time I’m saving for college. I view the in-state tuition target as a reasonable, minimum goal to strive for.
And, if my kid chooses to attend a more expensive private school, I plan on having additional ways to pay for it.
For example, my overall financial plan includes owning rental properties even after my kids go to college. I can use that rental property income to help pay for college.
Additionally, I plan on still earning income through a primary job. I can use that income to help pay for their college.
Between now and then, I can invest in more rental properties, a traditional brokerage account, or any other investment vehicle of my choosing.
I’ll still have the option to use that money to pay for college. The benefit is that I’ll have more flexibility.
Plus, you never know. Maybe my kid will earn a scholarship. Maybe my kid does not end up going to college.
Having different investments besides a college savings plan means that I’ll have options.
I would save the remaining $33,000 in an emergency savings account.
Finally, I would take the remaining $33,000 and put it into a high-interest savings account.
I have no immediate needs for this money. I have income coming in from a variety of sources, including my primary job, my rental properties and my job as an adjunct professor.
However, it’s been a goal of mine for a few years to bump up my emergency savings. It’s been a risk not having much saved up for emergencies, and I’m taking this chance to eliminate that risk.
Because I’m not currently in the market for more real estate, I can save this money for emergencies instead of worrying about a down payment for my next acquisition.
With my emergency savings account more adequately funded, I can better protect myself should disaster strike.
That’s why I’m putting the final $33,000 in my emergency savings account.
How would you use $178,000 today?
So, that’s how I would use a $178,000 windfall today.
It’s not as fun as thinking about $1.78 billion, but it’s a more realistic thought experience.
In case you’re wondering, if I had more money to invest at this point, I would focus on my baby girl’s college. I would use the same methodology that I used to plan for my son‘s college.
No matter the amount of money, it’s good to have a plan ahead of time. As a high-earning professional, the odds are that you will earn a significant bonus like this at some point in your career.
It might not be $178,000, but the thought process will work no matter what the amount is.
The takeaway is that it’s always a good idea to have a plan before you earn the money.
Enjoy some. Save and invest the bulk of it.
What would you do with a windfall like this?
Let us know in the comments below.