In a recent post, I asked: If you woke up tomorrow with $10 million in your bank account, would you do anything differently?
I ask a version of this question whenever I teach my personal finance course to law students.
Asking what you would do with $10 million is just another way to ask what you would do with financial freedom.
Attaching a specific dollar amount to the question helps make financial freedom seem real. It turns the aspirational concept of financial freedom into actual numbers.
Many thanks to one of our blog followers, Ian, for turning the question around and asking me what I would do with $10 million!
It’s been some time since I put some real thought into this question. I’m happy to have gone through the thought process in crafting this post.
If you haven’t already, I encourage you to do the same and think about exactly what you would do if you woke up with $10 million.
Before I share my answer, I want to highlight some other reader responses to the question, which should shed some light on my decisions.
Let’s get to it.
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Disappearing on a beach.
The most common response to what people would do with $10 million involved some version of:
Invest the money and then disappear on a faraway beach.
In a way, the “disappear on a beach” response illustrates what many of us are striving for with financial independence. By that, I mean the goal of having enough money to then not have to work if we don’t want to.
Personally, I share the goal of becoming financially free, but I’m not looking to retire early and disappear. After all, I believe in FIPE not FIRE.
I think jetting off to the beach would be nice at first but then get old pretty fast. That said, I can certainly appreciate the desire to take some time away from life’s daily stressors.
Invest and then buy a shotgun.
One reader, Sean, shared a pretty sensible plan:
Put $9 million in the S&P 500, pay off debt with the rest and buy a nice shot gun.
It’s hard to argue with this plan. Of course, it’s never a bad idea to pay off debt or invest in the S&P 500.
I think it’s also important to treat yourself, within reason. I’m not in favor of earning financial freedom if it means being afraid to spend money on the things that make you happy.
While I don’t know the first thing about shotguns, I’m guessing they represent a hobby of Sean’s. I’m certainly in favor of spending on hobbies, experiences, and activities that bring you joy.
Well done, Sean.
The struggle between “should” and “want.”
Finally, Zach shared a sentiment that many of us struggle with when it comes to money decisions:
I know what the answer should be but I’d really like to buy a house and a couple of the cool cars I’d always ogled over growing up.
Zach’s comment stood out to me in the way he phrased it. He knows what he should do, which in his mind is different from what he wants to do.
Zach’s one sentence comment sums up a money struggle that many of us have.
We know what we should do, but we’re constantly fighting what we want to do.
I would challenge Zach, and anyone else feeling this way, to take some time thinking about what you truly want out of life. I did this when I wrote down my Tiara Goals for Financial Freedom while on a beach in Florida.
If you put some real thought into it, you might find that material possessions are actually not that important to you. Rather, buying your freedom is so much more valuable.
I would want to know more about Zach’s desire to buy a couple of cool cars. Maybe, like our previous reader wanting a shotgun, having cool cars is a hobby for him that brings much joy.
However, I have my doubts that’s what Zach meant. The way he phrased it (“cars I’d always ogled over growing up”) leads me to believe he wants these cars to show off.
Here’s the problem with that type of spending.
Buying a couple of cool cars would likely only give you a short-lived burst of happiness. Sure, it would be fun to drive them around at first. Maybe it’d also be fun to have your friends over and show off what you just bought.
But, studies routinely show that the burst of happiness from material possessions like cars only lasts for so long.
When that initial burst fades away, you’re stuck with the hassle of owning multiple cars that you probably wouldn’t even drive much. Your friends would stop caring before too long.
Add in the cost of insurance, maintenance, and garage space, and these cool cars will be a major drag on your financial freedom.
By the way, there’s nothing at all wrong with buying a house. You need to live somewhere. Just keep it reasonable.
Otherwise, you’ll end up working long hours for a lot of years just to keep the house. That might not be a trade off you want to make.
What I would do with $10 million.
Without further ado, here’s exactly what I would do if I woke up with $10 million tomorrow.
1. $50,000 to go on an African safari with my wife.
My wife and I have three kids at home ages five and under. With a newborn, even date night can feel like an epic adventure. My wife does so much for all of us, that this is the easiest decision I’ve ever made.
With the first $50,000, she and I are packing our bags for Africa and leaving the kids with Grandma. Since this would be our first big trip in six years, we’re balling out without worrying about the cost.
I am a big advocate of using money as a tool to build memories. How could I do better than taking a dream vacation with my wife?
2. Pay off my house.
My goal is to be financially free. A big part of that is not having any debt. That’s why the next chunk of the $10 million is going to pay off my house.
I could certainly make more money long-term by investing in the stock market or purchasing more rental properties. But, with $10 million at my disposal, I don’t need any more money. I know when enough is enough.
I love my house and my community and would rather know that I can stay here with my family for the long run.
3. Pay off my rental ski condo.
In 2021, my wife and I bought a ski condo in Colorado. We currently rent it out for most of the year.
If I had $10 million, I would pay off the mortgage on the ski condo, stop renting it out, and spend a lot more time out west with my family.
As I mentioned, one of my main goals in life is to create as many experiences and memories as possible with my family.
Paying off my condo would allow all of us to spend more time together doing the things we love, like skiing, hiking, biking, and swimming.
Best of all, we could do these things while sharing our condo with our extended family members.
4. $250,000 in a high yield savings account.
Everyone should have an emergency savings account. I would put $250,000 into a high yield savings account and turn to this money as my first line of defense in case of emergencies.
After eliminating my mortgage debt on my primary home and my ski condo, $250,000 would be enough to fund my life for about 2 years. That’s a lot of runway and provides peace of mind.
5. $300,000 total in my kids’ 529 college savings accounts.
Besides eliminating debt, my other major financial goal right now is to save enough to pay for my three kids’ college. To cross this goal off my list once and for all, I would put a combined $300,000 into their 529 accounts.
I landed on $300,000 by playing around with an online calculator, like this one. $300,000 should be enough to reach my goal for each kid.
6. 70% of the rest in a total stock market index fund.
I am an index fund investor, through and through. I have no interest in trying to beat the market or time the market.
I’m perfectly happy with earning around 10% per year, which is the historical annual average return of the S&P 500.
So, I would put 70% of the rest of my money in a total stock market index fund. I prefer Vanguard’s popular offering, VTSAX.
If you’re wondering why I’m not putting all my money in “safer” asset categories, like cash or bonds, it’s because I still have a long investment horizon in front of me.
I plan on investing for decades to come. I’m OK riding out the market swings that come with investing in stocks. I also want to keep up with inflation so my purchasing power remains strong in the future.
7. 30% in a total bond market index fund.
While I would mostly be invested in stocks, I would be highly motivated to preserve more of my wealth. Like I mentioned before, enough is enough.
Investing in bonds is a good way to de-risk your portfolio, even if it means earning less each year.
For that reason, I would allocate the remaining 30% of my money to a total bond market index fund. I would choose Vanguard’s VBTLX.
I would not pay off my rental properties or quit my job.
You may have noticed I did not mention paying off my rental properties or quitting my job.
My rental properties are all on very low-rate mortgages and generate strong monthly cash flow. These properties are performing beautifully as is.
I don’t see any good reason to mess with a good thing. I could always re-visit if circumstances changed.
With $10 million, why am I not quitting my job and jetting off to a beach?
The truth is I really like my life right now. I don’t see any good reason to make sudden, major life changes.
I like the people I work with and the work that we do for our mesothelioma clients.
On top of that, I like where I live and am not really craving any major purchases. I would probably get some new furniture for the house. Maybe I’d plant another tree or two in the backyard.
Plus, because I’m still earning an income in this scenario, I can continue to use my income to fund my life. That’s why I didn’t account for daily spending in my plan for $10 million.
In fact, I’d have more income available because the $10 million is more than enough for my long-term savings and investment goals.
I could use the money I had been saving for these goals for more present day spending. I’m not sure I would, but I could spend more freely, if I wanted to.
So, there you have it. That’s exactly what I would do with $10 million right now.
What do you think of my plan?
Would you do anything differently?
Let us know in the comments below.