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. I’ve also asked this question to a lot of my friends and family members.
Whether in class or with friends, this question is a great conversation starter. It’s not so much about the dollar amount as it is about the money mindset that goes along with that amount.
That’s because 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. That’s because it turns the aspirational concept of financial freedom into actual numbers.
With those numbers in mind, you can more realistically think about what your life could look like if you were financially free.
That’s why I love the question. I find it very interesting to talk to people about what they would do with financial freedom.
Why I love talking about financial freedom.
If you hear $10 million in the bank and think of spending it on mansions, boats, and cars… this is not the blog for you.
I want to talk about using that $10 million to buy something way more valuable than material possessions: your freedom.
When you are financially free, you can choose to do work that is meaningful to you without worrying about how much it pays. You can also choose to spend more time with people who are meaningful to you.
I am striving for both of those things on my journey to financial freedom.
By the way, $10 million is just an arbitrary number. Maybe your number is $3 million or $8 million or $15 million. For this conversation, use whatever number represents financial freedom to you.
The amount may differ based on your age, spending habits, debt level, dependents, etc.
The idea is to pick a dollar amount that is high enough that you wouldn’t have to work anymore unless you wanted to. In its simplest form, that’s what financial freedom means.
I’ve found that when I have this conversation, $10 million is a good, round number to get people thinking about what they would do with financial freedom.
So, today we’re going to ask ourselves if we would do anything differently if we woke up with $10 million in the bank.
To help get the wheels turning, let’s start with some simple math to see what having $10 million in the bank really means.
What does $10 million in the bank really mean?
Let’s do some simple math using the 4% Rule to help frame the question.
The 4% Rule suggests that you can safely withdraw 4% of your investments each year and expect your money to last for 30 years.
Without getting too technical, the 4% Rule is based off of research looking at historical investment gains, inflation, and other variables. I view the 4% Rule as a useful tool to ballpark your magic retirement number.
The 4% Rule is a great place for us to start thinking about what you could do with $10 million.
Here’s what the formula looks like using $10 million as our current savings:
| Current Savings x 4% (.04) = Annual Retirement Spending |
$10,000,000 x .04 =$400,000.00
This means that according to the 4% Rule, you could spend $400,000 annually and expect your money to last 30 years.
This is a useful calculation that puts into perspective how much money $10 million really is. You can essentially view having $10 million in the bank as the same as having a job that pays you $400,000 per year.
The major difference is you don’t have to get out of bed in the morning to receive this $400,000.
Note for simplicity’s sake, we’ll set aside the tax implications of investment income v. W-2 income for this hypothetical.
One other note: if you had $10 million in the bank, you don’t have to spend $400,000 per year. Rather, the 4% Rule suggests you could spend up to that amount and not run out of money for 30 years. If you spend less than 4% each year, your $10 million will last longer.
How much can you spend each month with $10 million in the bank?
To help you picture your life with $10 million in the bank, we can break down that $400,000 annual spending amount even more.
I like to know how much I could safely spend on a monthly basis if I had $10 million in the bank. Knowing the amount I could spend monthly helps make the $10 million more digestible.
That requires just a bit more very simple math:
$400,000 annually / 12 months = $33,333.33
So, if you have $10 million in the bank, you should be able to safely spend about $33,000 per month.
Now, you can view that number in the context of your Budget After Thinking. You might learn that you’re spending way less than $33,000 per month. Or, you may be spending way more.
Either way, it puts that $10 million into smaller, more digestible numbers.
To recap, we now know that $10 million in the bank means we can spend roughly $33,000 per month and not run out of money for 30 years. The important question then becomes:
Would you make any changes to your current life if you started each month with $33,000 in the bank without having to work?
Let’s explore what your answer may say about your current work situation.
Would you still work your current job if you had $10 million in the bank?
If you had $10 million in the bank, would you continue to work your current job?
If your answer is “Yes,” that’s a great sign that you enjoy your work and the people you work with. You also most likely have motivations for working that go beyond earning money. That’s a really nice position to be in.
By the way, I know a good amount of people in this boat. Even with $10 million, they wouldn’t change a thing about their work situation.
If your answer is “No,” it’s worth thinking about why you wouldn’t keep working your job. Is it the people? The hours? The lack of stimulation? Overall stress?
$10 million in the bank should be enough to leave your job for new pursuits. You can start to ask yourself what you would do for work if you didn’t have to work for money.
I also know a lot of people in this boat. If they had $10 million, they would be out the door tomorrow.
Why am I talking about new pursuits instead of shutting it down completely?
With $10 million in the bank, your initial thought might be to just shut it down completely. For people of a certain age or people with health considerations, that certainly could be the right choice.
Setting those reasons aside, I do not believe in retiring early. I’m convinced that humans are meant to be productive. We are social creatures who at our core want to be contributing.
I think this especially holds true for high achievers who have put in the work and made sacrifices to become financially free in the first place.
That’s why I don’t believe financial independence has to mean retiring. It’s also why I don’t like the popular acronym, FIRE: Financial Independence, Retire Early.
The problem for me is that the FIRE end game is suggested right there in the name: become financially independent so you can retire.
I don’t like what the word “retire” implies.
If you look it up, you’ll see that the word “retire“means to withdraw, to retreat, to recede.
None of those things sound appealing to me at all.
Each word implies moving backwards. I’m not working so hard to achieve financial freedom so I can move backwards in life.
Instead, I like to view my financial freedom journey as FIPE:
Financial Independence, Pivot Early.
I believe in FIPE not FIRE.
When you have financial independence, you have options. You can make decisions based on your core values instead of making decisions based on money. You can pivot, if you want.
One of the ways you can pivot is by taking more control of what you do with your working hours. It’s not about quitting work entirely and wasting away on a beach. As nice as that might sound right now, it will get old fast.
That’s why I believe in FIPE not FIRE.
I encourage you to think about how you might use $10 million to pivot instead of to retire. Could you use that money to buy yourself the freedom to pursue more meaningful work?
So, what would you do with $10 million in the bank?
The point in asking about $10 million is to help you think about your current choices and whether it’s time to make some adjustments.
Having this conversation with your friends and family will teach you a lot about your current situation. Remember, talking about money is not taboo.
In these conversations, pay attention to what you learn about yourself and how you presently spend your time.
Even though $10 million may seem like a distant dream, you don’t need to have that much money to start your own financial freedom journey.
You can start making choices today to put yourself in a better position to pivot, if you so choose.
Maybe you wouldn’t change a single thing about your career choices. Or, maybe you would be out your employer’s door tomorrow.
In the end, thinking about what you could do with $10 million in the bank will help you lead a more intentional life.
So, let us know in the comments below.
What would you do with $10 million in the bank?
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