Early this year, I explained why I buy lottery tickets. Some of us buy comic books, some buy art. I buy little slips of paper that have a slight, very, very remote chance of maybe having a small probability of winning back the $1 I spent to buy it.
But what if I actually won some sizable amount of money? What about the actual big jackpot? What would I do with the money? I’ve actually thought about this for years, and each year, my plans change depending on our current financial situation. So, I decided to outline my plans, based on winning different levels of money.
ASSUMPTION 1: To make my dreams somewhat reality, I’m going to use a base 40% cut in the winnings for taxes. This is just a rough guess at the maximum I would owe towards taxes, and makes calculations easier. Your local may differ. Also, I’m not getting too technical in this since they’re all just dreams anyway. Don’t be a nerd and try to correct my math or assumptions. No one likes a know-it-all, so leave my dreams alone.
ASSUMPTION 2: I’m assuming any of these amounts are cash options, not annuities.
This is the top amount I see on a number of $2 scratch-off tickets. I don’t generally buy anything higher than $2, and I usually avoid scratch-offs anyway, but sometimes that little high is just what I need that week.
If I won $30k, I’d get to keep $18,000 after taxes. I would NOT use it to buy anything new. Instead, I would use it to pay off our highest interest debt, which right now is my student loan. With the remaining $4,000, I’d either pay some of Stacie’s student loan off or just put it in the bank as an emergency fund. I may also put it all in next year’s Roth IRA.
Now we’re talking about some real money here. This is roughly the 2nd place prize in the multi-state lotteries. After taxes, I’d get to keep about $150,000. Knowing that we have $50,000 in non-home debt left, and about $75,000 on our second mortgage, I would pay both those amounts off. It would reduce our monthly debt obligation from about $3,200 down to about $1,800. At that point, Stacie could probably quit her job and we could live comfortably off my salary. Sure, Stacie could quit her job now, but money would get REAL tight, and we don’t want that.
The remaining $25k would be split into emergency savings, Roth IRA and then some other investments. No need to buy any new toys yet.
Wouldn’t Dr. Evil be jealous of me! We’re moving into the 7-figure range here. What would I do with 1 million dollars? After tax, we’d have about $600,000. That would pay off our entire mortgage and non-home debt, with about $160,000 left over. Part of that remainder would stay with us for investments and the rest (maybe $100k) would be split with our parents to pay off debts and/or go towards retirement funds.
We would have no monthly debt obligations, just utilities, insurance, property taxes, and other incidentals. We wouldn’t be able to just quit our jobs (except for maybe a year or two). Stacie could take time off and set up shop to do outpatient consulting or write for Building Nutrition. I still wouldn’t just quit my job, but I don’t think I would be so stressed.
Now, the question is whether we would sell the house in DC, move to central PA (closer to family) and try to find new jobs there. Cost of living is so low near our parents, so we could live comfortably for years with a half-million in our pockets. However, neither of us would be satisfied just sitting around, and we would want that money to work for us. We would get jobs (probably in the same fields we’re in now), invest the money for ourselves and our parents (and grandparents).
Now, with $30,000,000 after taxes, we’re talking about retiring early. We’d get the heck out of the D.C. area and move closer to our families. We’d buy a good house, but not go overboard with marble floors and gold toilets. We would obviously pay off our debts, our parents’, grandparents’ and siblings’ debts, and invest money towards their retirements and our nieces’ and nephew’s college education.
Additionally, we would donate a few million ($5-10 mill) to Stacie’s alma mater and maybe to a few other charities or schools close to our hearts. We would both continue to educate ourselves and stay current in marketable skills, but more for launching our own ventures rather than working for someone else. We’d get to travel to Europe (mainly Italy, Ireland and Greece), and probably stay longer than 2 weeks at a time.
$150,000,000 and higher
Ok, this kind of cash is just ludicrous. We would definitely retire, veg on our $100,000 bed all day and watch Jerry Springer, Oprah and reruns of Seinfeld…in different wings of our $20 million house. Seriously though, we would donate a lot of the money to charities, and enable ourselves and our families to pursue their dreams.
Granted, we would need to ensure they don’t try to take advantage of the sweet life and lose any of their skills. We would need to be strict with any “allowance” we would give to our families, and make sure we’re not trying to control their lives with our money. I can see how many people winning this amount of money might wish they never bought that lottery ticket because of the problems it probably causes.
I dream of winning this much money, but in reality I’d be very worried about my and my family’s safety. As I get older, I dream less of winning this amount and more of maybe $25 million and lower. I think we can accomplish our rather mediocre dreams with much less money.
What Would YOU Do?
I invite you to share your dreams with any level of lottery winnings, however far-fetched. If you’re a blogger, I also invite you to write your own similar post and feel free to link back here so I can check it out!