And yes last week it happened again for the so maniest time or at least I nearly won the lottery again, I only missed by several digits. (only the last one was right.) My actual winnings were € 27,50 this time just not enough to buy new tickets from. Well maybe next month it will happen enthough I now that winning a prize above € 1.000.000, - is aprox 1 on 20 million people. But why the hell do I buy these tickets? Because there are a few things that I would love to realize even if it was a million euros. I do not need the jackpot of 27,5 million euros. Every price above € 100.000,- is very welcome. At least we could make easier choices.
A Million Euros isn’t that much!
I think we’re all very aware that a million euros isn’t what it used to be. In either scenario, whether you have worked and accumulated a million euros, or whether you’ve received a windfall, you absolutely cannot go crazy and start spending uncontrollably. Let’s take a look at what you CAN do with a million euros.
Invest for income
This applies to the second scenario – the one where your net worth, after years of hard work, is a million euros. Assuming your investment mix can generate an annual taxable income of 8%, a million dollars can generate an admittedly nice income of €80,000 per year – for many this is all it takes to comfortably retire, and for those of us living in more expensive areas, in major cities along the coast, it would still be a major boost to whatever other retirement income we might have.
Spend wisely
If you get a million euro windfall at some earlier point in your life, when you still have many working years ahead of you, I would advise against viewing this as your ticket out of the workforce. As we saw above, this kind of money generates a nice income – but not necessarily enough to retire on, especially if you’re young and still need to raise kids. In addition, if you start using all the income that your nest egg generates at an early age rather than reinvest, your money will be gradually eroded by inflation.
What would I do?
The things on my own list if I ever received a sudden windfall include non-exciting items such as paying off any credit card debt, loans and home mortgage. I would also reserve a small percentage (anywhere from 1%-5% or up to € 50,000) for helping close family members such as parents and siblings with repaying their own debts and give another 1%-5% to charity.
No splurging at all? You’re so boring
I actually do not rule out splurging a little. It’s normal to want to splurge when you receive an unexpected, large sum of money. I guess in my case I would allocate 1%-5% for splurging – this could go towards buying a new car, a small boat, renovating the house or buying new furniture or art and a cruise of course. Whatever floats your boat, by all means splurge a little on it, but do limit that splurge. It’s very easy to waste away a million euros.
And what about the rest?
So I repaid debt, gave some to family and some to charity, even splurged a little. Let’s assume I was left with half a million euros. Now what? Now I invest, and I treat this as any other investment, creating a mix of stocks, bonds, cash and whatsoever is possible. Whatever asset allocation I’m generally comfortable with. Now I sit back, watch the money grow, rebalance once a year and resist the urge to do anything else with that money, except for enjoying the extra security I now have.
Just believe me when I tell you that money does not bring more luck into your life, it only makes things easier if you a bit more than needed. Just enjoy life and make the best out of it.
The Old Sailor,
