June 29, 2019
In case you missed it, this week’s Oz Lotto was offering a whopping jackpot of $80 million. Although I didn’t buy a ticket (and never do), it got me thinking. What would we actually do with this kind of money?
I think everyone’s played this ‘what if’ game before. To sit back and dream what you’d do with all that cash (after swimming around in it for fun, of course!). And while it seems a little silly, I think this game can actually offer some great insights.
Today, for your entertainment (and mine!), I’ll share what we’d do with such a giant sum of money. And afterwards, I also want you to play the ‘what if’ game with your own household, and see what you come up with.
Other than it being fun to think about, it can also reveal more about our true underlying values, and our philosophy around wealth. These underlying thoughts are things we might not be fully conscious of in our daily lives.
So it’s the ultimate thought experiment! What would you do with $80 million? After talking it over, here’s what we’d do…
After moving, we’ve now been renting for almost 2 years. And while there’s nothing really wrong with it, owning is preferable from a simplicity point of view.
No inspections. No (repeated) emails to chase up maintenance and repairs. And no issues with modifying the gardens, hanging pictures etc.
And unless we start hearing gunshots or see junkies brawling at the local shops, we’re very happy to stay in this location much longer.
I love the nature aspect of our suburb, and especially the pocket we’re in, being connected to a massive regional park, with wetlands, lake and bush areas. Also, it’s quiet and not congested, while being in walking distance to local shops and public transport, and riding distance to what is effectively Perth’s second CBD.
So with $80m, and no major reason to optimise our wealth, we’d buy a house. The reason we don’t do it now is that much of our cash is tied up for the time being. And mostly, we think it makes sense to rent for many years before deciding where we want to settle.
Anyway, we have zero desire to move to the upmarket suburbs of Perth, to rub shoulders with the elite. Our area is a long way from fancy. But it meets our needs really well, with a nice balance between nature, space and proximity to things.
We’d either purchase or build a place on a large block (700-1000 sqm). This way we can have lots of food growing and also create little habitat areas for local frogs, lizards and other creatures.
Of course, we’d plaster the roof with solar panels and have battery storage, as well as a rainwater tank. This could be done with less, but hey, we’re going nuts here.
Total cost = $500,000 to $1 million.
This was a tricky one. Part of me thinks we could do just fine with no car, but the status quo wins in the end. With almost unlimited money in this scenario, we’d likely buy an electric car.
Maybe a Tesla, because they’re sexy cars and have great reviews. Or maybe a smaller electric vehicle, for practicality. Either way, it’s hard to justify because we don’t drive very much, but I’d definitely want to support the industry and lead by example.
Obviously, this would be environmentally friendly in the long run, as we’d charge the car at home and aim to own it for an incredibly long time, saving tons and tons of emissions.
The act of buying an electric car would be our way of voting for the technology. When we buy anything, we’re essentially voting. We’re saying “I like what you’re doing, and your business practices, so keep it up.”
It’s good to regularly remind ourselves of this. Each dollar spent is a vote for something.
Total cost = $50,000 to $100,000.
After discussing it, we wouldn’t do anything differently here. Mrs Strong Money would continue her part-time job.
She enjoys the social aspect, the friendly work environment, and being productive outside the house for a couple of days each week.
And of course, I’d continue doing my best to stay mostly ‘retired’ and simply work on this blog. At first I thought this answer seemed strange. But the more I think about it, having reached Financial Independence, this shows we’ve chosen to be productive for its own sake, not for money.
So that serves as a good reminder that we’re probably on the right track.
What about travel? Well, to be honest, nothing would change in the short term. We’ll continue to take local trips to lovely places in WA, where we can bring our dog with us. We don’t want to leave him behind so we can travel overseas.
Comparing travelling overseas before we had a dog, and only local travel after getting our dog, we’re happier with the second one. I guess like having kids, having a dog brings us tons of joy on a daily basis.
And as unpopular as it is, my view is that travel has just become another form of consumption. Sure it makes for a few good photos and memories, but as with most consumption, the high fades over time.
That’s usually when people start planning their next holiday! Somehow international travel has made its way into that ever-growing bucket of ‘needs’.
Don’t get me wrong, there’s nothing wrong with travelling. But it’s definitely not a requirement for a happy life. In fact, I’ve noticed the more satisfied we are with our day to day lives, the less desire there is to travel.
We enjoy our lives much more than before, without visiting exotic places. And the more local places we visit, the more we appreciate Australia, further reducing the urge to visit international locations.
I’m not saying we’ll never leave the country again. There are lots of places I’d like to visit at some point, later on. But it’s certainly not an ongoing itch we need to scratch.
And it’s likely we could fund this from part-time work earnings, leaving our savings and Lotto winnings untouched.
Certainly, a shopping spree would be on the cards to create a style that matches our new swollen bank account?
Haha, nope! For environmental reasons we’re content with the clothes we have. And if we do need new stuff, we’ll try and get it from an op shop.
While Mrs Strong Money is pretty good at this, I’m too lazy and hate clothes shopping in general. But I plan to make more of an effort and buy second-hand to reduce our footprint a bit further. And like most people, we have more than enough clothes already!
As for fine-dining, it’s generally more satisfying and healthy to continue with home cooked meals. Especially when a couple of ingredients are from your backyard! We could always get a butler and chef to take care of this for us. But why the hell would we do that?
So we can watch TV and drool into a cup while everything is done for us? No thanks. I don’t fancy dying young from an illness created by extreme inactivity. If you don’t use your brain or your body, both will deteriorate. Simple as that. The best life is in maintaining a certain level of self-sufficiency!
This part is a little tricky. While it’s nice to help other people, especially family and friends, I firmly believe that middle class people don’t need more money.
It’s just not going to solve their problems (even though they think it will). It’s like giving someone who is overweight, yet always hungry, more food.
Rich Western folks like us already have plenty of dollars, but not enough sense (see what I did there?). One way which I’d be comfortable helping out is by helping to pay off or provide modest housing for relatives.
Reducing personal debt and having paid-for housing would be a great benefit. It means less stress and also reduces the need for work, creating more freedom and a better quality of life.
Any more than this though, and extra money is likely to translate into more consumption and lifestyle inflation. So beyond this level of help, I believe the benefits of handouts could even turn negative overall.
We would allocate a couple of million dollars to this, at the most.
Total cost = $2 million.
So far, we’re struggling to make a dent in this money, in a way that makes sense to us. At this point we’re left with around $77 million! What would we do next?
A logical thing to do with such a giant sum of money is to invest it. Not to get richer and richer. But because idle money does little good for anyone.
So investing this cash keeps it working productively, and will throw off more money through dividends.
Let’s say we go with a conservative and very diversified 50-50 split between Aussie and international shares. This would generate a dividend stream of around 3% to 3.5%, ignoring franking and tax for simplicity. All up, this $77 million portfolio would throw off something like $2.5 million in dividends each year.
Side note: At the time of writing, if this was setup as a charitable foundation, there would be zero tax to pay and all franking credits would be refunded, resulting in a net yield of 4%.
Anyway, our personal spending would fall because we’d no longer be paying rent. Our non-housing spending of around $20,000-$25,000 is likely to be similar.
Higher costs would include council rates, water rates and property maintenance. Lower costs would be electricity (solar + battery setup) and car costs.
Overall, our non-housing spending is likely to be the same at around $25,000 per year. So from our $2.5m in dividends, we’d be spending just 1% of that, for a savings rate of 99%. Haha, how comical is that!?
And if you count our investments and part-time income (which I’ve completely ignored), then we’d never touch that $2.5m in cashflow at all.
Later, of course, we may spend more on travel, but it won’t even make a dent. So getting serious for a minute, what would we do with it?
Now, some people might say we should donate most of this money straight away. And there’s a good argument for that. But for a couple of reasons I wouldn’t feel comfortable doing so. Here’s why.
In anyone’s language, this is a giant amount of money. So even if we’re giving it away, we should carefully consider where it’s going and the effect it will have. This is no easy task!
Giving away massive chunks all at once from our wealth might feel great initially. But our charity preferences might change over time. And it’d likely be a better idea if we first spend more time learning about giving, before jumping right in.
As we learn more, we can then allocate to different areas and charities we feel strongly about, which are getting results. These are arguments in favour of donating the income our wealth spits out. So this is where the $2.5m of dividends would go each year, in the near-term.
Later on, once we’re well read on the subject and have nailed down what impact we’d like to make, then I’d be more comfortable to start donating larger chunks from the portfolio.
Ideally, this way, the wealth is used more efficiently and achieves better outcomes.
Wait. What’s going on here? Is something wrong with us, that we would so minimally upgrade our lifestyle and instead invest the money to be given away?
Have we just forgotten what money is for?
Actually, I believe it’s the opposite. We’ve learned exactly what money is for. Money is not a toy. Money is a tool.
Our life is perfectly fine the way it is. We’ve realised that adding more luxury and niceties does not add more happiness or meaning.
This is something many people don’t learn until a life of consumerism leaves them broke and directionless.
Our wealth will be spent in line with our values. On more sustainable living. On a nice (but not excessive) place to live. And directed to causes we care about.
If we had to choose today, that’d be animal welfare and environmental issues. But also global health and poverty is an ever-present issue.
Our other option, is to start playing the unwinnable game. That is, continuing to ratchet our lifestyle upwards in various ways, in an attempt to achieve permanent Level 10 Happiness. But it doesn’t work that way.
If we move to into a riverside mansion , we’d likely find out that after a while, we feel the same as before. In fact, it could make us more anxious, as we notice our neighbours have better manicured gardens than we do.
They have a tennis court, while we only have a basketball hoop. They have 2 Lamborghini’s and a yacht, while we only have a basic model 3 Tesla.
Many past lottery winners who used their winnings to fulfil their consumer dreams ended up broke and unhappy. The lifestyle and stuff they bought didn’t make them happy, so they continued to chase more until they were left disappointed and out of money – and often in debt!
The more we opt-in to the consumption game, the more trapped and anxious we become. So it’s far easier, smarter and simpler to opt out.
Realising we can be happy with, or without, being part of the big consumerism machine. And since we don’t need it, by opting out we can focus our time, energy and money towards more meaningful pursuits, where there are real benefits!
The trick is to opt out of this game before we have large sums of money. Otherwise, when we do have the cash, we’ll simply keep chasing our tails and wonder why we’re not any happier with all the rich-people perks.
What a fun experiment! This was harder than I thought it’d be. But maybe that’s just my habit of making considered financial decisions. This exercise forced me to really nail down what’s important and what’s just a distraction.
Look, I enjoy a modern Western life as much as the next guy, so we would allow ourselves a small sliver of the winnings!
But I personally feel most excess wealth should be put to a higher purpose than increasing opulence, which also provides more meaning and a sense of legacy to one’s life.
But everyone’s different, so you allocate your winnings however you please! If you haven’t already, I highly encourage you to do this at home.
What would you do with $80 million? Let me know in the comments…