Moneywise24 Personal Finance

Every now and then I have been thinking what I would do if I would win a few million in a lottery, or in the casino. I am sure most people have, perhaps you have. I have been discussing all possible scenarios with my friends, and often we ended up talking about expensive sports cars, yachts, luxurious estates and world travel. Honestly, if this is really how I would spend my millions, I would probably be instantly in debt.

I watched a documentary the other week, in which they were looking at what people had done with the millions they had won in a lottery, and as it became obvious, most people had spent their money very stupidly. A psychologist was asked about this phenomenon, and he claimed that it is only logical; these lottery winners were not at all used to thinking in dimensions of millions. They were literally thrown out of their own reality, which caused them to make irrational decisions.  This particular documentary set me to think: how would I handle that much money.

Keep my job

Okay, I have to admit, it really depends how much I won. But at least at first, I would definitely keep my job. Especially if I can not live off interest and maintain a good standard, what is the point in quitting my job? Besides that, I love my work. I might quit at a later time, but first I want to see how things are developing.

Cash Savings

Before I would do anything with the money, I would put some part of it on a savings account. Call it an emergency account if you want to, the money is intended for emergency situations, and in case I would lose everything. This money should allow me to start all over again just in case things go wrong. I would probably put aside about two years of my current salary.

Real Estate

Currently, I am renting an apartment, this might be one of the first things I want to get rid of. I would probably buy something bigger and more central than what I have now, but I do not see the point in buying a luxurious estate, which would vaporize most part of my money. A nice 2- or 3-bedroom condo in the city center will do, nicely furnished, a place where I feel good and comfortable. Besides, I am conscious of the fact that the bigger and more luxurious the estate, the more tax and other yearly expenses I will have. Real estate offers me the benefit of lowering my monthly expenses (my monthly rent) while making a long-term investment. Alternatively, I might purchase more than only one object, which I would rent out if I am not using them. This way, the incoming rent will compensate for my expenses I have on the real estate, and I am investing money with a long-term focus.

Long-term investments

At least half of my winnings, if not more, I will invest long-term on the stock markets. Firstly, I want my money to grow over time and it to gain value. Secondly, I want to obtain dividend payouts. If these dividends are high enough, they could even substitute for my current job, either partially or completely. But until I have reached a certain threshold, I would keep my job.

Business

If I feel entrepreneurial, I would perhaps start a business. However, I will do this with great caution. I do not have great experience with running businesses, so I will start small, even though I have the necessary funds to start big. By gaining experience, I can build my business from there, and engage into bigger businesses over time. The documentary I was writing about earlier showed a man, who invested most of his money in a bigger type of manufacturing business, which went bankrupt due to his inability to run that business. By the way, the guy ended up broke, and his wife left him. So did many of his friends.

Education

I am a fan of life-long learning, whether it is a new language, an MBA, or something else which I find interesting. I consider education an important part of my personal development.

Something needs to be spent, right?

Good, I have to admit; of course I will spend some of that money. I might buy some fashion, perhaps travel the world, buy a more fancy car, or take my flying license. I will definitely give myself some treats, but I will do this in a dimension I understand. I would hardly start to buy business suits worth 5,000 Dollars, as this is a dimension of spending I am not familiar with, and which I do not need either. The same goes for my world travel: I might fly business class on long distance flights, but I don’t see the use of paying 8,000 Dollars or so for flying first.

I am in charge of my money

I recognize the fact, that once I win the lottery I will probably be approached by many so-called consultants, who would recommend me to invest my money here or there. But I will, at all cost, remain fully in charge of my own money. I might consult someone I really trust, who may give me advice of specific trends and market developments, while at the same time I make my own decisions.

Honestly, I have never been in a situation of winning millions. However, I believe that becoming suddenly rich can be quite problematic for many people. And even if I am gaining wealth slowly over time, I will cherish the above points, in search for long-term growth, development, and a stress-free life.