Well, another big lottery winner last month and unfortunately, once again, it was not me and my co-workers. One individual won something crazy like $758 million and, in my opinion, made quite a few mistakes right off the bat. The first thing I would do is to get a good lawyer and financial adviser before I came forward and claimed the jackpot since the majority of states require you come forward publicly to claim your money in a press conference. She also called her employer and quit her job immediately. Money like this requires a lot of careful thought and planning.
Of course anyone that plays the lottery regularly has probably thought about the possibilities of what they would do with the money if they hit it big. I know I have. What if you came into some small windfalls though? Do you have a plan for that? I decided to figure out what I would do with some smaller windfalls. Of course most windfalls, whether they be bonuses or lottery or whatever will be taxed but for purposes of this fun little exercise I’m going to use round dollar amounts. I’m going to do $1,000, $10,000, $50,000, and $100,000.
$1,000: I’ve gotten bonuses in this amount before and they were usually handed out around early summer or Christmas so they were used for either summer vacation plans or Christmas presents. If I were to receive one now I would probably earmark half for Christmas and half towards my emergency fund since that’s a little lower presently than my comfort level prefers.
$10,000: $5400 would pay off two of my four credit cards and put a serious dent in a third, freeing up $115 a month that I can throw onto my last cards to get credit card-free that much quicker. $750 towards emergency fund, $2,000 for some plumbing work, $750 for my Christmas fund, $800 for repairs to my car from a previous wreck (body work only), and the remaining $300 for some fun blow money for me and the boys.
$50,000: Okay, now we’re into some life-changing money. Coming into money like this makes the decisions especially hard. The temptation would be to start having some fun and make some frivolous purchases after living lean for so long. I think I’m finally smarter than that though.
$34,500 would pay off all credit cards and student loans. $4,000 towards some plumbing issues and re-doing my master bath, $2,500 towards a family vacation since we’ve not had one in three years and very, very soon the boys will probably officially be out and living their own grown up lives and not willing to vacation with me anymore. $4,000 to the emergency fund, $1,000 for the Christmas fund, $3,000 to Michael’s deductible for 2018, and $1,000 fun money for some updates around the house or some little extra frivolous spending I don’t usually get to partake in.
$100,000: This would be heart palpitation-inducing money and probably throw me into panic mode and cause some decision paralysis for a few weeks. But here’s my general thoughts on allocating this much money: $54,000 pays off all the credit cards, my student loans, my car, and a small loan remaining on Michael’s truck. $5,000 to do the plumbing mentioned before plus add the bath remodel in my bedroom. $3,000 for a better vacation for us, $3,000 to next year’s deductible, $1,800.00 for new washer and dryer, $2,500 for updated kitchen appliances, $5,500 IRA contribution, $1,500 for Christmas fund, $4,000 to the emergency fund. That will leave me just shy of $20,000 and I think I would just keep that earmarked for some charitable giving, and helping the boys with any school expenses that crop up. Paying off so much also gives me a nice buffer in my budget to make much larger payments to my retirement savings and mortgage payoff.
I know, I’m boring. No fancy sports cars or toys for me. I am happy living a simple life and truly the peace of mind of knowing I’m not in debt anymore would make me happier than any sports car or newest smart phone or a Gucci bag.