Fortunately, few of us will ever have to do such things. Some, in fact, will simply receive a million dollars in a windfall. If you suddenly got a million dollars, what would you do with it? Here’s a look at what many Americans said they would do, along with some tips on how to realistically raise $ 1 million – no bargain.
The Schwab 2019 Modern Wealth Survey asked respondents what they would do with $ 1 million, and here are the results.
About a fifth of those surveyed said they would save money. It’s a great thing to do – especially if you don’t already have emergency funds in stock.
Most of us need such a fund, which would cover three to six months of living expenses – if not a little more. A job loss can happen at any time, as can an expensive loss of health or even an expensive repair that is suddenly necessary for your car or home. Make sure you have enough money to keep your roof over your head, food on your table, taxes paid, lights on, etc.
But you probably don’t need to put the million dollars into an emergency fund. Much of this amount in investment accounts, such as those intended for retirement, is also a first-rate idea.
About a quarter of survey respondents said they would invest the money, which is one of the most powerful things you can do with it – because the more money you have, the more you can grow. Here, for example, is the type of table you might see that shows what you can raise over time by collecting large amounts each year:
|Increasing to 8% for||$ 5,000 invested annually||$ 10,000 invested annually||$ 15,000 invested annually|
|10 years||78 227 $||156 455 $||234 682 $|
|15 years||146 621 $||293 243 $||439 864 $|
|20 years||247 115 $||494 229 $||741 344 $|
|25 years||394 772 $||789 544 $||1,2 million de dollars|
|30 years||611 729 $||1,2 million de dollars||1,8 million de dollars|
That’s fine, but if you suddenly had a million dollars – or even only half of it, see how it could increase over time:
|Increasing to 8% for||A one-time investment of $ 500,000||A one-time investment of $ 1 million|
|10 years||1,1 million de dollars||$ 2.2 million|
|15 years||1,6 million de dollars||$ 3.2 million|
|20 years||$ 2.3 million||$ 4.7 million|
|25 years||$ 3.4 million||$ 6.8 million|
|30 years||$ 5.0 million||$ 10.1 million|
It is much easier to get really wealthy if you start with a lot of money. Still, let the first chart remind you of what you could accomplish without any windfall at all – just some determination. It’s hard to beat the stock market to build long-term wealth. (Hint: using index funds is the easiest way to go about it and is perfect for most of us.)
28%: repay the debt
Over a quarter of respondents said they would use their million dollar windfall to pay down their debt, and with a million dollars, most people in debt should be able to pay back all of it. It is a very smart decision and arguably the best use of your money if you have high interest rate debt like credit cards.
Also note that you don’t need a windfall to get out of debt, even if you owe several thousand dollars. There are many effective strategies, such as earning more money, spending less, consolidating debts, targeting your debts at the highest interest rate first, and using balance transfer cards.
54%: Spend – for a house, a car or a trip
Finally, more than half of the respondents said they would spend money – on a house, a car and / or a trip. These are great uses for a windfall, but only if you have:
- No high interest debt
- An emergency fund with three to six months of expenses
- Retirement accounts are on track to provide what you will need in retirement
- Sufficient assets to cover other important financial goals, such as college
A million dollars is a lot of money, so you might be able to use it to tackle a lot of these problems – getting out of debt, setting up an emergency fund, investing a lot for your future , then .. maybe make a down payment on a new house, buy a new car and have a great trip!