If I Had A Million Dollars

Remember that song by The Barenaked Ladies, about all the things the lead singer would do if he had a million dollars? You know it’s already in your head. Anyway, as I listened to it today, (I’m not ashamed to admit it’s on my iPod) I got to doing some thinking. What exactly would I do with a million dollars?

Before we begin, a caveat. I’m going to assume the million bucks is an inheritance, or lottery winnings, or something that isn’t taxed (at least in Canada). Because what fun is it fantasizing about a million dollars if you immediately lose a quarter or a third of it to taxes? Since I’m pretty sure nobody is planning on giving me some sort of 7 figure surprise, this exercise remains a fantasy.

But hey, if you have a million bucks just burning a hole in your pocket, call me.

First, The Boring Stuff

I have a mortgage. At this point, I’m making fairly aggressive mortgage payments for it to go away, but I’m not really in a hurry to pay it off, especially considering low interest rates look like they’re here to stay for a little while. But if had a million bucks, I’d make it go away. That’s about $135k, right off the top. Balance remaining, $865k.

That’s it for me and debt, so next would be investing for income. I’d take half of the remaining balance ($437,000) and put it into a combination of dividend paying stocks, bonds, GICs and preferred shares. If I could get a scant 5% yield, that would spin off an income of $21,800 per year, without touching the principle. I honestly think I could do a little better than 5%, but I’m trying to be conservative here. Plus, I’d be primarily investing in stuff with less than 5 years to maturity, since interest rates are so low.

Well, that was a quick use of $572,000. What should I do with my remaining $428,000?

Would I Quit My Job?

That’s the big question, isn’t it? I hate to be that guy, but I honestly don’t know if I’d quit or not.

I like my job. It’s physical, which helps me keep the pounds off. For the most part, I like the people I deal with everyday and I like the routine. Plus, I’d still get free chips. I’m cheap at heart, so that’s a perk. Yes, even with a million dollars.

Alternatively, what a great opportunity to start my own business. Making close to $22,000 per year without lifting a finger would take a lot of pressure off having to ramp up earnings right away, not to mention no longer having a mortgage. At this point, I’ve been blogging for 2 years now, and I understand quite a bit about the business of the whole thing. I could start up another blog or two in other subjects, or I could use some of my sudden windfall to buy up a couple of financial blogs. With the time to run them, I know enough about the business to make them profitable.

And now that I type this out, I figured it out. I’d quit my job. How much fun would it be to blog for a living?

The Fun Stuff

I’d stick $100k just in the bank. It would serve as both a travel and opportunity fund. I think I’d still be a frugal traveller, but it would be nice to see certain parts of the world without having to worry about the cost.

What’s left? $328,000. Well, as a millionaire, I couldn’t continue to drive my crappy Ford Focus, now could I? For $28k, I could buy a pretty decent new car, so let’s go with that. Besides, that leaves me with a convenient $300k left to spend.

Hmm… What to spend $300,000 on? I think Canadian real estate in general is overvalued, so I wouldn’t be putting a nickel into that. I’d also avoid any private mortgage lending, barring very promising certain situations.

I’d take $100k of that cash and use it for picking stocks primarily for capital gains. I’d buy beaten up companies, hopefully ones with decent potential for turnarounds. I’d spend all sorts of my new found free time analyzing balance sheets and doing research. Yes, this is what I’d do for fun.

As for the last $200,000, I honestly have no idea. I’d keep it relatively liquid, maybe in short term GICs or a money market account. I’d call it my opportunity fund, reserved for buying some sort of other asset, like perhaps American read estate.

So, in conclusion, I’d only spend $700,000 of my $1 million, and barely spend any of it frivolously. Why would I? I have everything I need, and material stuff doesn’t really motivate me. The best part of having a million bucks? It isn’t the ability to buy a bunch of stuff. It’s the freedom that only passive income can bring. Since none of you are actually going to give me a million bucks, I guess I’m outta luck.

Readers, what would you do with a million bucks? The comment section is all yours.

Written by Nelson Smith

Nelson Smith writes about personal finance, investing and all sorts of other stuff at Financial Uproar. His real job is for a major snack food company, and yes ladies, he's single! You can follow him on the Twitter, where he usually tries to be witty.

17 Responses to If I Had A Million Dollars

  1. Love the plan! Makes me wonder what I’ve been doing with my time – I have no million dollar plan worked out. But I am pretty sure I’d have a few more splurges, perhaps the difference in our years?

  2. If I have a million dollars, I would Split it into 4 portions. I will give one portion to my parents so that they can quit the jobs and enjoy their lives. Second potion to plant some passive income. I will purchase some real properties in those cities that are still lacking, such as Barrie. They properties are going to have positive cash flow. The third portion, I will invest in stocks. I will use the last portion in starting my own business. I will try not to quit my job until my own business can support itself.

  3. I am with krantcents. It’s closer to retirement. I’d not spend a cent on anything that I don’t already plan to buy with money already accounted for.

    Now, if you tinkered with the premise, that it had to be spent and not on gold bars or items that could be sold easily, my answer might change.

  4. I’m too far from retirement. I’d keep my job for at least 7 more years to guarantee benefits and a small pension when I turn 65. I’d put all the money in high interest accounts and bonds. Then I’d invest about 70% of the total principal in high-quality DIVIDEND stocks (international, domestic and US). I’d do the investing over a period of about 5 years (to reduce risk through dollar cost averaging and to take advantage of deals as I saw them). Awesome post, really gets the creative juices flowing in your mind!!

  5. I would be sorely tempted to splurge on a huge trip, but I would take that money and invest it in a combination of dividend bearing stocks, index mutual funds and real estate. And then I would go back to my usual life.

  6. I would pay off my student loans! 975 left
    Make a huge mortgage payment. 700 left
    We bought a fixer upper in a very expensive neighbourhood. So I would put 200 in renos to bring our house up to what the house would be more in par with the hood. 500 left
    New electic car 460 left
    Max out TFSA for me and hubby. 430 left
    60 in a slush fund. 370 left
    Increase RSEP payments for our two daughters. There still babies so their is lots of time to grow. 360
    60 to our parents. 300
    Invest the 300.
    We have a young family and just starting our careers so we would not retire but I would sleep a little better at night!

  7. I would pay off my mom’s mortgage, make sure I have enough cash to pay my tuition for the next 5 years, and maybe enough left over for my sister’s education. Then I would invest maybe 500K in a dividend portfolio and the rest in maybe growth stocks. The main point is after covering my mom’s house and my family’s education, I would invest the rest. When I find a million dollars on the street I will worry about the allocation. Until then it is just a pipe dream.

  8. 150k pay off the mortgage
    50k home repairs/improvements
    100k kids educations
    50k replace both vehicles within 2-3 yrs
    25k major summer vacation before teen goes to college in Sept.
    25k purely fun money for total nonesense
    600k invested in income generating stocks/bonds/GICs ($30k/yr at 5%)

    We’d probably work for another ~5yrs to build up the funds to cover one last round of major home maintenance before retiring at 53/56 (roof, windows, septic, major appliances etc). Four years would cover the work, and the last year’s funds would suppliment the $30k investment income for our ~10yr retirement before 65 when other funding kicks in.

  9. …..i would think like a millionaire!!!!

    1) get a good Tax Account who has their Financial Planner license
    2) I’ll set up a LEGAL (follow CRA rules!) small incorporated company with multiple share holders and multiple classes of shares.
    3) Seek the most tax effective way to pay off personal debt (~225K in mortgage)
    4) Transfer ~500-600K to new corporation as ‘seed money’ for business.
    5) Take corporate ‘seed money’ and buy investments within the corporation. Buying a balance portfolio; yielding 5-10% capital appreciation and or income
    6) Now the fun part, as required, and working with my financial planner / tax accountant, structure either regular paying dividends or ‘special dividends’ depending on the needs (TFSA contribution / RESP’s, ects) or wants of myself and wife. By taking this ‘dividend’ income from the corporation instead of an open trading account, the effective dividend tax payable could be significantly lowered (depends on province). In addition, there could be all kinds of additional benefits (for example student scholarship programs for kids, corporate business gatherings in Jamaica, etc)… and if the corporation was set up following CRA rules in a country that has a lower (than Canada) or support a zero corporate tax rate regime then your corporation could be basically paying no/little corporate tax and the income (dividend) you receive is the most tax effective income form there is…Follow the rules people…
    6)set up a proper succession plan with your tax account/FA to ensure that upon death, the corporate financial goals are maintained/managed… this ensure that the CRA only gets what they deserve (as little as necessary) and that any provincial ‘probate’ taxes are minimized.
    7) try not to touch the principal of 500-600K, letting it grow, doubling in 10 years… we will both be around 50 and then structure our retirement in the most tax efficient manner possible.
    8)…. Whats left…175K ($1,000 / Month in pocket change for the next 175 months)

  10. If I received a million, tax free or after taxes, I would pay off any debt that I had that was over 5% interest, since there is none (mortgage is sub 5%), I would put all of the money into about 40 dividend paying stocks ($25k each).

    That should reliably generate $45-50k/yr. I would keep the dividends reinvesting till I hit $2million or paid off my mortgage whichever came first.

  11. I live in Vancouver BC – the most expensive city on the planet – so a million dollars would not allow me to quit my job. I’d be able to buy a middle class home in the suburbs, a car, and maybe put some money into an RRSP (but not much). I think I’d have enough left over to pay off my student loans, but that’s it!

  12. Pay off mortgage and max out RRSPs in dividend stocks.
    I’d have about $825,000 left.
    I’d likely splurge on a couple minor home renos just to get things current. Might buy a new vehicle, but I don’t see that happening right away.
    With the remaining $800,000, I’d try to avoid giving away too much to family as I’d want to conserve as much as possible for my own kids and their future. I wouldn’t feel too guilty about not sharing 1 million as it really won’t go that far when you think about 3x tuition x4 years each. Large majority would go into low-risk investing to try and generate as much return as possible. Likely too young to think about quitting my job at this point with $1 million free dollars. Now if that was $10 million, I’d go a little more crazy helping out family members and thinking about early retirement…. in hawaii or bermuda ;-).

  13. Who doesn’t want to become a millionaire? I definitely do. If I become one, I will get rid of few of my debts, the most important being the mortgage- as it’s a pain lingering in my mind ever now and then. The next wise decision would be investing that would give me enough returns for the rest of my life, it would be a lucrative venture or buying some bonds.

  14. Somehow made over a million, drive a nine year old car and have a house that is falling apart. Sitting in front of a computer buying tens of thousands of dollars in stock is not fun or easy.
    P.S.
    You will really start to worry about using online anything with that kind of money.
    P.P.S.
    Never had any debt for long, part of the secret.

  15. I’ll cross that bridge (having a million dollars or more), when I get there – as far as making a plan. But there’s a 95% chance I will keep my job.

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