What Would You Do with $5 Million?

I often get the comment that "a million dollars isn't worth what it used to be" or "it's not that much money" when I post about becoming a millionaire. I have a response to each of these thoughts:

• No, it isn't what it used to be. Nothing is. This fact is called "inflation."

• It might not be much money, but it's a heck of a lot more than most people have! (and usually a ton more than the people making the comment)

That said, it seems like coming into a cool $1 million wouldn't really change people's lives that much. At least that what the comments on my post asking What Would You Do with $1 Million? lead me to conclude. So, I'm upping the ante on this post and asking "What Would You Do with $5 million?" That should change people's lives a bit.

It certainly would for me. Here's what I would do (in order):

• Tithe to my church
• Determine how much of the $4,500,000 left over I'd need to fully retire
• Invest that amount
• Give the rest away
• Quit my job
• Take some time off (maybe a couple months or so)
• Get back into the swing by volunteering for a few non-profit organizations
• Consider starting a few small business ideas I've been pondering

So, would $5 million change your life? What would you do with it?

Comments

[Duane Gran]

A principled investor would do pretty much the same thing with five dollars as he would do with five million dollars, and I dare say the person without principles would follow suit in the same manner. If the quantity of the investment provides a crutch for someone then they don't stand a chance. Naturally, some investment classes only make sense once you have a baseline of funds, but there is *always* a way to do something smart with money.

[Kira]

Actually, with that much money I think I'd actually be a MORE conservative investor, since I would be horrified at losing it, even temporarily. I would probably put half of it into some income-producing funds with a little bit of growth, and then pay off the mortgages and student loans of my family and close friends. Whatever was left I would give away, and then after giving at least a month's notice and finishing up nicely, would quit my job and go work at the animal shelter. And probably get a PhD in public health.

[Kim L.]

I would most definitely quit my job and spend much more time with my kids while they are still young. I'd pay off all of our debt (cards, cars, house), give some away (charities and family), and invest the rest so we can retire early and comfortably. Oh, and buy us all a few treats too!!

[Yacapo]

I would probably quit my job, and use the extra time to work on business ideas and maybe start a few companies :)

[Lord]

After a second home and investing enough to cover its expenses, spending some on travel, the rest would be invested widely from financial instruments to real property to business ventures. I don't want to spend all my time creating a business, but would be willing to contribute to one. Learning would also be valued but I don't particularly care for academia. Limited gifts to family to make their lives easier would also be a small part.

[Foobarista]

I'm assuming this is after taxes - to get $5M after taxes, you'd have to start with about $8M. I'd have a plan set up where I'd safely have a draw of about $200K/year, and have fun. Having seen family relations ruined by relatives getting addicted to "found money" from other rich relatives, I'd not help relatives unless they actually needed it for health or education.

As to what "fun" is, it would start with travelling the world and then I'd figure something out...

[Lord]

My opinion of bonds is you have to have somewhere to park your money while waiting for bargains. I would rather be a borrower than a lender as the benefits are so lopsided.

[Terry]

Like Lord, I assume it is $5M after taxes. I would be tempted to quit my job right away, but I would probably work just long enough to figure out if I can live well and outlive the $5M and give to charity and give to my extended family and travel and invest and invest and invest.

[Brad]

Okay, 5 million is a little different. I would invest it into "safer" funds, quit my job, and live on the interest. Sorry, but I really don't believe in giving money away to charity...just too many horror stories of misuse from some "nonprofit" organizations. Toys, my time, blood...okay...just not money. And money turns the nicest of relatives from Dr. Jeckel to Mr. Hyde! I would continue to live a modest life and volunteer my time doing things I enjoy.

[moom]

hmm this doesn't change things much from the $1 million. Now though I would be catapulted straight into the accredited and qualified investor class. So that is something (i.e. hedge funds etc.) I would explore on the investment side. I wouldn't be giving money to charity right away, though but if I was at the $5million level I would start exploring ideas - I am interested in investing in socially beneficial business and research investments as the Google founders have recently announced. Only part of the money would go to this type of investment and only after a lot of research on potential ideas. No money to family etc. close family either has plenty or wouldn't want it anyway. So at the $1 million level I would focus more on actively trading my account, while at the $5 million level I might morph into more of an investor/mini-philanthropist.

[MillionDollarCountDown]

I am on my shallow side today. I will buy a yellow Lambo :) other than that life continues as is.

[Debt Free]

$5 million post tax - I'd:
Sink about $65K into a new, black Porsche Cayman S. No, really, I would. That's enough money you can afford a bit of indulgence, and I've wanted a Porsche since grade school. With much less than $5 million, that kind of money would be too much to spend on a depreciating asset.

2nd - Invest about $2 million into value oriented stocks of very sound companies, with a solid history of consistent profits, healthy dividends, and stock price appreciation. These types of stocks have a tendency to grow into substantial nest eggs if you reinvest all (in this case, you might spend some of them) the dividends.

3rd - rent out my existing home and buy another one. The new one would be closer to my wife's family and a bit nicer than our current home, but not too extravagant. The second home would probably be about $500,000 - $700,000. In our neck of the woods, that's not all that much of a house. 3,500 sq ft, 4 bed / 3 baths with a bonus room and a 3 car garage on a 8,500 foot lot are 700,000 - 1.2 million, depending upon the neighborhood. By moving I'd be able to get a marginally nicer home for the $ than in my existing neighborhood.

4th - Invest probably $500,000 - $750,000 in real estate in areas our state that are poised for growth. There are a few locations that have already experienced 25 - 35% appreciation in the last year, after decades of stagnation. The counties have invested heavily in infrastructure and tax incentives for new businesses. These areas are also geographically very attractive.Partly as a consequence of this, Microsoft, Google and some other high powered firms are building facilities in the areas, and more large firms are on the way.

5th - fully fund the kid's college, probably with a 529 plan. Our state has a decent one.

6th Travel a bit. Take the kids to see some things.

7th - Pursue a writing career. Keep the current job for a while, as I like my field and it's challenges. However, I'd cut back on the hours and spend way more time with the family.

[Dave]

I really like the idea of giving to my church, family and charities. I'd also pay off mortgages for a few close friends if I can figure out how to do it so they don't have to pay taxes on what I give them.

[brenda carpenter]

I have learned that I want a lot of money so I can give a lot of money away.Iwant to help people get what they need(food,shelter,coats,medicine).

[Mike Hunt]

Actually, I'd do nothing, just keep working. That isn't really much money. I don't mean to sound arrogant when I say this.

After tax $5 million becomes around $2.5 or $3.0 million. Those of you who think $5 million after tax will drop into your lap are not just dreaming, you are dreaming within your dream! I've got a NW of around $1.5 M with about 1.0M in cash. Still live a frugal, value based approach to life. Still am working 16 hours a day in my job. My wife works too, not so much out of financial need, but to keep her skills active and mind challenged. My different forays into the stock market in the past 2-3 years has ended up crashing & burning. I may get back in, but right now it is a trading market and I'm waiting for the next leg down.

Looking to buy a house in cash once the market bottoms in 2011 or 2012- housing will go down when interest rates rise when no foreigners buy our gov't bonds.

If you guys are going to dream, dream big for heaven's sake! Think $20 or $50 million. Look at the guys from Goldman Sachs... an 8 figure bonus was not uncommon, and now they are getting this from taxpayer money.

-Mike

[Peter North]

1. Quit my job (resident physician) immediately
2. Spend around 1-2 weeks doing nothing but sleeping as late as possible and goofing off
3. Invest the vast majority in safe, income-paying investments (ie utilities stocks, T bills, CDs, etc). I don't need a lot of money; in fact, if I had a retirement income of $50k/year that would be actually even more generous than my current situation
4. Spend my days sleeping late, reading, taking long walks, motorcycle rides, and drives
5. Likely purchase a cozy condo or townhouse in the same area where I presently rent
6. Fund my family's needs as possible