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March 28, 2011


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25k would let me pay off my student loans and the rest of my car loan, with extra left over to donate some and save some, but honestly, I’d probably spend the "save" portion on an experience—finally travel out of country, because that $1-2k would easily be saved in a couple of months with the $ that currently goes into my debt repayment.

A much larger amount? Again, that would pay off the debt and have some to donate. 50% would go directly into retirement savings. I’d consider buying a house in the $100k range (which gets you plenty of house around here, plus our dream home is < 1500sq ft.) Again, travel, and that budget might be more like $5k. The rest would be in some safe investments, and I’d probably splurge and pick up the sewing machine I’ve been wanting ($6k).

Fund grandchilds education fund

With $25k - Donate 10% to my church, and pay off my wife's car. That would leave about $10k. I'd probably dump that amount into savings with hopes of picking up another rental property soon (already planning to do this, but another $10k would help).

$1 million - Again, start with giving 10% to my church. After that, I'd pay off my wife's car and our home mortgage. That would leave about $700,000. I'd probably begin to very seriously look for a business to purchase that my wife and could both work at together. We want to be self employed very badly. We could probably purchase a business for $500,000 that would provide $150,000 per year in cash flow. That would be more than enough to sustain us, especially with the house paid off.

$5 million - Mostly the same as above - give away $10%, pay off our debt. Then after that, I'd use most of the remaining amount to invest in real estate. With about $2MM, I could easy generate enough passive cash flow from r/e to never need to work again. I'd invest the other $2mm in bonds. I still might consider purchasing some other type of business to keep my wife and I busy. I'd also play a lot more golf.

Not that I've ever though about it or anything...

I guess I will save about 25-30% in each case just for the taxes. For the 25k, I will put the rest into my mortgage. For $1mil, I will pay off my mortgage and invest the rest into dividend paying stock. Depending on the payments, i might take a semi-retirement job. For $5mil, I retire immediately. Put money into dividend stocks, give money to what I consider to be worthwhile causes. Of all the scenarios, I will be most happy with $1mil followed closely by 25k. The $5mil will just give me too much headaches.

Once upon a time, I DID receive an unexpected $25k windfall, when my great-grandfather passed away and left the remainder of his estate to my sister and I. I was 25 years old and already in the process of planning to spend an extended period of time living abroad (in eastern Europe) and traveling extensively while there.

The unexpected inheritance moved up and expanded my timeline significantly - meaning I left much sooner and stayed much longer than I'd originally intended. It enabled me to travel more and work less (I taught English at the time) and essentially bought me one of the very best years of my life.

Was that the best use of the money? Not necessarily, and if I inherited the same amount today, I would absolutely treat it differently. But at the time, when I was footloose and fancy free, it was the very best thing in the world.

I can answer from real life experience: I received a similar amount unexpectedly several months ago. I invested all of it in several index funds for small caps.

My only debt is real estate so I would probably throw it at that. (taxes and giving are a "given".

Agree, it wouldn't be but a bump. I will leave the other two for daydreaming time...

The $25k would become a down payment on another rental house immediately, and would be very welcome because we can only save up for down payments so quickly during this amazing market.

With $1 million I would buy several homes outright with the first half and leverage the other half with a larger real estate investment.

With $5 million I would primarily buy real estate with cash, maybe saving $1 million for leveraged purchases.

I would probably give some portion of the larger amounts to the aid organization we support, but mostly I would drastically increase our monthly giving out of our new monthly cash flow from the investments.

Even with the $5 million windfall, I doubt we'd buy much (maybe a car for my wife) or move quickly, nor would we immediately quit our jobs. But within a few years we likely would "retire" from our regular full-time employment to either part-time work or our own business(es).

We have no debts, no kids, and sufficient retirement/emergency savings. But we love to take extended travel trips and would probably use a $25,000 windfall to escape the desert heat and spend a couple of summers in cooler climates, renting a beach house, road-tripping through Canada/Alaska, or renting an apartment overseas.

With $1 million we would upgrade to a nicer house. We wouldn't spend more than half the amount on the house but it would be nice to pay cash and continue to be debt-free.

Anything over that would be invested, and would probably move up our permanent retirement plans considerably (we are already semi-retired).

10% to church; remainder funds Roth IRA, 529 plans, savings (in that order)

Soon to be college expenses. You never have enough saved and what is left over, if any, invest for retirement.

$25k: check with a few churches I know to see if they have specific needs the money could be used for. If so, set up the full amount as a matching gift to encourage others to donate. If not, give small portions to general ministry funds, and invest the rest (in whatever area is needed for rebalancing.)

$1m: Immediately move to the city where I want to live, buy the house I want from a family member, and set aside enough for remodeling. Check with churches regarding specific needs, give to general ministry, invest the rest. This is a large enough sum that my wife could semi-retire at age 28, and probably start a game company.

$5m: same as $1m, but probably with a different portfolio balance.

For both of the $millions cases, I'd have to sit down and run the numbers on various portfolio allocations like the permanent portfolio ( ) and go over my strategy with a Vanguard adviser. I'd definitely look into some sort of umbrella insurance.

$25k - Pay off mortgage on principal residence, use the rest to beef up emergency fund (due to recent withdrawal).

$1M - All of the above PLUS pay off mortgage on rental property, expand asset allocation into taxable brokerage accounts (e.g. international ETFs, dividend investing, commodities), pay cash for a couple of additional rental properties, spruce up current living space with some much needed furniture and other functional items, hire part-time domestic help (e.g. cooking, cleaning).

$5M - All of the above PLUS consult with experts (tax professional, estate/trust attorney, financial advisor), seriously consider retirement after a period of gradually settling into my newfound wealth.

With $25k, I would finish paying off my student loans and finish funding my Roth IRA for 2011. With a higher amount, I'd donate 20% to my favorite charities (DonorsChoose, Charity: Water, and Camp Sunshine), save 20% for medium term goals (car fund), and would talk to a financial professional for the rest.

I would use the $25,000 to create a dividend stream, or I would use the money to put down money on real estate, or I would find a profitable small business and consider starting one up, or I would...

I guess at this stage of my life $25,000 is still a decent chunk of money for me.

While not an earth shattering amount, it would still greatly aid me though this wealth building stage that I've just started (not including my 401k).

Oddly, we are in the process of receiving around 25k unexpectedly, through the death of a relative. (I'd rather have said relative though. I miss her terribly.)

We've paid off our mortgage and will make the annual contribution to our ROTHs. We may set the remainder aside for next year's ROTH contribution. I've been working on spouse to give some away.

I'd pay off our second mortgage.

I feel pretty guilty about not contributing much at all to charity right now, but I don't believe in helping others until I've taken care of myself and my wife. My wife has increasing medical problems, so I'm paying off debt preparing for when the time comes when her health care costs are gonna go through the roof. I do believe once my second mortgage is paid off, I'd have plenty of money to save and could begin giving more generously to charity.

Whether $25K or $1 million---I'd dump it all into savings/investments. It would let me sleep better at night and I might be able to retire a few years earlier. It's not enough money to change anything about my life--I'd still need to work, save, etc, & I wouldn't even buy a new car because my old one still works fine.

And, am I the only one who thought it was strange to separate "savings" from "investments" on the survey? ??? If you have significant "savings" (> $50K) I think they should be invested in some way, even if just in very low risk bonds or something.

Just received an amount slightly bigger than that last week, so I've spent a lot of time thinking about it. We'll nvest most, spend a little, give some away, nothing striking. Not enough to make a major change in our lives, but enough to use our imaginations a bit.

25K would just go into the investments (retirement fund). I probably wouldn't go out and buy anything that I hadn't already planned on buying anyway. Now a million or more. That's a different story. I'd be putting in my 2 weeks notice if it was that kind of money.

Seems like the answers match about what I feel Schwab's clients would say. I wonder what the numbers would look like if it were a completely randomized poll.

Personally, I would likely donate 20%, allot some to my car replacement fund and save/invest the rest.

The answer wouldn't change regardless of the amount. However, if I had enough investment income to quit my job, I would spend my days volunteering.

$25k - We'd pay off my husband's student loan debt and use the rest for our upcoming trip to Italy, Slovenia and Croatia!

1 million - We'd pay off the SL and the mortgage, do some renovations, and take our families on a fabulous cruise, and put the rest towards retirement.

5 million - we'd pay off our debt, our parents mortgages, maybe buy a bigger house, and my husband would probably change jobs to something less demanding.

I would endorse the check, no matter its size, put it in an envelope and mail it to Fidelity Investments.
When it arrived I would add it to my existing investments.

$25k would be put in whatever reduces my tax burden the most, which probably means depositing it in my SEP.

Whether it was $5,000,000, $50,000 or $5,000 it would go straight into investments of some type. At $5 million, I would consider paying off the mortgage after thinking about it for a year.

I would set aside 15% for taxes, 20% for giving, and put the rest in a travel fund. I will be 74 next month and I want to go all I can while I can. My kids (43 & 47) are urging me to do just that. I have helped them when they needed it and now they tell me to enjoy my life and don't worry about leaving them anything - and they are not in the best financial shape.

This would not be much different than I am doing now. I am extremely blessed that I make as much in retirement as when I was working (about 22k). I only have about $73-4k in a 503b, but I only need to use it for keeping my home fit. Luckily, at my age, I do not have a lot of wants to fulfill, just to be able to go places and visit family and friends.

Actually, I have a question about this topic. Wasn't there another post on the site about two weeks ago which covered how windfall income actually makes people poorer because of the financial decisions they make based on that one time payout?

I was trying to find it and was unable. If anyone could direct me, that would be great.


Jim --

Not that I remember, but to be honest, I post so frequently even I can't keep track of all I write. ;-)

Your best bet is to search the archives here:

I did get an unexpected inheritance for $80k. First I put $50k into a 529 for my son's college (he was 4). That should take care of most or all of college! Next we added another 2 months to our emergency fund (6 months total now). Next paid off the car loan. And finally we had fun with the rest!

My husband and I are lucky to have received bonuses 3 years running. They are not this large; but we've decided to donate 1/2 and put 1/2 toward our "vacation" fund that we are using for the first time this year. Should we get something much larger than this figure we would probably start splitting into 1/3rds for donation, vacation savings, and regular savings.

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