What would you do for a million dollars? Well, a silly set of questions asked by Buzzfeed in 2018 found that 15% of respondents would live in a sewer for a month and 67% would look for the money in a rat-infested trash bag.
Fortunately, few of us will have to do such things. Some, in fact, will simply receive $ 1 million in windfall. If you suddenly received 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 you could realistically rack up $ 1 million without a windfall.
The 2019 Schwab Modern Wealth Survey asked respondents what they would do with $ 1 million, and here are the results.
21%: Save
About a fifth of respondents said they would save money. It’s a great thing, especially if you don’t have a stored emergency fund yet.
Most of us need to have such a fund, which would be full of three to six months of living expenses, if not a little more. A job loss can happen at any time, just like an expensive health setback or even an expensive repair that is suddenly needed for your car or home. Make sure you have access to enough money to keep your roof over your head, food on your table, your taxes paid, the lights on, etc.
However, you probably don’t need to put the entire million dollars into an emergency fund. Placing much of it in investment accounts, such as retirement accounts, is also a first-rate idea.
23%: invest
About a quarter of respondents said they would invest money, which is one of the most powerful things you could do with it, because the more money you have, the more you can grow. Here, for example, is the type of table you can see that shows what you can accumulate over time saving significant sums each year:
Growing 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 |
30 years |
$ 611,729 |
$ 1.2 million |
$ 1.8 million |
That’s great, but if you suddenly had a million dollars, or even just half, see how it could grow over time:
Growing to 8% for |
A one-time investment of $ 500,000 |
A one-time investment of $ 1 million |
---|---|---|
10 years |
$ 1.1 million |
$ 2.2 million |
15 years |
$ 1.6 million |
$ 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 rich if you start with a lot of money. Still, let the first table remind you of what you could accomplish without any windfall, just some determination. It’s hard to beat the stock market for building long-term wealth. (Hint: Using index funds is the easiest way to do it, and it’s perfect for most of us.)
28%: pay off debt
More than a quarter of respondents said they would use their $ 1 million windfall to pay off debt, and at $ 1 million, most people with debt should be able to pay all of that. This is a very smart move and arguably the best use of your money if you have high interest rate debt like credit card debt.
Also note that you don’t need a windfall to get out of debt, even if you owe many thousands of dollars. There are plenty of effective strategies such as earning more money, spending less, consolidating debt, focusing on your highest interest rate debt first, and using balance transfer cards.
54%: Spend it on a house, car or trip
Ultimately, more than half of the respondents said they would spend the money, on a house, a car, or a trip. Those are good uses for a windfall, but only if you have:
- Debt-free with high interest rates
- An emergency fund with expenses of three to six months.
- Retirement accounts on the way to provide what you will need in retirement
- Sufficient resources to meet other important financial goals, such as college.
A million dollars is a lot of money, so you can use it to deal with a lot of the above: getting out of debt, setting up an emergency fund, investing a lot for your future, and then … perhaps you will make a down payment in a new house, buy a new car and have a great trip!