“A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” – William Feather
I did a post before about why I don’t play the lottery, but this is a serious question. Imagine you were awarded a million dollars, or you sold a business for a million dollars. What would you do with it?
Nowadays, it is extremely easy to blow through a million dollars. I, like everyone else, used to think that a million dollars was the lifelong dream/goal. In reality, it’s not. Here in Canada, you will be lucky to get yourself a detached home in the suburbs without having to dish out a million dollars alone.
So, what would you do with a million dollars? The truthful first answer you have in your head will inform you of how you are with money now and how you would be if you got that money.
Granted, you may say you would save the majority of it, but you will never know what you’d do until you actually get it.
Here are 3 things not to do with a million dollars
Buy An Exotic Car
When you think of a millionaire, you think about foreign cars like Ferrari’s and Lamborghinis. Well, one of the worst things you could do if you get a million dollars is buy an exotic car.
Of course, it would be awesome to drive a Bugatti around your neighborhood, but the value of that car will depreciate as soon as you pay for it. Plus, the maintenance for the vehicle will set you in the negative quickly. Even a simple oil change can have you begging for money.
Instead, lease one of these cars or buy one with the intention to sell it within a year. This all depends on the specific vehicle and miles.
Hand All Of Your Money To A Manager
Most people have no sort of knowledge when it comes to money management. People like this tend to buy mutual funds, stick to bonds, or simply just save their money.
Some would rather hand their money over to the first money manager that they come across. The problem with this is that people with new money are lunch food for financial advisors and money managers.
The Nouveau Riche tend just assume that everyone has their best interest in mind. They quickly learn that having a lot of money is the fastest way to lose money.
Save It All
The defensive new millionaire may opt to just save his or her money and not risk it by investing. This although is the worst thing to do. Reason being, inflation will make your spending capability worthless over the years. Any investment, even the safest investment that is more than 2 or 3 percent is enough to make your dollar value stay above inflation.
By saving, you ensure that you have those dollars immediately. The only downfall is that if you suddenly need hundreds of thousands because of illness or some emergency, you do not have a million dollars anymore. If you had invested, you may only need to use the interest and dividends that you had built up over the years by investing.
The worst thing anyone can do is have a million dollars then still only have a million the next year. Be smart but be willing to build and create more wealth.
Until next time,
Live Long and Prosperous.
Value Investing Millennial Jahnome McEwan provides FIFTY tips for Young Adults looking to build wealth from now. If working a 9-5 until retirement twists your stomach, Jahnome has a way to get you out of it!
Click here if you are interested in learning how!
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