We’ve all thought about the hypothetical situation of someone magically handing you $1 million tax-free. How will you spend it?
We’ve also heard about lottery winners blowing all of their prize money that in just less than a month’s time, they’re even more broke than they could ever handle.
So the key here is not to make the common mistakes others make when given such a huge amount of money.
And that common mistake is to basically throw the money away on buying unnecessary things and showering family and friends with lavish gifts.
Here’s what I’m going to do just in case I magically get the money.
Buy a home. It’s still a good time to score some pretty nice piece of real estate. Since I’m not a homeowner yet, this is at the top of my priority list. I won’t but a mansion though, just a nice house for a family of 5 in a safe and quiet suburb.
Buy a car. No Ferraris or Lambos for me. Just a decent family car will do. Perhaps I could get a secondary car like a convertible or sports car for “fun” purposes but I’ll get it used.
Get trust funds for (future) kids. No kids yet but I’d definitely set up something for them. Kids can eat up millions over your lifetime, so not even the prize money will quickly cover for them. Setting up trusts for them can ease the.
Set aside a splurge budget. Hey, there’s no point in not enjoying your money. I’d probably set aside just 1% for this. $10,000 is more than enough to buy some pretty fancy toys for the big boys.
Diversify the rest. Will all the spending done, it’s time to secure the rest of the money. I’d probably diversify them through CDs, mutual funds, stocks, and insurance.
Continue working. After all the spending, I’d probably be left with just a few hundred thousand diversified. Now that won’t cover for the rest of my life from now until retirement so sticking to my means and working is absolutely necessary.
Now only if someone really hands me a million tax-free.
One point you forgot to mention is to ‘give some money away’!
Always makes one feel good. A friend of mine gave me one of those 1 million dollar bills (pay money, of course). We then thought about how funny it would be to let some of those fly out the window of the car as we’re driving down the road – lol. It would be interesting to see how the drivers behind us would respond, but of course we wouldn’t want to cause an accident so we have refrained from throwing the play money out. 
If I was given 1 million dollars all I’d care about is investing it (well, most of it… like you said, you gotta splurge a little) and work towards turning it into a second million, and so on, and so on, until I had enough to live completely care free for the rest of my days.
That is a tough question. A million dollar is a lot of money and I think deciding what to do about it is not easy. So the best thing to do is to keep it in the bank and decide later. You don’t want to be carrying the amount around. But I can assure you that I will share some to charity. It is something I always what to do.