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What Would You Do With a Windfall?

Written by Nickel - 45 Comments

What would you do with a major windfall? For the sake of argument, let’s say that someone dropped a million bucks in your lap. Would you pay down debt? Buy something nice? Save or invest it?

About a week ago, I posed this question to my “Tweeps” (people that follow me on Twitter). The primary limitation on their responses is that Twitter requires that all messages be 140 characters or less.

I never answered this myself, so I’ll do so now:

@fcn: “First, I’d pay a bunch of taxes. Then I’d take a nice vacation, maybe renovate our attic, and save/invest the rest.”

As for everyone else, I got 24 responses:

  • @SuburbanDollar: “I would pay off my mortgage and student loan, buy a new boat, and invest the rest. 8% return on the remaining 750 is like 60k…”
  • @The_Weakonomist: “I’d upgrade my honeymoon, buy a house, save $50k and invest the rest.”
  • @TheHappyRock: “$400k is enough to pay pay off current house and buy a new one with cash. Total debt freedom!”
  • @ElBueno: “Buy a modest house. Invest some. Give some to sister and brother-in-law for their business. Take a few years off from job to build mine.”
  • @ManVsDebt: “Conservately invest it all, live only off interest, and devote life to form nonprofit to educate inner city teens on personal finance.”
  • @centsiblelife: “Pay off all debts, spend $100K updating our house/yard, put away $ for 4 college educations, save the rest and live off the interest.”
  • @jeffrosecfp: “Treat my family to a few nice things, donate some and invest the rest and live off dividends and interest for years to come.”
  • @enochko: “Approx. 10% in inflation-protected securities (emergency cash for 2-3 years), rest in index funds (currency hedged for int’l funds).”
  • @freefrombroke: “With $1M? Buy a house, go back to school full time, and put away the rest.”
  • @zenshinji: “Something like save 100K for my kids’ college, invest 400K, save 400k, and pay myself with the remainder.”
  • @FiscalFizzle: “With $1M and rates a bit higher, I’d buy a house and car for cash, invest the rest in something relatively safe and live off the interest.”
  • @Flexo: “Buy a house, invest, give to charity. Unfortunately $1M isn’t enough to start a foundation unless I forgo the house and investing.”
  • @jayarezee: “Pay off our mortgage and invest the rest!”
  • @MyLifeROI: “Pay off my parents mortgage so they can finally relax, MBA, max ret. accts, start a 529 for (way in the future) kids, Vanguard funds.”
  • @beatingbroke: “Pay everything off. Set up investments for college and retirement. Long vacation. Donate, donate, donate.”
  • @closedblueyes: “Pay off $73k in student loans, buy a house ($300k or so), pay off my mom’s mortgage ($80k), and save/invest the rest.”
  • @stephonee: “I don’t think I would even pay off my student loans. I would invest the whole sum carefully, but aggressively. All stock index funds.”
  • @Azuaron: “Student loans? Gone. Move out of campus housing to an apartment. Setup emergency, car, computer, and moving funds. Invest the rest.”
  • @RevancheGS: “Buy house, keep cash for spending/maint/prop taxes, set up housing for parents, revise the will, get a Master’s, save/invest rest.”
  • @countmypennies: “Pay off my house (or buy a house), make a few charitable donations, and start saving for my hypothetical children’s college ed.”
  • @nbnw: “A million bucks? Pay off my debt and take the job I wanted, not the one that I can afford.”
  • @Shondratasha: “Pay off all debt incl. mortgage, invest in real estate I can buy and hold, research for @ least 1 angel investment.”
  • @katekashman: “$1M? Give 10%, Save 10%, Spend 10%, put aside 10% for kid’s colleges, and invest the rest. Real fun is planning to spend the 10%.”
  • @bargainr: “I’d put half in savings (for a rainy day!), the rest into some income bearing investments to supplement my income.”

It looks like debt reduction, saving, and investing are all high on most everyone’s list. Honestly, I was a bit surprised that more people didn’t mention treating themselves to something nice with at least a fraction of the money. I wonder how closely reality would mirror the above responses. Perhaps the majority of respondents are just more responsible than me. :)

What about you?

What would you do if fate presented you with major windfall? Again, let’s assume that we’re talking about a million dollars. Would you be 100% responsible? Or would you go a little crazy?

And now for some shameless self-promotion… If you’re not currently following me (@fcn) on Twitter, you are cordially invited to do so. Oh, and you can also get new article notification on Twitter by following @fcnfeed.

Published on April 17th, 2009 - 45 Comments
Filed under: Miscellany

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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45 Responses to “What Would You Do With a Windfall?”

  1. 1
    Ann Says:

    Pay off all debt. $10,000.00 gift to each sibling (3) and $20,000.00 to mom & dad. Fully fund children’s (2) college accounts. Take a couple out of the ordinary vacations with hubby & kids. Invest the rest.

  2. 2
    kyle Says:

    Hey, I said I would buy myself a new boat.. and it would be a really nice new boat. I think we all, my self included, probably would indulge much more than we said we would. It would be hard not to, I think I am going to go get a powerball ticket so I can find out what I would do with that windfall.

  3. 3
    Baker @ ManVsDebt Says:

    I would definitely indulge, but it would be off the interest. Rather than give a large chunk of money I would invest it all and then give my time… (hopefully more valuable?)

  4. 4
    the weakonomist Says:

    Wow my friend, I don’t want to know how long it took to put that together. It’s great to see everyone has a general agreement and how money should be spent.

  5. 5
    Nickel Says:

    Weakonomist: It took awhile. :)

  6. 6
    teaspoon Says:

    Donate 5% to The Nature Conservancy; pay off my student loans ($24,000); pay off my mortgage (180,000) and my mother’s (prob. around 200,000); quit my job and travel for a year; invest whatever’s left over.

  7. 7
    Tim Says:

    I’m surprised at the paucity of responses that indicate the windfallee would give money to charity. Should I be?

  8. 8
    Heather Says:

    I dream about somehow coming into just enough to pay off our student loans. Life will be SO much better when those are gone.

    I think we would tithe 10%, pay those student loans off (50k), pay 5k to fix up our 23-yr-old car, then if it were up to me we’d put the rest in savings and pay ourselves a modest salary (approx 30k a year + tuition) for the next 5 years while my husband gets a masters and doctorate and can then begin teaching, which is his dream career. Once he has his degrees and a teaching job, we would buy a reasonable house, and I would desperately want to take a nice vacation. I’m pessimistic enough to think that after taxes, we would have pretty much used up the money by this point. (What is the tax rate on a windfall? 50%?) But then again, no debt and a paid-for house and a job? What more could we need?

    Knowing my husband, we’d also be treating ourselves to a few things along the way like a new computer and a new TV, and we’d be arguing about how much we can go out to eat and whether we should buy a brand new car.

  9. 9
    Courtney Says:

    Half to taxes (ugh). 10% to church, 5% to other charities. Pay off mortgage and student loan (total ~$185K). $50K for fun stuff (nice vacations, new furniture, gifts to family, etc). Invest the remainder and then return to life as normal (but immensely more free).

  10. 10
    Kelly Says:

    @Tim, with 140 characters I didn’t have space to add charity!

    Since that is a part of our normal budget (and I assume a good majority of people’s budgets include this), I would say that “living off the interest” implies that some of your monthly interest would go towards charity.

    Our big treat would be to fix up our house/yard to make it as we want it (not the fixer upper it currently is). I would also include in my yearly budget plenty of time and money for vacations. :)

    I did have a mini-windfall recently, we divvied it up approx. 23% to savings, 46% to debt repayment, and 31% to a fun purchase. (a swingset for our kids).

  11. 11
    Kev Says:

    First off – if I came into that kind of money I would do my best to keep it a total secret. Everyone you have ever met in your life would be banging at your door otherwise…

    I would set aside 250,000.00 dollars to build a new home on an acre or two of land (that would easily be possible where I live). We already have one rental, and i would start renting out our current home out as soon as our new one was finished. I don’t think I would pay off the rentals though. They both are locked in at sub 5% rates as it is – I would just let them sit and have the tenants pay them off via rent payments. Some of the money would be gifted to our parents and siblings. The rest would be invested / saved. With a paid off mortgage, I would probably say adios to my life as programmer and go back to college to become a pharmacist. Of course my wife would have to remain at her current job until I was finished.

  12. 12
    Jo Says:

    After paying off debt and mortgage, I would give 10% to my church, invest and save another percentage, and with the rest work it out so I could become a philanthropist. It’s been a life dream of mine. I would physically work with animal organizations, Habitat for Humanity, “assist” Doctor’s Without Borders and a few other worthy causes.

    Unfortunately, with today’s inflation issues, a million bucks doesn’t go very far; but if there’s a will, there’s a way.

  13. 13
    Clair Schwan of Frugal Living Freedom Says:

    The answer is easy. Pay Uncle Sam, then sock it away in multiple accounts with my siblings as co-owners, and live off the interest. I’m debt free now, so the interest would easily pay for my lifestyle.

    Clair

  14. 14
    AussieDosh Says:

    I’d clear some debt, save portions various short / long-term goals, invest 10% in stocks and put the rest aside for property when buying conditions are right.

  15. 15
    Tyler Says:

    Is this $1 million pre- or post-taxes? Assuming post-taxes (you won 1.5 million but got 1 million) I’d pay off my current car loan ($15,000), get my fiancée a new car ($25,000), pay fiancée’s student loans ($30,000), set-up two college funds ($100,000 a piece), make donation to the Shriner’s Hospitals ($130,000) and invest/save/earn interest on the rest. As I will keep my employment, my salary would provide my fun/enjoyment money, while the interest would provide bill/grocery money.

  16. 16
    Trevor @ Financial Nut Says:

    Wow… what would I do with that type of cash? Buy my wife a decent car. Stash away a ton of it for our retirement because of how great stocks prices are. Place a large sum of it in an index fund. Take a small vacation. Buy a Mac. :)

  17. 17
    PawPrint53 Says:

    I would put enough away for my husband and I to live comfortably in retirement (added to what we have now so it wouldn’t be the whole amount). Then I would donate the rest to my nonprofit group that is trying to get a low-cost spay/neuter clinic up and running.

  18. 18
    Jason Unger Says:

    Probably pay off everything we owe; debts, school loans, mortgage. Take a little trip. Then put the rest away.

  19. 19
    teaspoon Says:

    Frankly, I’d be pretty happy to get a windfall just big enough to pay off my student loans: $24,000.

  20. 20
    MoneyEnergy Says:

    One million? That could do a lot. I’d pay off student loans ($28,000); buy a house ($300,000) and rent it out; invest $500,000 in high-interest bearing vehicle; keep $100,000 for full-time education (maybe going back to law school); with the remaining $75,000 or so there might be a vacation in there…. oh wait… I’d want to pay off some of my parents’ debt for them, too, for helping me get through school etc.

  21. 21
    Raj Patel Says:

    I would pay off all debt, without question. Adios revolving credit card account balances, mortgage obligations, auto loans, and educational debt.

  22. 22
    Greg / Wise Bread Says:

    I would pay off my parents’ mortgage, take a 6-12 month ’round-the-world vacation, buy myself a new car, and then use the rest of the money to make more money. I’d want to be an angel investor (versus playing the stock market, for instance).

    There was a conversation about this same topic on Wise Bread recently. Check out the comments for ideas (like we need more ideas…) on how to spend all that money. :)

    http://www.wisebread.com/if-yo.....-you-would

  23. 23
    angela Says:

    I would pay off all debt including the mortgage. I would put 100K away for each child (300K). I would have 50K in an emergancy fund. I would give some to my mom and dad, some to my in-laws, some to my brother (only sibling). I would plan a vacation to WDW and a Disney cruise during peak season. I would max out our 401K’s and invest the rest. I would finish my degree.

  24. 24
    Shoeby Says:

    100k would pay off all debt including the mortgage. I would invest the rest and try to live off the interest, but would still continue my education, and probably keep my job.

  25. 25
    sara l Says:

    Pay off debt, weeklong family reunion in my mom’s home country (I have aunts/uncles I haven’t seen in 10+ yrs). That would be around 1/4 of the money. I’d invest some conservatively, using the interest for a stipend. Possibly pay off my mom’s house. Finally I’d donate to charity.

  26. 26
    BrokeLoser Says:

    Give at least 10% to worthy charities, payoff the mortgage, and save/invest the rest. Quit my soul crushing corporate job, and go back to college to finish a degree or two.

  27. 27
    bouncing back betty Says:

    Pay off my remaining debt (car, mortgage, student loan), buy a slightly larger home with a few bells and whistles that I’d like in a house take some time off and travel for 4-6 weeks, drop a chunk of change on my two pet charities, and wisely invest the rest.

  28. 28
    Kosmo @ The Casual Observer Says:

    Invest it and retire earlier. I’d rather extra years of leisure than expensive toys. I really enjoy not working :)

  29. 29
    DDFD at DivorcedDadFrugalDad Says:

    Good post! I would:

    - Be sure the taxes on the money were paid (No taxes on life insurance proceeds)
    - Pay off outstanding debts to become debt free
    - Invest the money prudently, hoping to further grow the money for the future
    - Finally, perhaps splurge on some small things

    Here is more:
    What Would You Do if You Suddenly Got a Financial Windfall? http://divorceddadfrugaldad.co.....dfall.aspx

  30. 30
    someone Says:

    I’m in the position of getting ~500K. Plan to buy a house in cash… no mortgage, or finance charges, woohoo! And we’re buying a used civic. Debating whether to go hybrid or not..

    We have no debt otherwise, so rest will prob go into an index fund.

    I’ve always been a “saver”, but knowing we’ll have a house paid outright will be great piece of mind. I hate paying interest… paying 14% of income for debt service is insane.

    Everything will stay same but with much less stress about economy/outsourcing, etc. I feel very fortunate.

  31. 31
    Mike Says:

    I’d pay all outstanding debt, use some money for a down payment on a home, and invest the rest in my business by hiring some employees to do all my work for me.

  32. 32
    Mr. Natural Says:

    I’d quit worrying about selling this home of ours before splitting to the Northland of New Zealand (She is Kiwi, and we are both in our 60’s – time enough for one last great adventure), where we could put up a nice little suburban eco-independent house and property. Perhaps a demonstration home-site. I think I would give some money to a few orgs like ACLU, World Wildlife Fund, Sea Shepherd, etc.

    Glad to see links to places like wisebread, frugal living freedom, and others.

  33. 33
    Danielle Says:

    2% interest on 450,000 is only $9,000, am I calculating that wrong or are you guys really able to live off of that this year? Maybe if you won 4 million, and were able to bank 2 million of it, and your interest would be 40K…

    I think giving to charity will offset your tax burden, so maybe everyone who says that is not being JUST altruistic? I assume you could also max out any retirement accounts I am eligible for.

    Here is my answer to the question:
    I would research tax law enough to know the best way to hold on to as much of it as I can. I would pay off mine and my husbands student loans, vehicles and other consumer debts. Lastly I would purchase land/home and plan/execute a modern and energy efficient home (solar panels, geothermal heat and windmills) and outlying buildings and probably an expensive but very eco friendly vehicle. I would also plan/take the european vacation I have always dreamed of.

    I can’t guarantee I will give large monetary gifts to my family, charities, or that I would quit my job (if I have one). Those decisions can’t really be made in advance, it will have to depend on my situation. Bonus, if I don’t give my immediate family money it will be really easy to say no to other “family” that comes out of the woodwork.

  34. 34
    Nickel Says:

    Danielle: Yes, when people say that they’ll save/invest, they’ll have to do much better than 2%. Historically, this shouldn’t be difficult over the long term with a well diversified portfolio. Also keep in mind that it’s important to keep the nest egg growing. If you spend everything that it spins off, inflation will eat you alive (because you’re investment income will remain flat).

  35. 35
    monka Says:

    Actually happend to me. Settlement from terrible car accident. Still dealing with the effects and loss of job due to disability. At least have the settlement money to live on. Paid off house and debt, some charity donations, rest conservative investments to live on.

  36. 36
    Crafteegirl Says:

    If I won a million, I’d pay off my credit card debt, our mortgage, significantly pay down the mortgage on our rental and give mom $50K for her mortgage (~$250,000). I’d buy a slightly larger vehicle…possibly a Saturn Vue or a Honda Pilot. (I drive a Honda Civic right now and though I LOVE the gas mileage, it’s difficult to get my son in and out of the car seat – and even more difficult getting anyone else in the car with the car seat still in it!) I might also give my dad $25K or so…Love them the same, but Mom has saved me more times than I can count. I’d also pay myself a partial salary so that I could work part time (2 days a week) and spend more time with my 1 year old son. Then, I’d let my husband invest the rest…figuring we could retire early in a good 10-15 years. Ooh, now if I could only get the windfall – LOL!

  37. 37
    prufock Says:

    A million dollars?
    1 – Pay off all debt (~$50K in student loans and car payments combined).
    2 – Buy a reasonably-priced house (~$250K). Roll this into income by creating a basement apartment or taking in a boarder.
    3 – Pay off my family’s debts: brother’s student loan, car, and mortgage; sister’s student loan; parents’ car and credit cards (~$300K).
    4 – Buy myself some studio space, recording equipment, musical instruments (~$100K). Hopefully roll this into a side business in recording.
    5 – Investments, long-term (~$100K).
    6 – Mad money (~$100K). Includes gifts, travel, and just spoiling myself. What’s money for if not to enjoy?

  38. 38
    LinearChaos Says:

    Wow, wouldn’t this be an awesome occurrence!

    I would definitely pay off all my debt, buy my mom a house with cash, and then invest the rest to grow for me…if the market ever comes back that is. ;)

    Hopefully I would have enough after the IRS took their share!

  39. 39
    Glenn Says:

    A million bucks is way more than I would need. $250K and I would quit my job and live off the interest and pursue my hobbies to make some supplemental income.

    I live pretty frugally, so reading about people wanting a $250K house makes me laugh. If I had a house that expensive the property taxes would be like $6000 a year where I live. That is almost as much as I pay for my current mortgage for a whole year.

  40. 40
    Rosa Says:

    Danielle @33 – that’s hilarious, $4 million is the figure my partner says I would need to win in the lottery if I want to quit my job.

    But really, that’s what I’d do – quit my job & start looking for something I can do while the kiddo’s in school, when he starts school in 2 years. I could *definitely* live off $1 million for a few years, no problem.

  41. 41
    John Says:

    Lets just say I’ve never been responable with the little money I make. I think this would follow me into my million being spent without regard to my future. We only live once. Which is enough!

    All the above posts are nice, really really nice. Kudos

  42. 42
    Steve Says:

    $1mm in extra income probably represents about $540,000 after taxes (in SC with 39% fed and 7% state inc tax) unless a portion is not taxed say for charitable donations.

    I would allocate $200k for charities leaving $800k taxable yielding $432k after tax. I would reduce debts with $332k and totally enjoy the $100k. About $25k on a luxury trip for wife and I. $25k on family members and $50k on furniture for our home.

  43. 43
    Bob Says:

    If I were to get $1,000,000.00 dollars! I worked 41+ years at the same job I took 2 days after graduating from high school. I was forced to retire early due to kidney failure, however my wife has to continue to work so we can pay the bills and mortgage. With this kind of windfall we could pay off the mortgage and bills and have enough money so that my wife could stop working and stay home and help me with my medical needs. This would also open up a job for someone that is out of work.
    We would very much welcome any windfall!

  44. 44
    Christine Says:

    I would pay off my car & student loans, get a small house or condo, make a generaous donation to my parish’s food pantry and social action charities, then take a leave of absence from work to take an around the world cruise. The remaining principal would be invested and left untouched. I’d use half of the income generated to pay for fun things like vacations and let the rest be reinvested. I don’t think I would stop working since I like my job.

  45. 45
    Moveboxer Says:

    I would clear out any type of debt and save for my kids and their college fund!

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