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If I had a million dollars…

If I had a million dollars, I'd move here.

If I had a million dollars, I’d move here.

The other day I was working in the yard, and I had a song pop into my head that I hadn’t heard in forever. After singing through a few verses of it, I got to thinking, “Yeah, that’s not a lot of money anymore. Or is it?”

If you haven’t guessed the song by now, it’s Bare Naked Ladies’ “If I had a million dollars.”

The lyrics are funny and whimsical, and if you’re not familiar with it, it’s a song musing about everything that they would do if they had a million dollars. There are some of the usual things you’d think of such as, “I’d buy you a house… Some furniture for your house… A K-car, a nice Reliant automobile… a monkey, haven’t you always wanted a monkey?” Then there are the “extravagant things” that would be bought such as; “I’d buy you a fur coat, but not a real fur coat that’s cruel… A tree fort for your yard… an exotic pet, like a llama or an emu… and my personal favorite, we wouldn’t have to walk to the store; now, we’d take a limousine ‘cause it costs more…” That got me thinking, if they bought everything on this list, how far would their million dollars get them vs how far would it get the SSC family?

How far would a million dollars go if you spent it like the song suggest? Well, let’s see.

For simplicities sake, we’ll assume this is a post-tax million dollars. Where we would like to retire a house can range from ~$160k upward. We’re looking in the $200-$250k range. Let’s say they want a nicer house (they are millionaires now) and go with a newer $300k home. Then you add in some new furniture, because you don’t want any shabby digs in your new house. I’ll stay conservative and say maybe $20k, for furnishing a whole house. That should cover most of a house if you’re not shopping at Ethan Allen. Now if we look at the K-car, let’s say this is a modern day Hyundai/Kia equivalent, and go for $20k for the car, with tax, title, license. We’re at $340k spent, but our main cost of living things are covered right? Now for the fun things! Llama is about $400-800 with about $20-$30/month costs not including vet trips. In the grand scheme of things, not too much there. A monkey is about $4000 – $8000 though! Holy cow, that’s way more than a llama, and it sounds like they have way higher maintenance costs too. A tree fort for the yard, can cost as much as a house. Since they want to “take a limousine ‘cause it costs more” they’re probably not going to DIY the tree fort. Those costs range from a couple thousand on up. One of our co-workers is looking at a $5k playset for their 1 year old. Let’s just say $5k. Back to the limousine, when I had to take a car to the airport due to company policy and safety, it was about $70 each way. Let’s say that would be the average limo cost to go to the store, that would be an extra $75 a week added to the grocery budget, or $3744/year. They’ve already spent almost half of their million dollars and they still need to buy fur coats, John Merrick’s remains, some art (a Picasso or Garfunkel), a green dress, but not a real green dress, that’s cruel. Yipe, that’s a lot of spending!!

Let’s see how the SSC family would use this. Our number for FIRE is essentially a million dollars. HOWEVER, this is a million dollars NOT including our 401k’s. Oh, tricky, tricky right? Well you see, because we have been building and growing our 401k’s for a while now, we see that as money that left to grow on its own should be able to afford us the lifestyle we have now. Pushing that aside, our ER/FFLC number is roughly 1 million dollars. Maybe this is still a lot of money, even 23 years after this song was first recorded.

This should cover a mortgage outright first of all. Yes, we have equity in our house and based on the growth around our current area, we are assuming we will at least be able to sell it at a break even for what we paid for it, fees included even though we will most likely get more for it. We like to play it conservative assume break even and not count on any home sale profit. We are now down to ~$800k left over from our “million dollars” for us to live off of until we get to age 60/62 and can start drawing off of our 401k’s. I am aware of the Roth ladder and other options to draw on them earlier, but again, I’d rather plan so we didn’t have to count on that. Looking at our budgeting we have been spending roughly $56k per year. This is with about $8500 per year assumed in health costs, and $1500 per year assumed in dental. These are just ball-parked based on what we could glean from the Government health care website market options.

Breaking our budget down and having a floating yearly spend based on how well the market is doing, the cFiresim calculators show a 98% chance of success with our plan and investments as they are now. That’s not too bad really. This is assuming a 4% Standard Withdrawal Rate (SWR), and 7% growth, along with 4% inflation. We’ve accounted for higher inflation in healthcare at the urging of Mrs. SSC’s parents. Having survived a bout with cancer, their costs have increased dramatically. We also have a 5% cushion built in, and will most likely have a year of cash as a safety net. Yes, yes, there are better ways we could probably have that cash as a liquid asset but for now, we’re thinking cash. This is all NOT taking into account any side income, part-time or full-time jobs we may pick up. Also, not accounting for any pensions or even social security, which seems to be probably another $1-$2k per month each. Also, we account for $12k/year for our personal fun money/allowance/sanity fund, whatever you want to call it. So if things got tough, we can automatically “cut” $12k of expenses just by not using allowance type money for our hobbies and stuff. Then our yearly spend would be ~$44k assuming nothing else changed.

There are times I review these numbers and think, “Why the hell are we still working?!” Then I remember, “Oh yeah, we still have a ways to go!” We currently can just buy a house…. Then we’d have no jobs, no security money, and we would be watching the clock like a hawk to tap into our 401k’s then wake up broke and sad at 75… Booo…. So, we stick to the plan. Remember though, most of our investments will get the glorious benefit of compound interest, so it isn’t as if we will be setting aside a full $1,000,000.00. No way, man! Let that grow and earn, and grow and earn, and grow. Please for the love of God, grow!

The point I’m trying to drive home, is that you could spend a million dollars like the Bare Naked Ladies suggest, and you’d be back to broke pretty quickly.

I’m fortunate that we are in a situation to be able to plan, save, and get towards our FIRE goal but it comes through diligence with spending and saving and staying on track. We could derail it at any point by getting back into the consumer mindset, but we stay the course. Why, you ask? Well, even though I love my job and get satisfaction out of it, I have other things I’d rather be doing with my life that would fulfill me more. Who reading this now doesn’t have at least 2 other things they would rather be doing than sitting in their office at work? Who would rather have free time to fully pursue their passions and not try to cram them in with a “Go, go, go, Lifestyle?” You’ll see one raised hand at this keyboard – if you could look through the screen that is. Although then that would be a little creepy… Hopefully, you get the point.

How would you spend a million dollars?

Would you spend it or just live of the interest or dividends it brought you each month?

10 thoughts on “If I had a million dollars…

  1. Steve

    You’re exactly right – for a lot of people, that million will go so fast that they won’t know what hit them. Heck, even lottery winners find themselves in similar scenarios, and some of them are taking home tens of millions of dollars.

    Like I’ve always said, it’s not about how much you make. Retirement is a direct result of how much you save, through and through.

    If I won a million today, I would simply buy my freedom by retiring. An extra million would easily put us in a place where both my wife and I could retire and live comfortably for the rest of our lives. I’d invest 100% of it and simply live off of the capital gains, as is the plan for the end of 2018 – our FI date.

    1. Mr SSC Post author

      I agree 100%! If my family had won that when I was younger, except for a fun couple of months, you’d never have even know it, it would have disappeared so quickly.

      If we had it, I’d follow suit and say, “Yep, I’m outta here and on to better things.” We’re looking at 2018 for our FI date too, so fortunately, that’s not very far off. Somedays, it just feels like it…

  2. Fervent Finance

    If we’re talking $1m net of taxes, I’d probably take $60k and put it down on a property for myself and $60k on an investment property. And then I’d take the $880k and split it over about two or three Vanguard index funds. Pretty simple and boring. But that’s me! And then i’d use some of the interest and dividends each year for some crazy travel and vacations until I decided I was financial independent.

    1. Mr SSC Post author

      That sounds awesome to me! I’m sure I’d take a nice trip with some of that money, but like you, the lion’s share would go straight into some type of Vanguard fund(s).

  3. Amber Tree

    Let me dream for a few moments… 1 million dollar (Are Euros ok as well?)

    I would set up a fixed tem ladder to cover the mortgage. Why not pay for it: tax advantage.
    Then, I would buy a rental property, almost full in cash.

    With what is left, approx half of it, would go into investments. Half index and the other half in DGI (As I like to play with investmensts)

    This set up should allow us to start our life by design: it includes still work, but on a freelance base.

    1. Mr SSC Post author

      That sounds pretty awesome! Ahhh, daydreams of FI and a million “cash units” whichever currency you are playing with. They’re nice to think about.

      At least all the plans I’ve seen so far are sensible, investing and being at FI or close to it. I don’t see NOT working after the lifestyle change kicks in, but freelance like you mentioned or as I choose.

  4. Our Next Life

    We heard this song on the radio a week or two ago and were laughing because you’re completely right. If you bought everything they list, maybe minus the “kraft dinner,” you’d be broke in no time. (And because a million dollars isn’t what it used to be. As kids we each thought that sounded like SO MUCH MONEY.) 😉

    To play along, though, if we came into a million dollars today (on top of what we’ve saved already) — we’d hand in notice at our jobs, and start our early retirement in a few weeks! We’d pay off the last bit of our mortgage, top up our Vanguard accounts, and start “our next life.”

    1. Mr SSC Post author

      I would also be done with work. Maybe coast a few weeks until I convince myself that , “Yes. Yes, I can really be done with this phase of life”, but I wouldn’t be working longer than a few weeks, if that.

      Back when this came out, it did seem like SO much money, but it’s amazing how quickly you can spend it. Especially, if you start adding up everything they mention.

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