How many of you had those conversations about what someone would do with lottery winnings? I certainly have, and I’ve had very similar conversations of what people would do if they scored a large sum of money. We will talk about the importance of saving money.
What would you do with 1M? – Importance of Saving Money
Let’s paint a picture here. We will talk about a lottery winnings of 1 million dollars or some sort of lump sum of 1 million. What would you do with this kind of money? Would you be able to retire assuming you are, let’s say, 23 years old making an average salary?
The one thing I hear that really makes me think is, 1 million will never be enough to retire on! I ask why not? The answer I usually get is, do you really think that 1 million is going to pay for everything you and possibly a family of 4 would need for the next 50+ years?
If I quit my job and left the money in my checking account using it to pay the bills for the next 50 years, to be honest, I have no idea how long it would last. Quick calculation tells me that if I require a $50 000 salary per year, it would last me 20 years. However if I required a $100 000 salary it would last me only 10 years. At the end of both of these scenarios I would be flat broke again and this assumes I did not splurge on anything outside of my normal spending habits.
I know the above situation is something that I certainly would not do. What if I said that for the average 23 year old, the 1 million dollars could potentially last your lifetime. Better yet, it could last your lifetime and you would still have the 1 million dollars sitting there 50+ years later.
Well this is assuming a $55 000 dollar salary (click here to learn where this comes from) could pay the bills per year which obviously depends greatly on the lifestyle you wish to live. If it didn’t match your lifestyle, you could still retire and work part time doing what you want when you want and have the reassurance that you have that guaranteed income.
The point here is that not everyone thinks of this 1 million dollar lump sum the same. Thousands of people would blow through this money faster than anything we’ve ever seen before. This happens every day. Unfortunately, a very small percentage of people would even consider investing the entire sum. Heck, you could even continue to work and collect the 55 thousand dollars per year as “fun” money. Remember the 55 thousand dollars per year is renewable passive income where blowing through the one million dollars is not. What could you do with an extra $55k per year? This is why we all need to say, save your money!
Or would you rather use the money to fund bigger/smarter TV’s, computers, home automation, bigger houses, or better yet 1.9s 0-60mph Tesla Supercars at the expense of your retirement / passive income? Maybe this is not so money smart, is it?
What does all of this mean? – Importance of Saving Money
There’s probably a small percentage of people who are given this opportunity, but it does happen. For the rest of us, how can we relate? Well, it’s quite easy. Save your money! If you start your savings early enough, you too can arrive at the same dollar amount without anyone needing to fund your account for you.