What Would I Do If I Inherited One Million Dollars?

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About a week ago, Sandy from Yes, I am Cheap proposed an interesting idea to the Yakezie Blog Network: she proposed that all blogs that were interested write a post on the common topic of “if you suddenly inherited a million dollars from your long lost cousin Bertha that you haven’t seen since you were a baby, what would you do with the money?” 


Since I absolutely love these initiatives where several different blogs write about a common topic (such as the Yakezie Blog Swap, which I always try to take part in), I was very eager to have the chance to reflect on what action steps I would personally take with $1 Million, if I were to be lucky enough to receive it. It also reminded me a great deal of a topic in the 2nd Yakezie Writing Scholarship Contest (which I helped judge several months ago) where essay applicants were asked to write about what they would do if they won the lottery. 

Inheritance/Estate Tax

Like it or not, the first 30-40% of the $1 Million would most likely have to be set aside to pay Uncle Sam for any estate, or inheritance, taxes that I would owe on the money. However, according to Kiplinger’s, Congress’ lack of action lately on renewing the estate tax in 2010 may allow up to $5 Million to be exempt from taxes. This would be quite a blessing!

Since I’m not quite sure what the verdict will be on this or if a final decision has been reached by lawmakers, I will, for now, operate under the assumption that 40% of the $1 Million be paid in taxes.

Amount remaining = $600,000

Play Money

Of the remaining $600,000, I would take 5% ($30,000) and set it aside for what I call “play money.” This amount of money would be small enough that I would be all right with losing, but would still enable me to “live it up” and enjoy the $1 Million.

Several possible things I would use the play money for are shown below:

• A trip to Spain/France.
• Buying new hiking or cycling gear.
• A trip to the Grand Canyon.
• Visit Yellowstone National Park.
• Backpack on the Inca Trail.

Donate Money to Charity

Currently, I donate 5% of my income to a number of charitable organizations. However, the main one is the National Multiple Sclerosis Society, for which I participate in a bike ride each year in order to raise funds to support and find a cure for this disease.

With the $600,000 remaining after taxes of the $1 million inheritance, I would take 10% ($60,000) and donate it to the Multiple Sclerosis Society. I sure would be their top fundraiser then!!! 🙂

Amount Remaining After Play Money and Donating = $510,000

Achieve My Purpose Focused Financial Plan

With the remaining ~$500,000, I would invest it in achieving my Purpose Focused Financial Plan.

This is a system that I adopted after reading David Bach’s book, “Smart Couples Finish Rich.” A Purpose Focused Financial Plan is a very interesting personal finance strategy that David adopts with the people he advises in his financial planning business. If you haven’t read it already, I would strongly recommend that you pick up a $0.01 (cheap!) used copy of the book from Amazon – Smart Couples Finish Rich: 9 Steps to Creating a Rich Future for You and Your Partner.

In particular, the things that I would use the inheritance for (relating to my Purpose Focused Plan) are listed below:

• Ensure that I continue to contribute 5% of my income each year to charity.
• Pay for traveling and participating in running and cycling races in various locations.
• Max out my Roth IRA and/or 401k each year.
• Maintain an emergency cash fund with 6-9 months of expenses.
• Pay off my condo mortgage of ~$90,000.
• Achieve my life dream of owning a cabin in the mountains.

How about you all? If you won or inherited $1 Million, what would you do with the money? Would you save it, spend it all, or a mix?! Share your experiences by commenting below!

***Photo courtesy of http://search.creativecommons.org/?q=million%20dollars