Thursday, March 8, 2012

Managing $500,000

Of course, the main point of this story (link) is that the winner of a $1 million dollar lottery prize in Michigan was still taking food stamps after she had won the prize and taken delivery of the $500,000 check. The outrage was palpable. Of course, the state should have known it, but also the failure of honor on the part of the winner was notable. Some people were upset that lottery tickets were purchased in the first place by someone who was on public assistance.

But we are not going there today. One of the themes that has recurred over and over in commentary concerning this story is that the lottery winner, Amanda Clayton, will run through her money and be broke again, and back on assistance in a year or less. That made me wonder: how would I personally handle a windfall of $500,000?

I know for me, I would spend some money, and some of it on similar things to Ms. Clayton. My car, which I like a lot, has 130K miles on it. I would be buying a new one. Something modest mind you--I would not spend more then about $20-25 K on a car max. Then I would probably drop at least $30K on my house, taking care of deferred maintenance and making improvements. Nothing fancy--no granite countertops or any of that junk. New roof and windows, a revision of a preexisting remodel that wasn't done correctly, redone electrical system, new gas range, tree and landscaping work. The only indulgences might be the back up generator and the wood stove that I would love to have. I would also use the money to help with the cleaning up and thinning process I have been doing for a while, to rent a portable storage bin and a dumpster. After improving my house and car, I would improve myself. I would invest in some education to make myself more employable, and I would continue to work and earn a living, even if it was part time in this economy. There's something about having a skill, practicing it, and getting a bit of money on a steady basis that has a lot of appeal. I could go entrepreneurial too, if I find I have a good idea that others would want--and would pay for.

Say, after all that I have spent $100,000. There is still $400,000 left. Plenty to invest, save and use in many ways if you are willing to live modestly, not show off, and say no to the inevitable grifters, related and otherwise, that will come your way. But unfortunately for Ms. Clayton I think those saying she'll be broke are correct. At the end, she will only have left those things she paid cash for, and if she hasn't figured out that she needs a skill (she's only 24 so plenty of time to train for something--now that would be a good use for her winnings!) she will lose those things as she tries to figure out how to support herself. After that? It's hello, dole.

The irony of all this is that most people, such as myself, who have a clue about money rarely play the state lottery games. We know how long the odds are of winning.


Anonymous said...

I have always said that I would spend 1/3, save 1/3 and give away 1/3. But, like you, I dont play so I wont win.

Bob G. said...

You pretty much think the way I do if you had THAT much moolah.
Ditto here...I don't play.

Again, with this case, we see the problem with HUGE government...their LEFT hand can't figure out what the RIGHT one is doing (most every time)...pitiful.

Excellent post.

Stay safe out there.