Wednesday, January 13, 2016

The Powerball and You

The Powerball jackpot is currently estimated to be $1.5 Billion.  That's an incredible amount of money.  If you worked 40 hours a week for 50 years (2080 hours a year), a reasonable assumption, your hourly wages would be in the ballpark of $14,000.  That's a lot of money to make every hour.  To put that into perspective, let's break down a 40 hour work week for you.

Your new work schedule would be living wherever you want, doing whatever you want, for approximately as long as the money lasts.  I think most people could reasonably live forever on this, and let's presume you make it last until you die.  Let's also presume that you've got around 50 years of working life ahead of you.  Generally this will prove untrue, but it's simpler for the numbers.  The working week for this illustration will be from 8am to 4pm.  We're also averaging your winnings over a 40 hour work week.  Real lottery payouts are only once yearly, or once up front.

Pretending for a moment that you wake at 8am every single week day, by 12pm you've made more money than half the people in the country make in a year.  You could hire someone to do all your housework full-time and you'd have them paid off every year at Noon on January 1.  You decide to make a cup of coffee, and start watching television.  At 4pm on January 1, your new truck is paid off.
The next day you decide to do things a bit different.  A decent house can be had in most parts of the country for under $100,000.  By the end of the day on January 2nd, you have paid your new house off.  It's Tuesday of your first work week, and you've spent more money than four people make in a year.  On Wednesday, you decide to play video games all day.  At 4pm, you have enough money to buy several years worth of groceries for perhaps ten small families.  You being you, however, decide to buy a small airplane and get a pilot's license.  With the money left over, you decide to hire a pilot to fly you, in your airplane, to Hawaii, where you enjoy a party.  Of course, you don't arrive for another day, and on January 4, you now have enough money to hire a very fancy boat back to the mainland.  As you embark across the ocean on day 5, you don't spend any money.  Instead, you decide to save that extra hundred thousand for the weekend.  Wouldn't want to spoil that killer party.  The money you made today will allow you to throw a two-day party in the desert with your closest 500 friends.  You could buy each of them a 12-pack of beer and still have enough money left over to feed them all fast food dinners.

Week one is over, have you run out of ideas for things to spend your money on yet?  If so, that's good, because you're going to make another 576,000 or so per week for the next 30 years, give or take.  I suggest investing and donating a significant portion of it, as this will lessen your tax burden, and will definitely make you look like a really nice person.  Realistically, it's always best to take the 30 year option, and make sure you put enough in some kind of semi-liquid investments.  You don't want to shoot the entire wad in one place and have nothing to retire on.  Going back to a regular job after a few years of living like royalty won't suit you one bit.  Remember, you're going to have enough money in one lump sum to buy a nice house every single day for 30 years or more.  Trying not to spend it as though you're buying a house every day is in your own best interest.

Some people are going to ask you for money.  You can't give to everyone, so decide a small amount you're willing to part with up front.  Once you hit it, that's it.  Of course, you can make exceptions for friend and family.  You'll have enough money in the first two weeks to satisfy almost any desire your family and friends should have for the rest of your lives.  Health care, transportation, food and so on.  This is an astounding amount of money.  Don't waste it too much.  If you feel so inclined, send me some!  However, don't feel obligated to do it.  It is your money after all.

If you're still reading this, take one last thought.  The money won't change your character, it will simply make you able to act that character out.  You're going to find out pretty quickly what kind of people hang around you, as well as what kind of person you are.  Only the latter is important.  With that kind of money, you can get rid of bad friends, but you can't buy a new attitude.

What would I do with the money?  Half would go into investments, including maxing out my IRAs every year. One-third of the remainder would go to various charities and institutions I feel are worthwhile.  One-third further would go toward helping my friends and family achieve various things.  The last one-third I would divide between all my necessities and fun times.  Run like wild on around $5M per year, for the next 30 years.  Then those investments would start kicking in, hopefully, and I'd retire happily somewhere, and live roughly the same on that income for the following 30 years, if I were so lucky to live to be 90.

Peace to all of you!

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