Canadian Finance Blog

Posted: 16 Feb 2012 02:00 AM PST

Remember that song by The Barenaked Ladies, about all the things the lead singer would do if he had a million dollars? You know it’s already in your head. Anyway, as I listened to it today, (I’m not ashamed to admit it’s on my iPod) I got to doing some thinking. What exactly would I do with a million dollars?

Before we begin, a caveat. I’m going to assume the million bucks is an inheritance, or lottery winnings, or something that isn’t taxed (at least in Canada). Because what fun is it fantasizing about a million dollars if you immediately lose a quarter or a third of it to taxes? Since I’m pretty sure nobody is planning on giving me some sort of 7 figure surprise, this exercise remains a fantasy.

But hey, if you have a million bucks just burning a hole in your pocket, call me.

First, The Boring Stuff

I have a mortgage. At this point, I’m making fairly aggressive mortgage payments for it to go away, but I’m not really in a hurry to pay it off, especially considering low interest rates look like they’re here to stay for a little while. But if had a million bucks, I’d make it go away. That’s about $135k, right off the top. Balance remaining, $865k.

That’s it for me and debt, so next would be investing for income. I’d take half of the remaining balance ($437,000) and put it into a combination of dividend paying stocks, bonds, GICs and preferred shares. If I could get a scant 5% yield, that would spin off an income of $21,800 per year, without touching the principle. I honestly think I could do a little better than 5%, but I’m trying to be conservative here. Plus, I’d be primarily investing in stuff with less than 5 years to maturity, since interest rates are so low.

Well, that was a quick use of $572,000. What should I do with my remaining $428,000?

Would I Quit My Job?

That’s the big question, isn’t it? I hate to be that guy, but I honestly don’t know if I’d quit or not.

I like my job. It’s physical, which helps me keep the pounds off. For the most part, I like the people I deal with everyday and I like the routine. Plus, I’d still get free chips. I’m cheap at heart, so that’s a perk. Yes, even with a million dollars.

Alternatively, what a great opportunity to start my own business. Making close to $22,000 per year without lifting a finger would take a lot of pressure off having to ramp up earnings right away, not to mention no longer having a mortgage. At this point, I’ve been blogging for 2 years now, and I understand quite a bit about the business of the whole thing. I could start up another blog or two in other subjects, or I could use some of my sudden windfall to buy up a couple of financial blogs. With the time to run them, I know enough about the business to make them profitable.

And now that I type this out, I figured it out. I’d quit my job. How much fun would it be to blog for a living?

The Fun Stuff

I’d stick $100k just in the bank. It would serve as both a travel and opportunity fund. I think I’d still be a frugal traveller, but it would be nice to see certain parts of the world without having to worry about the cost.

What’s left? $328,000. Well, as a millionaire, I couldn’t continue to drive my crappy Ford Focus, now could I? For $28k, I could buy a pretty decent new car, so let’s go with that. Besides, that leaves me with a convenient $300k left to spend.

Hmm… What to spend $300,000 on? I think Canadian real estate in general is overvalued, so I wouldn’t be putting a nickel into that. I’d also avoid any private mortgage lending, barring very promising certain situations.

I’d take $100k of that cash and use it for picking stocks primarily for capital gains. I’d buy beaten up companies, hopefully ones with decent potential for turnarounds. I’d spend all sorts of my new found free time analyzing balance sheets and doing research. Yes, this is what I’d do for fun.

As for the last $200,000, I honestly have no idea. I’d keep it relatively liquid, maybe in short term GICs or a money market account. I’d call it my opportunity fund, reserved for buying some sort of other asset, like perhaps American read estate.

So, in conclusion, I’d only spend $700,000 of my $1 million, and barely spend any of it frivolously. Why would I? I have everything I need, and material stuff doesn’t really motivate me. The best part of having a million bucks? It isn’t the ability to buy a bunch of stuff. It’s the freedom that only passive income can bring. Since none of you are actually going to give me a million bucks, I guess I’m outta luck.

Readers, what would you do with a million bucks? The comment section is all yours.

If I Had A Million Dollars originally appeared on Canadian Finance Blog on February 16, 2012.