What Would You Do If You Got Given €1 Million?

Hi RIP friends,

I’m finding new fancy bloggy ways to procrastinate writing about important stuff! This time it’s a thought experiment being run in the UK FIRE community this month, where bloggers are invited to participate.

The thought experiment is the following:

What Would You Do If You Got Given £1 Million?

Originally proposed by The Saving Ninja, this idea is not new in the FIRE community. It’s actually a recurrent one. I remember a similar thought experiment slightly more than a year ago launched by Give, Earn, Live, focusing more on investing: “How To Invest A Million $“. I wanted to join back then, but I was too busy so I skipped.

It’s time to kill two birds with a million stone!

First of all let’s talk about currency.

Saving Ninja asks about GBP. A Million GBP is equivalent to 1.12M EUR.

Give Earn Live asks about USD. A Million USD correspond to 875k EUR.

I’m going to use EUR, which is currently exactly in between: 1M EUR = 1142k USD = 890k GBP

Ok, let’s answer to the question: What Would You Do If You Got Given €1 Million?

Instinctive answer would be bad-ass, Warren Buffett style.

I once read (don’t remember where, though) that Warren Buffett was asked a similar question:

Q: “Mr. Buffett, what would you do if you suddenly receive 1M USD to invest?

WB: “I’d invest all of it in a S&P500 index funds. Next question please.

But of course a million is nothing to W.B., it doesn’t change anything in his grand scheme.

To the RIPs an extra Million EUR would, all of a sudden:

  • More than double our wealth.
  • Make us cross our current Italian FIRE Number, and reach 150% FIRE.
  • Makes us reach our current Swiss FIRE Number.

We would achieve so many milestones all at once, it’s not just another Million to throw on top of our money pile!

Ok, let’s get started!

The First Day

It’s Monday morning, we’ve just completed the wake up routine with Baby RIP, singing her favorite good morning song, and playing with her. I’m preparing myself for work while instinctively checking my bank account. There’s 1 extra Million EUR (tax exempted) gift.

First thing I’d do is to sit down, check 10 times the account balance, call my bank to be sure it’s not an error, and maybe verify the origin of the money and that they’re actually tax free.

Then I’ll let myself feel pure adrenaline, dopamine, oxytocin – you name it – flowing thru my body. Whoaaaaaaah!! Ok, back to normal. Shitty hedonistic adaptation…

Next, I’ll take the day off from work and tell Mrs RIP to put on her best dress because we’re going to have a luxurious lunch somewhere in town. I’ll tell her what just happened to us, while sipping a glass of Champagne. Then I’ll tell her the same stuff few more times since I’m sure she won’t believe me at first. But at one point she will, and that’s when the music will fade in and we start dancing at the restaurant under startling eyes.

We have the resources to execute our plans, and some more. Maybe. Plans change. According to Parkinson’s law in finance: “wants expand so as to fill the resource available for their satisfaction”.

Anyway, no decision is taken on day one. In the end it is possible that this is just a dream. Let’s keep expectations low. In the meantime: garçon, another bottle of champagne. Merci!

Of course I’d not tell anyone about our windfall, not even our parents and relatives. Just my blog readers. Nobody will know about it!

On concrete level, our Net Worth will jump from 875k to 1.875M EUR, with 1.05M in cash.

Our current FIRE Number in EUR is 1.2M, but I know it’s time to make a major revision to our “Retire somewhere in Europe” plan, and I’m crowd-sourcing it.

Our current spending level in Switzerland projects us to 1.8M CHF = 1.6M EUR, which means we could be FI in Switzerland too, even though expenses would grow by at least 50% if we stay in Switzerland with children.

The First Week

I would go to work the entire first week (excluding day one, assuming it’s Monday). Both because I want to feel what’s like to go to work when you don’t have to, and because I don’t know if I’d actually stop worki… HAHAHAHA!

Ok, relax RIP, it’s just a thought experiment.

I would not keep working at Hooli for long, that’s one thing I know for sure. Probably I would not quit immediately: I might slow down to a part time position for a while, I might delay quitting by few months to catch some stock vesting / bonus event. Anyway, it’s just a matter of time.

During the first week I’d like to observe myself: how would I react to work duties when I don’t need the monetary rewards anymore? I expect some differences but not many. I’m already in a position where I could quit and spend next 10-20 years without having to worry. We could already be semiFI in Switzerland, leanFIRE almost everywhere in the Western world, and fatFIRE everywhere else.

With the extra million it would be different though. We’d be FI (fat or not) almost everywhere in the world. Working would really be completely optional, no more needed.

During the first week, maybe first few weeks, I’d like to see if there’s a clear plan for our family’s future. So far, we’re postponing the big decision further in time. Ironically, having more money may highlight the “let’s retire in Switzerland” option, which is one of the few scenarios where we would not be fully FI yet!

Even in case the Swiss option would appear to be dominating, I’d plan my exit strategy from Hooli and probably from my software engineering career. I’m close to burnout, I need to take a unilateral, indeterminate break from my current career. That doesn’t prevent me to keep coding for fun, but I won’t want to do for anybody else’s cause.

The First Month

I’d have probably finalized my exit strategy from work. Maybe not publicly announced yet, in case I’ll be waiting for bonus/stocks, but internally 100% finalized.

In case the Swiss option is winning, I’d go for a temporary slow-down (50-60%) at Hooli while figuring out next steps. In case such a hard slow-down is rejected, I’d probably quit anyway. Going 80% is pretty common and socially accepted (and approved by managers) most of the time. Going 50-60% is a different game though. I know very few Hooli employees who do that. I’d aim to 50-60% because I’ve already been working 80% for 9 months. It’s been awesome, but still not enough for me.

By the end of the first month I would also have handled the jackpot money, the Million. Of course the actual allocation would depend on the final strategy, but still some steps could be taken. Is our spending level going to increase once we are 150% (fat)FI in Italy for example? Is our investing strategy going to be more conservative once we’re 150% (fat)FI? Are we really FI if we decide to live in Switzerland forever? Answering these questions would impact how the windfall is allocated.

A step that could be taken anyway is to open a second (and maybe a third) brokerage account with a different broker. I’m going to invest more money and I’d like to diversify at intermediary level. I don’t want a single entity to handle all my money. I’m willing to accept some extra fees, but I’d open a second account. Maybe Degiro, maybe CornerTrader, I don’t know yet. In case we already decided the target country, I’d check what’s more efficient in that country. For example, if I know I’m moving to Italy I’d go with Fineco.

Anyway, let’s try to allocate this Million, assuming current plans (moving to Italy) will hold:

  • 100k cash – I’d like to increase our cash cushion. We’d be more than 100% FI, so I’d be fine with a safer allocation. I’d handle cash as a buffer to withdraw from when the market sinks. I know it’s a strategy with lower expected returns, but it’s also a strategy with lower risks.
  • 200k short term investments (probably more cash) – if we decide to move out of Switzerland and go to Italy it may make sense to purchase the property where we want to live, or build our own house. I’m not a huge fan of home-ownership, but in some countries (like Italy) it still makes sense. Low taxes on primary residence and high rents. Not sure though, I may reallocate this amount to investments, or cash.
  • 600k regular investments – of course I’d throw more money into investments. I’ll probably touch our asset allocation strategy a bit, according to our new FIRE number. The fatter our FIRE, the less riskier our strategy would be.
  • 100k crazy betsCryptos (maybe), p2p lending, angel investing on startups, individual stocks… I’d play some bet with a fraction of our windfall. Maybe not 100k, but at least 50k.

What you don’t see here?

No money to family and friends. Well, of course we would not tell anyone about the windfall. Nobody would know. Yes, we’re going to make visible life changes, but that’s going to happen anyway and they kind of suspect/know it. Plus, our families are not in need of money and even if some relative is, we’re against lending money to family and friends. Of course we might be a bit more generous next Christmas, but not much more than that.

No giving, no donating to charities. I still need to make up my mind about the giving thing. I’ll write about it one day. I don’t like giving money to charities, I see it as an inefficient way of doing good. I want to give as much as I can to as many people as I can, but I don’t think about giving money now. Plus, I generally don’t trust charities unless I know them personally. I know about Effective Altruism, but that’s also controversial (even though a good starting point).

No stupid splurge spending. Apart from the fancy restaurant and the Champagne bottle on day 1. Yeah, we’ll probably spend some money stupidly on stuff, but nothing that makes a dent in this allocation.

Are we so selfish and greedy? Well, I wouldn’t say that.

To compensate for our extreme rationality with the Million, I’d establish a temporary financial anarchy with our monthly cash flow: I would like to see a saving rate of 0% while still working full time, until the actual Early Retirement date. I would like to see  all the money we would have saved (and invested) being allocated to “whatever“. Spent randomly on one-off splurges, and given to people in need if we feel like giving.

And if we find ourselves unable to spend all our income (old habits die hard), what’s left after splurges would be accumulated into a “sabbatical fund” that we’re going to enjoy soon. see below.

The First 3-6 Months (while still working)

Leaving my job would take some time, few months at least. I assume 3-6 months after the Million.

During first 3-6 month I would love to have mid/long term plans finalized. What are we going to do with our lives? Are we staying in Switzerland, move back to Italy, or consider a third option? It’s a tough question. We may be able to answer this question or not yet, even after having quit my career for good!

Either way I’d like to plan for a long sabbatical/vacation to celebrate/explore. I’d like to spend 3-6 months exploring options (in case we wouldn’t have decided yet), or celebrating our freedom. That extended trip would be covered by the sabbatical fund, i.e. savings during last months of work.

The exploracation (which I though I coined the term but apparently I didn’t) goal would be to try out few candidate destinations for 1-2 months each one. The celebracation (not even this one, f**k!) would be slow traveling in Europe or something like that.

The “sabbatical from life”, whatever form it will take, would probably happen immediately after having quit Hooli.

After the Sabbatical

That’s a blank slate. That’s after FI life. That’s chapter 2 of our lives.

I have so many ideas on how to invest my time, things I’d like to do, projects I’d like to kick off… but I know many more things will be coming.

But that’s a story for a future post 🙂

What would you do with an extra Million?

28 comments

  1. with an extra million i will reach a one million saving.
    In this case i will read again the full blog from the beginning and apply slavishly RIP´s plan for the FIRE.

  2. I have a lot of unstructured ideas of what to do with a one million euro windfall. I will take up the glove and write about it on my blog, to keep this challenge going and to structure my mind. It’s a fun thought experiment to run!

    1. P.S. your blog aesthetic is one of the best I’ve ever seen! Simply amazing!
      I’ve not yet read your content though, just wanted to leave a feedback on its look&feel 🙂

  3. Not trying to be a smart ass but unless you robbed a bank or received it from our Creator himself, a (big) chunk of that providential money will go to your Swiss friends in Bern and Zurich!
    For instance, assuming you win the jackpot with Swissloss, that’s 35% gone before you even get anything!
    First thing to consider would be to move in a tax-favored commune somewhere in Schwyz or Zug to at least get back some of it…

  4. That actually happened to me a couple of years before I slightly early retired three years ago. I was already financially independent but still working because we had been bought by new owners and it felt like they were over paying me, even if I technically had enough without a paycheck or the inheritance. It did make me finally realize that there was no point in staying on at no matter how much they paid me because enough is enough and if anything was running out it was my time. My wife and I spent a few percent upgrading our hobby equipment (fishing boat and off road ATV) to modest but reliable equipment from the junk we had been using but 95% went right into our normal investments. No new house, no new cars, just an even bigger portfolio and a nudge to start my exit strategy.

    1. Hi Steveark, congrats for being in the Warren Buffett’s group 🙂
      I think my answer would have been to shovel all into the current investing strategy if I were already FI.
      Since this Million would make us cross few barriers, a more thorough answer was required 🙂

  5. We are thinking similarly but my proportions would be different because of our numbers. If I take our last years spending as an example we could live on roughly 15k. Let’s add some more to cover growing expenses because of the kids (and hedonic adaptation) and put 20k as the needed amount. According to the 4% rule that money would need a 500k nest egg (I don’t count on taxes here as the place of living could change, so no clue yet). Getting €1M would immediately push us into double FI in our country (and all neighbor countries possibly).

    I would do the allocation like this:

    Cut the money in half and invest 500k in a well-diversified index fund portfolio through several brokerages (maybe 4x125k) which are also location-diversified. This nest egg would be our safety net, the plan B which won’t be touched if not absolutely necessary. If we could get on without touching this I would consider this part as my daughters’ college/life-starter fund. When they would turn 18, 13 and 16 years from now accounting with a 7% interest rate that money (250k to each of them) would turn into 602k and 738k. The gains above inflation could be used for education or starting their business. Of course, I would not inform them about this windfall to keep them motivated, the longer the money could remain untouched the better would be for them. If they handle their additional financial needs it could grow another, lets say, 5 years, when they would finish school or need bigger capital for their company to grow or whatever their endeavors would be. By this time their nest eggs would grow to 845k and 1035k. If we did not need that money by then I would just pass on the ownership of those accounts to them and advise them that they should keep them growing and aim for FIRE.

    The other 500k would be invested to fund our FI life, but to achieve higher diversification I would invest it in a different way. I would cut that amount into half again(2x250k) and let my wife and myself invest it according to our own preferences. She likes material stuff so I know that her choice would be real estate investing in form of a couple rental apartments and/or office rentals. I would also advise her to open and run a coworking place (of course another Mustachian one, but maybe it is just my dream?). I would like to learn more about a huge variety of things so I would cut my part into 5x50k and put each of them into different “investments”. The first one would go to found a startup for my own pet projects and I would happily carry on working on these at my will, maybe half-time (probably a combination of a software company and a microbrewery). I also would learn about angel investing and one part could go this way (renewable energy, agriculture technology, helpful software, innovative education, etc). I would fulfill my stock market curiosity and two part would be thrown towards dividend growth investing and options trading. The last part would be invested in a company/organization which has the goal to revolutionize education. The latter would not be for direct financial return but for making this available for my kids (yes, I am selfish, move on).

    Ok, I know, I am a hopeless dreamer, but this was a thought experiment after all 🙂
    Thank you, RIP, for not letting our brains get rusty 🙂

    1. That’s a very well thought plan, which is a reflection of the fact that in your spending regime 1 Million is 2xFI, which is great!
      In Switzerland it’s not even 0.5xFI, so no room for redundancy 🙂

  6. Hi RIP, when you say “For example, if I know I’m moving to Italy I’d go with Fineco.”, what makes you choose it? I am still looking for a broker for myself and i have read over and over again your post about when make sense to use IB, and i’m still not there.. but not so far.
    Thanks,
    L.

    1. One of my close friend and part of the “Italian Hooli Investing Club” has an account at Fineco in Italy.
      Andrea, from incassaforte.com (best Italian FI blog around), uses Fineco.

      Those are my references, didn’t do any in depth study though.

  7. Hi RIP,
    Thanks for your post. Interesting as always.
    In fact I think you could/should realize your described plans even without additional 1.12M EUR – now, and not only after FIRE… With 875 k CHF you are still on the save side, even in Switzerland. (Because it’s not realistic that you don’t earn anything from the date of FIRE on until your life-end..) So I would suggest you to throw away such thinking games and start to live according your ideas. NOW! (As I do, even without that much of money you have.)
    All the best Simi

    1. You’re definitely right, and that’s what I’m working on (psychologically).
      Money and confidence are interchangeable.

      Thanks for your words 🙂

  8. $1 mil extra would not be enough to make me giddy! Not much would change for me. I currently have more than $2 mil in cash savings, and I am still working at my blue collar job with a super nasty boss. As in evil nasty. (The bullies we were in school with become bosses in the blue collar world!) I’m 44 years old, and once you have more than 20 years invested in a job, it’s just too hard to leave. I’d leave the pension on the table, as well as great health insurance. I currently have zero health issues, but you never know. I know of too many people with all different types of cancer, and it’s scary. That can wipe out your fortune! My original plan of -save up $1 mil & quit- has changed to-retire as early as possible so that I keep the pension & health insurance. By the time I’m 50? Then I’ll reward myself with a nice open bay-front home with a boat!

    1. Ouch, it seems we have bigger problems here. You already have $2M and a job you hate and… you’re not taking action? Not even with a third million? Because you’re scared you’re going to face health issues? For sure you will if you’re staying in your hellish job!

      Come in Europe, health care is cheaper 🙂

  9. There are plenty of charities out there that are quite effective and do lot of good.

    It is one thing to say that you don’t want to give money to a charity. After all, it is your imaginary million and your business. But your reasoning sounds like rationalization. Sorry, if that is bit harsh.

    1. “It is one thing to say that you don’t want to give money to a charity. After all, it is your imaginary million and your business. But your reasoning sounds like rationalization. Sorry, if that is bit harsh.”

      I don’t understand this part of your comment, can you please rephrase it? I’m willing to answer but I’m not sure I got the point.

      1. Well, I have been reading a lot of blogs about FIRE. One thing I have noticed in many of them is that it often tends to be about the self. However, we have to recognize that lot of people in the world have problems that are not necessarily solvable by simply saving more.

        I agree that classical charities are not always the best solution to many of these problems but there are several more modern initiatives that still need resources from people with means. So, I personally believe that an individual with means (especially, one who can achieve FIRE) should budget money and time (yes, it is not all about signing a check) towards the “greater good.”

        1. I understand that a lot of people in the world have problems and money can help.
          But I believe that what reduced extreme poverty (https://www.youtube.com/watch?v=efnHiz0USQE) is technology, investments, strategy. Not pocket money.
          Teach a man to fish instead of giving a couple of fishes.
          I think the impact of handing off some money is small and doesn’t solve the problem. I’ve never seen a city where homeless people are welcome and supported experiencing a reduction of homeless. While I emphasize with people in trouble, I’m convinced that my best action is not giving raw money to them.
          I don’t have it clear in my mind, but I have this feeling that wealth in my hands could compound more efficiently. Eventually pledging to give most of my wealth when I’ll be gone maximizes the impact of my money over my lifetime. Better if it won’t simply be “a donation”, but an actual plan (a trust?) financed toward poverty elimination. Probably joining an already existing similar plan.

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