Windfall experiment what would you do with $5,000,000

The Windfall Experiment: What Would You Do With $5,000,000?

Basics, Debt Reduction, Financial Education, Thoughts of a Mastermind 28 Comments


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Windfall experiment what would you do with $5,000,000

Ahh, to win the lottery – what an experience that must be.

Not everyone is able to win the lottery, but at some point in our life, we will probably come into a large sum of money: a stock you picked goes wild, a family member who was smart with their money passes away unexpectedly, or maybe you just found $20 on the ground!

What would you do with that money? Would you save it? Invest it? Spend it? In this post, I want to present you with a windfall experiment: what would you do with $5,000,000?

First, I want to talk a little bit about windfalls in general, and second, I want to work our way up to $5,000,000 by first answering the questions: what would you do with $5, $20, $500, $2,000, $50,000, $200,000, and finally, $5,000,000.

What is a Windfall?

As defined in the Merriam-Webster dictionary:

Windfall: an unexpected, unearned, or sudden gain or advantage

For me, I define a windfall as any sum of money that I come into where I didn’t work for it and is unexpected. A windfall is something that I did not budget for and now am reaping the benefits of. Some examples include: finding a $20 bill on the ground, receiving a bonus at work, getting unexpected consulting work, etc.

what most people do with a windfallWhat Most People Will Do with a Windfall

We have all heard the stories of how professional athletes have gone broke (see here) and how lottery winners aren’t much happier than before they won, and also go broke (see here and here). Most people’s natural tendency is to spend! You just got multiple thousands and millions of dollars? Why not spend it all:


A new car? Why not 3 new cars and a boat??

Sure, that house on the hill looks really nice!

If a person wants to keep up with the Jones’, then by all means, spend your money, but as someone focused on financial freedom, I’m going to take a different approach.

The Windfall Experiment: What Would You Do with $5,000,000?

The moment we have all been waiting for… The Windfall Experiment!!

Please follow along with me and answer the following questions. First, a few warm-ups:

What Would I Do with $5?

I find $5 on the ground. I put it in my wallet and save it for coffee or a drink later in the week. It’s not going to burn a hole in my pocket, but I will use it for a small expense later in the week that I already would have purchased. The key point here, is that I would use it on something that I already was planning on buying, not something that I didn’t plan to buy.

What Would I Do with $20?

I find $20 on the ground. I put it in my wallet and save it for lunch or coffee later in the week. It’s not going to burn a hole in my pocket. Similar to the $5 windfall, I’m not going to go and spend it right away.

Enough with the warm-ups, now let’s take a step up:

What Would I Do with $500?

Just this July, one of my friends from college stayed in the extra room in my house for $500. It didn’t change my spending or saving habits. I just kept on with normal life and put the $500 into my checking account for the mortgage payment.

What Would I Do with $2,000?

Now, we are getting a little higher..

With $2,000, I’d look at my debt situation and assess whether or not I should pay off some of my mortgage or any outstanding credit card balance. This August, I received a property tax refund for $1,417… again, I just put it into my checking account and used it for everyday expenses and my mortgage payment at the end of the month.

What Would I Do with $50,000?

$50k? Now I can actually do some damage!

With $5,000, I’d max out my Roth IRA. With $10,000, I’d prepay my mortgage to get rid of PMI. With the remaining $35,000, I’d have to figure out where I’m living, because I could do some serious home improvements with that money. Otherwise, I’d keep it in savings and look to wisely allocate some of it to taxable accounts or keep it for a future down payment.

What Would I Do with $200,000?

With $200,000, I’d do similar things with the $50,000 but could make a serious dent on debt and retirement accounts. $200,000 isn’t quite enough to retire on, but it would be a good start.

With $5,000, I’d still max out my Roth IRA. With $10,000, I’d prepay my mortgage to get rid of PMI. With the remaining $185,000, I’d still want to assess where I’m living. If I want to stay in my current house OR believe that it is a valuable use of my capital for a rental property, then I’d use some of the money for debt paydown and some of it for home improvements. My mortgage balance is roughly $250,000, so with $185,000, I could definitely make a dent and get close to becoming debt free.

At the same time, $185,000 is a lot of money for some parts of the United States. In some areas in the Midwest, I could buy 3-5 properties with 20-25% down and have positive cash flow. This is something I would have to consider.

Now… the moment you’ve all been waiting for:

What Would I Do with $5,000,000?

This is an interesting one. Enough with the small stuff – 401ks and IRAs? I don’t even qualify for you – I’m BIG TIME NOW BABY!!

With $5,000,000, I’d definitely leave my day job and probably stop any small scale entrepreneurial endeavors (except The Mastermind Within, because I love writing 🙂 )

With $2,000,000, I would look to buy Commercial Real Estate in vibrant communities, specifically, multi purpose buildings (think business space on the bottom floor, and apartments up top). Commercial real estate has all the tax benefits of residential real estate, but also can charge much higher rents, and is a benefactor of economies of scale since multiple units are under 1 roof.

I would put $500,000 into broad stock market index funds, $750,000 into dividend paying stocks for dividend income, and another $1,000,000 into various fixed income instruments for increased interest income.

With the remaining $750,000, I’d use $500,000 to buy precious metals (silver and gold) and then use the rest of the money to move to an energy efficient house that is to my liking. I don’t know if I want to live in my current house forever… with $250,000+, I definitely could find a great place to live!

Takeaways from the Windfall Experiment

I’m a natural saver and would hope that if I received $5,000,000, I would take steps to secure my financial future. Commercial real estate, done right, is a fantastic investment – buying apartment or multi purpose buildings in vibrant areas would help me grow my cash through income and appreciation (not to mention the tax benefits!)

Another thought is diversifying your investments is a lot easier when you have millions (vs. thousands). Throw a couple hundred thousand in a few buckets and you will probably be able to stay wealthy!

Some spending would be necessary as well. Traveling is something I want to continue to do more of. Lately, I’ve been driving all over the Midwest to see friends and family, and I even went to Las Vegas for the first time earlier this summer! As mentioned, I’m going to FinCon this October, and also going to California with my parents and sisters. Exciting times!

5 tips for managing a windfall5 Steps for Managing A Windfall

Here are 5 steps for managing a Windfall:

  1. Take a Step Back and Assess the Situation
  2. Make a Plan
    • Figure out your financial needs.
    • Assign priorities to your needs and devise a detailed plan to allocating your new cash
  3. Take Action on Your Plan
    • Ideas and plans are only worthwhile if you take action.
  4. Track your Expenses and Distributions
    • My number 1 tip for personal finance is to track your income and expenses – it’s even more crucial to do so when you haven’t budgeted for unexpected income.
  5. Go Back to Living a Normal Life
    • A windfall is just that, a windfall. Yes, it’s possible with enough money and planning, you could retire early or make massive lifestyle changes, but for most windfalls, they aren’t going to tip the scales. Go back to living within your means and be thankful for the fortunate event.


When getting a bunch of cash, so quickly, the best thing to do is take a deep breathe and assess your current situation. What are your financial and non-financial goals? What are your needs, not wants that should be addressed first? After addressing your goals, then take action to save, invest, and if you must, save a little bit on yourself 🙂

Readers: what are your results from the windfall experiment? What would you do with $5, $20, $500, $2,000, $50,000, $2,000,000 and $5,000,000? Have you ever received a windfall before and what did you do with it?



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Comments 28

  1. I had received the first four windfall amounts and I am hoping and praying with my lottery ticket to land one of the three remaining amounts.

    I am also a diligent saver and I will invest at least 75% of my windfall money. Easy come, easy go. I want to make sure that it doesn’t happen to me.

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  2. I think we’ve all daydreamed a bit about a big windfall. I know I have when the lottery gets really big. Here what’s I do with these windfall amounts:

    $5: In my pocket for lunch, coffee, or next random purchases.

    $20: In my pocket for lunch, coffee, or next random purchases. Might even buy someone in line a cup of coffee too.

    $500: Review my current needs debt, e-fund, investments and apply where needed.

    $2,000: Review my current needs debt, e-fund, investments and apply where needed.

    $50,000: Donate some percentage. Review my current needs debt, e-fund, investments and apply where needed.

    $2,000,000: Donate some percentage. Pay off the mortgage, review my current needs debt, e-fund, investments and apply where needed.

    $5,000,000: Donate some percentage. Pay off the mortgage, review my current needs debt, e-fund, investments and apply where needed.

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  3. Hard to argue with your plan for $5M. I think most people, maybe not finance bloggers but most people would buy a bunch of stuff – new car, new boat, maybe some nice jewelry. I would probably do a little bit of that if I’m being honest. I might want to upgrade my wardrobe a bit – nothing crazy, maybe some new banana republic clothes. And that takes me down to $4,999,000. From there I would analyze the 10, 20, 30 year potential of a few select moves: 1) pay off all my student loan debt, or a portion of it, 2) pay off my current mortgage, 3) purchase income producing real estate (probably apartment complex or commercial), 4) invest.

    I doubt I’d quit working. $5M is a lot, but could run out super quick if you aren’t careful. I’d live off my working income and reinvest everything for a period of time – maybe until I reach $10M? But who knows, maybe I wouldn’t be able to stop there

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      Yeah I agree with you on the wardrobe aspect! I never spend money on myself… I finally upgraded my linebacker-style suit jacket to a slimmer fit one.. for $200. I guess I’m happy with it.

      You bring up a good point… look at the duration of your investments, 10, 20, and 30 year horizons.

  4. So a good point you make with windfalls is how you understand it for what it is – it’s unexpected extra that you don’t necessarily need. When it’s money that you don’ t need, you can do a lot of smart things with it. It’s one of the reasons I’m so big on side hustling – even small, stupid hustles like the ones I do. Assuming you make enough to live in your day job, any extra money you make can basically be treated like a windfall.

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  5. I would sit down and think what is my end goal for making money and passive income. For me it’s to be able to travel and surf indefinitely. With $5m I’d invest $4m then buy two or three small homes in select locals around the globe then live and travel off the passive income. I reckon you only need $20k-$30k a year to travel in developing countries and $50k-$70k a year if you stick to developed countries

    1. Post

      I really like your thoughts Stuart on buying homes in multiple countries… that would be very nice! Thanks for adding your perspective to my thoughts

  6. I play the ‘what would I do if I won the lottery’ when driving past the Mega Millions or Powerball signs. I live on less than $100,000 per year right now…so I expect I could do that with a windfall too. I could definitely leave my job for $5M. Even $1M = 10 years at $100,000, but the other 900k is working for me the first year, so I’m sure I could stretch it further. 🙂
    I got a $100 gift card bonus at work last week. I haven’t figured out what to do with it. I could use all or part of it to donate to charity, I could use it to help out friends, I could buy… I don’t know because really I have enough in the bank that I could do any of these things without the gift card. It’s kind of like Paula Pant says You can afford anything, but not everything. I could do something with the card, but not all of the things I’ve come up with. If it was cash, I would just have put it into savings, with a gift card it forces you to spend it, some how, even if you then keep the cash you didn’t spend. I’m sure I’ll figure it out.

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      Thanks for stopping by and commenting Jacq, I really appreciate it! 🙂

      Having 900k to work for you every single year for 10 years sounds really great 🙂 I think you could do a lot with it… it’s so much fun to dream.

      I don’t know if we will ever see a $1 million gift card..

  7. We had one big unexpected windfall when buying our first house as my uncle surprised us with 10 grand to help with the down payment. Thanks Uncle!

    Assuming uncle Sam already took his share. I would give away 500K (okay I wouldn’t but my wife would make me as she keeps a little karma on our side), pay off current house (150K) but keep as rental, buy new house for 350K. Set aside 500K for college. Invest 2 million 60/40 in index funds. Would strongly consider building the most amazing gym in the area with the remaining. And yeah quit my job.

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      Thanks Grant for stopping by. That’s awesome you’ve got $10,000 big ones before from your Uncle 🙂

      Yeah, I didn’t want to worry about taxes here. I also overlooked the donation part of the scenario, as I would most likely as well – but that wasn’t the focus of the exercise.

      An awesome gym would be sweet!

  8. I did get a windfall of close to seven figures. What did I do? Stuck it in Vanguard where it still sits three years later. Didn’t change my net worth that much. But it made my early retirement cushion that much larger, and I am retired. I can’t fathom why anyone would spend a gift like that on stuff. Life isn’t stuff.

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  9. My biggest unexpected windfall to date is my wife going back to work. Beyond that I’ll skip to the big money as for smaller numbers I wouldn’t change my behavior. For 5m I’d buy a mountain cabin and tell my work either they pay me to work from home or I walk. I’d still work if they agreed which is likely

  10. Well now that’s one to noodle on! I’m like you – go for some big ticket real estate! A buddy of mine keeps trying to get me to go in with him on apartments, but cash and nerves are my current blockers.
    With $500,000 I’d retire TODAY.

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  11. Looks like you’d do all the responsible things which is great! 🙂
    I’d probably do similar stuff. In addition, with the $5m or even $1m, I’d give some away to my family and charity as well.

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      I left out any charitable giving as once I get my income streams in place, I could focus my time and efforts on giving back. Thanks for stopping by SMM.

  12. With 5M, I’d probably put a million or so into various savings accounts/CDs at different banks.

    I’d do the same thing with the rest as I do now, maybe a bit more conservative on the portfolio side and live off the interest/dividends. I’d probably quit my job, convince my g/f to quit my job and travel around a bit.

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  13. JD Roth asked on Twitter what people would do if they won the lottery, and my $5million answer to you will be similar to what I answered to him:
    1. Big donation to Give Directly ($1 million)
    2. Buy a small house in my neighborhood outright (let’s say $1 million for even numbers – the extra can be set aside for repairs and taxes)
    3. Put a bunch into my investment account ($1.5 million)
    4. Load up a donor-advised fund ($1.5 million)

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  14. With $5,000,000.

    I earned 1M and spent it all.

    I am naturally spender in the process of learning how to save.
    I don’t like saving as life is abundant in all fields. If I save I think I limit potential.

    I would invest 500k in different bussiness which will give me multiple source of income.

    Buy real estate in London Uk to rent it. 1M for this.

    Build house with 200k in the country side with organic fruit and clean water from well.

    Buy some Brunello Cucinelli clothes for familly. 100k

    Help out my closer family with 200k.

    Travel a lot.

    Buy some gold for 500k
    Give my wife 1M as she is excellent saver.

    1.5m left a side and watch how investment goes.

    5M is written on my goal card.

    1. Post

      I love the thinking Nick! That’s some very specific things to buy – but I love how you are balancing work, investment, family and fun.

      Thanks for sharing

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