Today seems to be the day to discuss Financial Windfalls on the PF blogs. Over at We’re In Debt, the King of Debt posted an interesting question: “What you would do with a windfall of $500,000?” And over at Get Rich Slowly, JD answers a question from a reader who wants to make sure he doesn’t squander a windfall of $125,000.
I posted a response to the King of Debt’s post, and as I thought about how I’d handle a $500,000 windfall, I was actually surprised by my decisions. I realize that my priorities are not really in line with conventional money wisdom. I don’t necessarily want my money to work for me later. I want it to give me freedom NOW. I don’t care to retire later. I want to travel while I’m young enough to enjoy it and even share those experiences with my children.
With that said, here is the way the breakdown worked out for me:
45% ($225,000) to pay off all back debt and the mortgage
24% ($120,000) directly into 529 accounts for college for the children at $20,000 per child.
23.2% ($116,000) to a high yield savings account for payment of child support for the next 8 years.
6.8% (34,000) to invest in a moderately aggressive portfolio
1% (5,000) Vacation
*Experiment #1 – Yesterday’s spending
$91.55 for school lunches for the kids.