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

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

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?