What can you do with a million dollars? Is having one million U.S. dollars in your bank account could be sufficient till the end of your life so that you’d no longer had to work? Suppose that somehow, suddenly your account has been credited with a million dollars. No matter how – it could be from inheritance after a rich uncle or by winning a contest. Firstly, most people immediately would choose to go for crazy shopping. It is difficult to spend the entire $ 1,000,000 in a few days, so after about a week there comes a moment of reflection. You start to wonder if there could be something to invest this sum in. It’s well known that money can make money.
It does not count today to earn more than 3% after tax, so from that million dollars you are able to earn approximately $ 30,000 per year. It gives, however, only $ 2,500 payment per month, so you’d rather won’t go wild and decide to quit your job. I’m neglecting of course the aspect of inflation, which means that the same amount of money will be worth a lot less after a few years. Or maybe not to worry about it, and just normally spend this money every month? If you’d spend $ 4,000 per month your one million dollars will be gone after 20 years. If you’d spend $ 5,000 a month it will be gone after 16 years, and spending $ 10,000 monthly – after eight years. With one million U.S. dollars, you can already call yourself a rentier, but obtained passive income, as you can see, it is not too big. $ 2,500 in US conditions is not much, but you can still move to a country where prices are lower, eg the Philippines. In this country for life and fees per month you’d spend leisurely maximum of $ 600. All this thanks to the phenomenon of geo-arbitrage. As an example, I’ve included the Philippines, because for instance, a pretty big apartment in not touristic village can be rented there for about $ 200 a month. But this is only an option for someone who has not yet founded a family. If you have children then your situation is much more complicated, because you have to spend a lot more money to support your family.
How else can you invest one million U.S. dollars? You may be also taking into account buying 2 or 3 apartments for rent in a larger city where there are a lot of students. Assume that you bought three apartments, 2 two-bedrooms and one studio apartment. Suppose that you have to pay for all $ 1,500 monthly rent. Studio apartment can be rented for $1000 a month, and two-bedroom apartments rented for students, locating two people in one room paying $400 or 1 person in the room paying $800. So you earn $ 4200 per month minus $ 1,500 rent, which is $ 2700, minus the tax. It’s more or less the same if you had the money kept at the interest-bearing savings bank or invested other way. Of course, owning property is safer than keeping money in the bank (bearing in mind the events in Cyprus). Even holding a million dollars in 4 bank accounts does not guarantee that the government or the owners of the banks will not want to get to it someday. With rental housing is in turn a little more problems such as searching for tenants or making repairs, etc.
If you do not want to rent apartments you can also shop around for commercial properties, which you can rent for a company. Let’s say you manage to buy one for $ 1,000,000 in a great location in a large city. You can rent it for $ 5,000 a month at least. The problem is to find such an investment opportunity, and then have the tenant all the time, so you’d not have to pay yourself rent to the city. From this point of view, however, it is safer to invest in several dwellings. There is no need to worry about it right now, because I think everyone would like to have such a problem, that is what to do with a million dollars. Paradoxically, however, if someone suddenly gets not a million, but a few millions then these problems will not affect him, because he will have a lot more maneuvers to choose in order to diversify his sources of income.