Let’s say you have a rich uncle. You probably don’t, but let’s say you do. And let’s say your rich uncle dies, and since you’re the favorite niece/nephew of your rich uncle, he lives you $1 Million in his will. No, let me rephrase that - he leaves you enough money in his will that you have $1 Million left over even after you pay taxes. Incredible, right?
I know this is a stretch, but stick with me. This is a mental exercise that will help you learn something about yourself and your financial personality. And hey, it’s not a bad fantasy.
So you have the money, but there’s one problem…what are you going to do with it? I’d say most people don’t have any idea what they’d do with a million dollars if they had it. Work through this exercise with me. You’ll learn something about yourself, I guarantee it.
Discover Your Financial Personality
I’m not going to answer any of the questions below for you today. In a series of future posts we’ll take them on one at a time, but at this point I want you to do the work yourself. Sit down with a piece of paper and a pen and do your best to answer each of the questions above. Think of it as the beginning of your financial autobiography. After you’ve answered them, you need to justify your answers to yourself.
Here are a few questions to think about as you decide what to do with your million:
1. Would you pay off your mortgage and all other debt?
What would be the upside of paying off all debt? What would be the downside? Could there ever be a downside to paying off your debt?
2. Even if you paid off all your debt, you’d probably have some money left over (I hope!). What would you do with the remainder?
Would you buy a new car? Would you buy some toys?
Would you invest some or all of the remainder?
3. If you decided to invest the money, how would you invest it?
Would you buy stocks, mutual funds, or real estate? What about bonds? Do you know the difference?
If you were going to buy real estate, what kind of real estate would you buy? Rental property? Commercial or residential? Raw land?
Make Decisions According to Your Values
I’m guessing a lot of you won’t be able to answer the questions with any confidence. You may be able to answer the questions, but could your decisions stand up to direct attack? They’d better be able to, because your financial choices will be attacked every day - directly by the media and indirectly by the decisions you see other people make.
A big key to becoming financially independent is the ability to identify your financial values, make decisions according to your values, and then stick to those decisions no matter what you see your neighbors do or what the media tells you.
Take an hour to write down your answers to these questions. If you don’t write your answers down, you’ll forget your thoughts within minutes, and they’ll be of no value you to you. By writing them down, you make them concrete in your mind. This will pay off!
*Image credit: g.naharroSubscribe to the Butler Project's RSS Feed and get fresh content as soon as it's posted.