If you won the lottery

First off, I don't play the lottery, because I understand enough mathematics. I call it a tax on ignorance of mathematics, in fact, and am endlessly amused when it's used to fund education. (Not that that's inappropriate or ironic; tobacco taxes being used to fund education programs to help people quit smoking makes sense, and so does this.)

But like I'm sure everyone else I've worked out, as a way to pass the time, what I'd do if I won some huge amount of money somehow. (Really, the odds of winning the lottery are so low, that not playing it barely reduces it significantly. I might happen upon a winning ticket! But one can imagine windfalls from other sources, too.)

Most people's list of things they'd do with a million dollars probably start with things they'd buy: a new house, a new car, some particular toys or gadgets, a private island, something for their friends and family. That's silly. Consider that a relatively low-risk investment can easily earn 4-6% interest, which means $2M put into the bank can give you an income of $100,000 every year for life without having to do a day of work. Buying things with your windfall is just digging yourself into a hole without a source of a way out. What's surprising is what a huge percentage of lottery winners do just that, and end up, five years later, broke and in debt and wishing they'd never won.

The first thing to do with a windfall is pay off your debts. No investment can reliably offer a better income than simply not having to make credit card, car, or mortgage payments anymore. After that, it's reasonable, being only human, to allocate a few tens of thousands to whimsical things like a good TV or even some travel. But after that, you should go straight to investment.

At a windfall of $1M, I could make enough income that we could continue to live as we have with one big change: Siobhan could retire. (Which is a very good thing: Siobhan's got the kind of personality that would be much happier that way.) It would take about $2M before we could both retire.

A lot of people respond to this idea by saying "I would still work, I would be bored without work." I find this idea insane. Do you really have so little interest in hobbies? If I never had another day of work in my life, I could still fill an entire lifetime just with reading the things I wish I had time to read. Another lifetime playing games I don't have time to play. Another lifetime on travel. Another one on learning stuff I don't have time or opportunity to learn. Another one on writing things I'd like to write. Another one doing volunteer work for causes I believe in. If I can fill six lifetimes without even including work, how can anyone not be able to fill one? But even if that's so... retire anyway, then spend your time doing the same kind of work on your own terms for charity.

After that, the next few millions would be allocated to various friends of mine, in order both of how close they are and how much they could benefit from it. One million each could pretty much get every one of them set up for life -- maybe not enough to never work again, but certainly enough to have a good home and something to fall back on and get rid of their debts. I've got four people or couples on the list there, so that's millions #3-6.

The next three millions would go to charities. The Nature Conservancy, the Planetary Society, and the third one divvied up between a number of charities focused on environmental, social, and economic justice, particularly on the long term -- helping the world stop needing as much charity.

It's not until the tenth million that I start talking about frivolous things like buying an airplane and learning how to fly it, but most of it would just increase the reserve in investments from which I draw an income. A bit would go to a few improvements to my house, but really, my house is already pretty near perfect, and I couldn't spend more than fifty thousand on improvements. After that, I start divvying up again between my friends and various charities.

How can anyone think a Maserati is better than never having to go to work again?