...how would I spend it? I'm a fan of Your Money or Your Life by Joe Dominguez and Vicki Robin so my focus tends to be more on my time and how I want to spend that rather than accumulating stuff (which is not to say that I don't have stuff).
I'm also a fan of Rich Dad, Poor Dad and the main thing I walked away with after I read that book was the idea that I don't work for money, money works for me.
Here's how I would make my million dollars work for me to give me more time: in a nutshell, I would try to set up a source of fairly passive income so that I could pay for all my expenses without having to be tied down to a job. Don't get me wrong, I still love my job, but there's a freedom that comes from knowing that you don't have to do that job, or any job for that matter.
I know how to live pretty cheaply. Some commenters don't seem to believe my budget is accurate, but oh well. If I had a million dollars, I would definitely want to raise my standard of living, so let's say I double it. Let's say I want $5000 a month before taxes.
So, how can a million dollars give me $5000 a month?
1. Put it in a Savings Account
If I put it in a savings account or CD averaging 3% APY (who knows what the economy will offer in the next few years) and took out $5,000 a month, I would run out of money in 16 years. Lame.
2. Invest it in Stocks and/or Mutual Funds
Let's be really optimistic and assume the economy recovers well and we go back to average returns of about 10%. How long would my million dollars last? According to this MSN Money retirement planner, the money would not run out! That sounds good. But the 10% return rate just seems like such a dream right now :(
3. Real Estate?
I have some experience being a landlord. I currently own my own house in which I rent out two bedrooms, and I also own a small rental house that I rent out to a family. Let's see what's possible if I replicate the numbers from my rental house experience.
I live in a place where home prices are pretty cheap. I bought my 3-bedroom single family rental house for under $60K and I put in about $2K for repairs. Seriously. I currently rent it out for $820/month not including utilities and I pay $260/month for property taxes and insurance.
So, let's assume I can buy a similar house for $75,000 after all closing costs and repairs and that I can rent it out for $800. Assuming I spend/save $400 each month for taxes, insurance and put some money away for future repairs, I can make $400 per month.
In order to generate cash flow of $5000/month with that, I'd need 13 houses. It would cost me $975,000 to buy those 13 houses for about $75K each. My positive cash flow from that portfolio would be $5200/month. Even if I had two houses vacant at any given time, my positive cash flow wouldn't go under $4500/month.
AND, as the years go on, I can raise the rent to keep up with inflation.
I think I like this plan the best. So far.