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Slowly!
I'm on the final countdown to my early retirement (still don't like the word retirement and still haven't come up with a better word) and at this moment I have 41 days of working for "The Man" to go, hopefully the very last of my life. Wow, that makes it all sound a bit real. My current net worth (excluding my home and car) is sitting at:
13,042,283 South African Rands
704,988 Great British Pounds
931,592 United States Dollars
With two pay checks left, an annual bonus, some cashed-in leave and a decent tax refund looming due to my over-payments into my pension over the last year, there's a little bit more to come. Add to that, the fact that we're in the middle of a stock market correction (13% drop) which inevitably will recover, I'm reckoning the "Working Middle" of my life is going to spit out pretty much a million dollars to support the rest of my life (still calling it retirement for now). I'm planning this bit to last until my 100th birthday at which point I'll be one of the following:
Dead
Ready To Go
Past Caring
Someone Else's Problem
So using that rationale. the cool million has to last 20,431 days exactly. I should state at this point, there's going to be a few numbers in this post, so given the almighty dollar is the roundest number of the three and I like saying "One Miiiliiion Dollars!" like Dr Evil from Austin Powers a lot (Pinky finger to lips and evil chuckle.... now), all of the numbers in this post will be in USD. Go to XE .com for an instant currency converter if it's a thing for you. Ok, back to the plan.
So if $1,000,000 needs to last 20,431 days, I need to keep my spending down to just shy of $49 bucks per day. Doesn't sound so amazing being a millionaire now does it? I'll cancel the chrome Lamborghini order.
However, that million, is already invested in the stock market and it's going to grow if I don't spend it too quick, in fact it's going to grow a lot according to history.
So for a kick off, I need to assume a growth rate. The s&p500 has delivered a historic growth rate of 10% so that would be a good place to start. Let's simply go with 10% for now.
So if I don't touch the $1m investment and it grows by 10%, I'll get a not too shabby $100,000 salary each year, and that means I can spend $274 a day. Now that's more like it right? Well no, it's not that simple.
I live in South Africa and the inflation rate here is a hefty 4.5% so I need to add $45,000 to my million buckeroo investment just for it to be the same value next year. That means I only have $55,000 left for me at the 10% return so that brings us back down to $150 a day, still feels ok? I can work with that.
Unfortunately the two things in life that are a certainty is death and taxes, so 'The Man" still gets his cut regardless. In South Africa, the Capital Gains rate (the tax on investment income) is 18% so that cuts my $55k down to $45,100, which is $124 per day. Well it's not going to fund the super yacht I was planning but it'll have to do.
Now don't forget that this has to fund myself, Mrs H and Winston the wonder-pooch for the rest of our lives. There is inevitably going to be ups and downs so I should probably try and build up a little contingency fund for any rough patches. I'll make this less scientific as there is always the ultimate sacrifice of actually going back to work for someone [shock and horror face] so lets make it easy and say it's $5,100 per year to round the whole thing up to a nice even $40,000 or $110 per day. Is that enough? Well it'll have to be for now.
Just one more thing;
Mrs H is actually planning to work her current job for a while but "a while" is a bit broad even for me so I'm assuming she works for 2 more years in my plans so I'm hoping we can pretty much live off her salary in that time and of course I'm not adverse to making a few shekels working if it's something I enjoy and not a full time gig so for the purposes of this exercise, lets assume I can leave the draw down for two years before we try to live off it alone.
That then means that the $1m will then have grown to $1.21m at 10% but would have been eroded by inflation by 4.5 % each year so if I adjust for all of that, when I start to live off of my savings, and considering everything above I'll have to live off [drum roll]....
$48,770 Per Year
$4,064 Per Month
$938 Per Week
$134 Per Day
So the answer to the question of how does a 44 year old spend $1m, is nothing for 2 years and then at $134 per day until he's 100.
If you've read this far, you're probably now trying to figure out if you could live on $134 or R,2091 or 105 British Pounds (I seriously need to buy a keyboard with a GBP sign on it!) per day. My instant reaction is that it feels doable but you also need to remember that all the household bills need to come out of that, then it's got to fill three belly's, clothe three backs and if there's anything left, give us something to smile about. My next post will seek to answer that question, is it enough?
So there it is. Stay tuned to see exactly how that will get spent.
Until next time, keep living