Does One Million Dollars Make You Rich?

I remember about 25 years ago thinking that one million dollars was quite rich and it became my goal to become a millionaire by the time I was 30 years old.  Well thirty has come and gone and even though I am closer to being a millionaire than I was several years back, I am still a long way from it.  However, is one million dollars even that rich anymore?

There has been a lot of press about a recent lottery winner still receiving food stamps.  Notice that the sponsor of a bill to rectify this type of situation refers to “someone who found riches”.  But as Sam points out, she still has to pay taxes on the winnings and would only get $562 per month if investing the money in a CD.  You know that isn’t going to happen.  This money isn’t going to last the rest of her life, and I honestly doubt that Amanda has a plan for the money or how to improve her lot in life.  Which brings us back to the question….

Is One Million Dollars Considered Rich?

In a word, NO!  I don’t think it is necessarily rich anymore, although it could be.  First, it depends upon your definition of rich.  Are you focused on a single number that defines rich.  Many might put that number at $2 million, $5 million, or $10 million.  But others might be looking at a particular type of lifestyle with the ability to fly to Paris for dinner on a whim.

Others might look toward financial freedom or the ability to make choices regarding one’s time.  There are many who might fall into this category without having $1 million, but simply have enough cash flow producing assets to cover one’s expenses.

Amanda’s Options

Now Amanda doesn’t strike me as the kind who might consider this, but she could earn a lot more than $562 per month by sticking the post-tax portion of her funds into a CD.  Personally, I would be investing that money into real estate in order to earn some nice passive income and provide the flexibility to gain additional education or not even have to ever get a job.

Since it sounds as if Amanda already has transportation and a place to live, let’s work with Sam’s assumption that she has $300,000 left over.  I know Michigan is probably not that much different from Indiana as far as real estate goes.  With $300,000, I could get 2 nice duplexes at about $130,000 each that would rent for $750 per side.

I would still have $40,000 left over for maintenance should anything come up but I would expect any serious items to be caught on inspection.  Figuring 10% for vacancies, 10% for ongoing maintenance, 10% to a property manager (I assume that Amanda is not interested in self-management), and $4800 for taxes, let’s she what she might clear monthly pre-tax.

  • Income:  $750 x 4 = $3,000
  • Expenses: $300 each for vacancy, maintenance, and management plus $400 per month for real estate taxes = $1300
  • Net Pre-tax Income:  $1700 which is a lot better than $562

Furthermore, she would be paying minimal, if any, income tax on this income since the depreciation on residential real estate would easily wipe out half of her income if not more.  Add in a personal exemption, and she might even be able to not pay any income tax at all.

This could provide a decent lifestyle for Amanda and give her some flexibility knowing that she has a consistent $1700 per month in income without having to do any work at all.


It turns out that all the media hype brought on by this has taken Amanda off the government dole, so I would say that she better come up with a plan now.  I suppose buying $300,000 worth of lottery tickets might be in the cards now, huh?

Readers, what are your thoughts regarding all of this?  Do you have a plan for a windfall such as this?  Would you go with real estate or a CD or other investment?  Would you spend all the money?  How do you define rich?



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