While $1 million doesn't go as far as it used to, it's still more than 10 times the median net worth of American households. And it's still a huge sum of money that could make it possible to do many things you've likely been dreaming of.
So, what would you do with $1 million? A recent study from Schwab shows that Americans would have lots of fun plans for this imaginary windfall -- although we'd do some practical things with the cash as well.
What would Americans do with a $1 million windfall?
According to Schwab's 2019 Modern Wealth survey, here's what Americans would do if they were suddenly given $1 million:
- 54% would spend it
- 28% would pay off their debt
- 23% would invest the funds
- 21% would save the money
The results add up to more than 100%, suggesting that many survey respondents would have used the money for more than one purpose.
While spending is by far the top option, the top purchase Americans would make with their imaginary million is a practical one: a house.
Of course, while survey respondents said they'd spend on a home first, vehicles and travel were also other top purchases people would make. So clearly some of the million would be spent on fun splurges.
You don't need $1 million to accomplish these goals
While life would be a lot easier if you were handed $1 million, the bad news is that this is just a pipe dream for most of us.
But the good news is that you don't need $1 million to accomplish any of the goals most Americans have on their list. You just need to make careful decisions about what you do with the money you have.
If you hope to buy a house, start by budgeting for a down payment and working on earning the highest credit score possible so you can qualify for a mortgage loan. Be specific in your goal -- if you want to purchase a $300,000 house in five years, you'd need to save $1,000 per month to have a 20% down payment or $500 a month if you put just 10% down.
Likewise, if you want to repay your debt, prioritize sending extra payments to either your creditor with the lowest interest rate or your creditor with the smallest balance. Put "found" money such as tax refunds or bonuses at work toward your goal.
As far as investing and saving, you'll want to "pay yourself first," and make saving an essential monthly bill in your budget. If you can, consider having money moved automatically to an investment and savings account each month as soon as you get your paycheck so you'll know you're always putting aside what you need for the future.
In most cases, if you make a budget and actually live on it, you'll be surprised to see you can find the cash you need to make these big dreams a reality over time -- even though that $1 million windfall won't come for most people.
You can even save for the fun stuff, like travel and vehicles, if these splurges are important to you. Starting a vacation or car fund and budgeting to put money into it will ensure you have the cash you need to indulge your passions.
And if your income really is too low right now to budget for any of these dream expenses, consider looking into a side gig, asking for a raise, or improving your skills so you can find a higher paying job.
Start working on making your million-dollar dreams a reality
Thinking about the things you'd do first if you suddenly got $1 million can be helpful in clarifying what you most want to do with your money.
But since being handed $1 million is unlikely to happen for most of us, it's up to you to find room in your current budget to try to make your dreams a reality.