I like talking with my dad about all kinds of things. One interesting kind of conversation is around counterfactuals: You change one thing and start thinking about how the rest would behave. For example, assume Mars would have a working ecosystem similar to Earth, but without animals. Or suppose we would have nuclear fusion.
In this article, I want to explore how my life would change if I won money 💸
My current situation
I’m 32 and I’m living in Germany with my wife and two cats, no children.
My wife and I spend about …
- 1600 €/month for rent (including water and heating)
- 280 €/month for food
- 60 €/month for electricity
- 30 €/month for internet
- 20 €/month for mobile internet
- 150 €/month for leisure time/dates + about 1500 €/year for vacation
- 50 €/month for household items
- 22 €/month for broadcasting (mandatory in Germany)
- 15 €/month for insurance
- 30 €/month for clothes and shoes
That is about 2382 €/month on average for two people.
Future plans
For this article, I assume that I will die with 93 years (calculator). I assume that prices will not change.
We want to have two children, which means that we have to support them for probably 22 years. I guess about 700€/month per child is realistic (source).
A comfortable minimum for retirement
Currently, we need about 2382€/month.
Once we have two children, we need an additional net income of 1400 €/month.
I have 60 years of life left. 22 of those we’ll pay for two children. That makes
(22 years · 1400 €/month+ 60 years · 2382 €/month) · 12 months/year = = 2,084,640 €
Meaning if we had 2.1 Million EUR we could retire with the current style of living.
Let’s say that I can retire at the age of 67, meaning I would have 27 years to receive my pension. Let’s say my pension was 2100 € and my wife would receive 1500€, giving us actually more than we need in those 27 years. That means we only have to calculate until 67.
(22 years · 1400 €/month+ 35 years · 2382 €/month) · 12 months/year = = 1,370,040€
Meaning if we had 1.4 Million EUR we could retire — (falsely) assuming that this would not reduce our pension.
If I won 500k €
We would buy a house if we had 500,000 €. That would reduce our rent from 1600 €/month to 600 €/month. Well, it would no longer be rent but insurance, taxes, heating, and reserves for repairing the house.
That would change the amount of money we need from 2382 €/month to 1382 €/month. Meaning the money we need to retire would be:
(22 years · 1400 €/month+ 35 years · 1382 €/month) · 12 months/year = = 950,040€
So roughly 1 Million EUR for retirement, if we have a house. You can see that the house increased the amount by about 100k EUR — but it would also give us a lot higher standard of living.
Overall, winning half a million EUR in Germany makes your life a lot more comfortable, but it doesn’t make you rich.
If I won 1 Million EUR
How would the lives of my wife and I change if we won a million Euro?
We would probably buy a more luxurious house in a better area, probably for around 750k EUR. That would leave us with 250k EUR which we would invest in an S&P 500 ETF. Assuming that beats inflation by 2% per year, it would give us about +54% in 22 years using compound interest leading to a total fortune of 385k EUR.
Assuming that those were the expensive 22 years with the two children, we would only need 13 years with 1382 €/month before we get the pension. That would be 215,592 EUR. Meaning we could stop working at 54 — that’s 13 years earlier!
However, we would probably not do it abruptly. We would reduce our hours. That would lead to a tax benefit due to Germany's progressive income tax.
If we bought the 500k house we would be left with 500k EUR. Eight years of compound interest increases this to 585k EUR. If we get a net income of 5000 EUR together, we would only need to work 8 more years. We could stop working at 40– that’s a whopping 27 years early!
At that point, I would definitely reduce my working time. Very likely, I would work one day less per week leading to 32 hours instead of 40 hours. Maybe even additionally reduce my daily time from 8 hours to 6 hours, which would then be only 24 hours per week. That’s enough to give the week some structure but little enough to give me a lot of flexibility to do more sports, visit friends more often, write more articles, and invest more time into learning new skills. Maybe even start to study again.
To the outside world, my life would look very similar. The only thing that would change is that I would invite family and friends more often when we go to restaurants.
People with 1 Million USD in investments are called High-net-worth individuals.
If I won 2 Million EUR
This is where it starts to get fun. If my wife and I got 2 million together, each one of us could get 1388 EUR per month for 60 years.
There are various withdrawal plan calculators (German example). If I take a million for 60 years and have only 2% interest (after inflation), I would get 2375 EUR/month. If it only has to last until I’m 67, then I would get 3300 EUR/month. And, of course, exactly the same for my wife. Taking away the costs of living, that still leaves a comfortable 2100 EUR/month. For 35 years. Without working a second.
At that point, you don’t have to worry about basics: The home, food, electricity, internet, heating — it’s all no problem. You can buy whatever you want in the supermarket. You can make very nice vacations in any place of the world.
However, there are limits:
- Houses: If I wanted to buy a house with about 180m² in my current area, I would need to pay 2–3 million EUR.
- Traveling: Staying at expensive hotels and first class flights could quickly reduce that wealth, if it’s done very often without care. A first class flight with Lufthansa from Munich to New York costs currently around 7.5k EUR and staying in InterContinental in a Junior suite is at 750 EUR/night. Meaning if you did every month a 7-night vacation of this type, you would spend 153k per year. Less than I expected, but after 7 years the million would be gone.
- Events: If you like to throw parties, you can get rid of this amount of money pretty soon. In a nice location, you might pay more than 200 EUR/person. Invite 100 people and you spend 20k for one event. Do that twelve times a year and you spend 240k per year.
- Cars, Yachts, Airplanes: The average price of a Ferrari is around 200k EUR. Even single cars can exceed the million. Don’t even think about a yacht or an airplane.
- Gambling: People lose a lot in casinos. All the time. That’s just stupid. Don’t gamble.
With this amount of wealth, I would buy for convenience: Get a cleaning lady twice per month, pay the extra so that I have to plan less for vacations, have somebody do my taxes.
I would very likely still work ~20 hours per week. And very likely, after a couple of months enjoying the wealth, I would start seriously with some of my own business ideas.
If I won 3.1 million EUR
Buy a nice home with 800k EUR: A rather modern home in a nice area, but nothing extremely fancy. This reduces the monthly costs to 2100 € for my wife and myself combined.
Ensure wealth with 1.3 million EUR: I would invest 650k for my wife and make a payout plan which would give her 1500 EUR every month for 60 years. I would do the same thing for myself.
Ensure wealth of my children with 1 million EUR: Very similar to my personal wealth investments, I would save money for my (unborn) children. This means with roughly 3 million EUR my (future) family and I are guaranteed to stay wealthy.
If I had 10 million EUR
10 million EUR is a crazy amount of money. If you were beating inflation by 2%, you could take over 23k€/month for 60 years.
If you don’t buy ridiculous stuff (e.g. VERY expensive cars, a yacht, a plane, expensive houses, gambling) you can pretty much do whatever you want. You will not manage to become poor. It’s simply not possible.
Assume you would sleep every single night in a luxury suite for 750 EUR/night. That would make 23k EUR/month. But then you would also get a discount for booking it that long.
By the way: Ultra-high net worth individuals need to have at least 30 million USD (source). That would be 2375 USD/day.