A Gift to My Future Self

By Ojas Joshi

Assuming that in my lottery, I won 13 million dollars, here is how I would divide it up. First, I would choose to take the lump sum payout of the lottery, an estimated 8.06 million dollars. Essentially, I am taking all of the cash available in the lottery, rather than accepting the winnings over annual payments, in which case the total cash would accumulate to the projected 13 million with interest. Then,federal taxes would reduce the 8.06 million dollars that I have taken out to around 5 million dollars. 

Five million dollars. While this may seem like a lot of money at the moment, over time, inflation would make short work of my buying power. In 50 years, assuming an annual inflation rate of 3%, the 5 million dollars that I have will be worth 1.1 million dollars; nearly 1/5 of my initial amount. Therefore, if I intend on maintaining my wealth, and maintaining financial security into retirement, I have to utilize investing in some manner. Thus, I will put 20% of my money, one million dollars, into fixed-income investments. This way, my money will not depreciate at the same rate. The rest of my money, four million dollars, will be put to use in other ways: college costs, housing, cars, travel, and other ordinary expenditures. Most importantly, however, the one million dollars I put into fixed-income investments will reap major benefits in the future. Based on an average return of five percent per year for my investment, and adjusted for inflation, my one million would turn into nearly 2.6 million dollars. Truly, a gift to my future self.