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May 27, 2002

My Plan For $34 Million

It's already fading quickly from our memories that Lotto Super 7reached a record $34 million dollars recently. I know that I spent about $30 more than I usually spend (nothing) trying to win first $20 million, then $24 million (missed the $22 million week) and eventually the $34 million payout. As it turns out, there were four winning tickets worth just over $9.4 million each. Paltry, compared to 34 thousand thousand clams, but still a rather substantial payout. I wouldn't say no.

Sadly, I learned that God doesn't respond to promises of tithing with lottery winnings, so I'm still out of work and unable to fulfill my whims and desires. But that doesn't mean that I didn't think of what I could do with the winnings. If you didn't plan how you would spend your winnings, you probably aren't optimistic (or desperate, hopeful, or na´ve) enough to play, which may not necessarily be a bad thing. Here's what I would have done.

As I mentioned above, I would spend some of the winnings on the church we attend. I don't exactly have the longest history of church attendance (that's another whole series of articles) but I am sufficiently grateful to our church that giving them $3.4 million to go towards a new church would not be a problem. Come on... giving away ten percent of a helluva lot of money still leaves you with a helluva lot of money, and gives you warm fuzzies to boot. I'd love to be able to look at our church and say, "Yes, I helped build that."

Once my tax-free winnings are deposited into whatever account the financial advisor I would retain would tell me to open, I'd pay off everything I have to pay off. I'd blow away my mortgage (penalties be damned), get rid of the remainder of those pesky student loans, pay off and cut up my credit card, bid adieu to our line of credit, and even go so far as to tell Union gas to come get their damned rented hot water heater, as I'll be buying one.

A hot water heater may be a silly purchase, however, as soon after my winning I would launch full-bore into the design and construction of our new house. As a friend of mine would say, when I move out of this house it'll take six friends to move me. It would have everything we'd ever need, and of course no reasonable expense would be spared. I'd finally have the kitchen my wife and I, who both enjoy cooking, have wanted: large and spacious, tons of storage, kilometers of counter space, and matching appliances with all the features we need and can finally afford. Add on a nice amount of landscaped, treed property (with a suitable view, of course), a deck perfect for BBQing, hot tubbing and general lounging around, a luxurious master bedroom ensuite bathroom, a media room that would shame most cinemas, and of course the raison d'etre, the 6 (or more) car garage.

I've always loved the automobile. Recently I've had a slight change of perspective towards a more environmentally responsible point of view, but I still drool over some of the offerings the automotive industry produces. With a suitably deep wallet, I could and would indulge this hobby. So, what would I buy? That's the tough part, especially if I were to limit myself to only a half-dozen cars. An Acura NSX would be mandatory, I would think. My wife might not let me get away without getting a Ferrari, or at least looking really hard at one. I'd probably get some things less exotic but equally as fun, such as an Acura RSX Type S, a Subaru WRX Wagon, or maybe even an Audi biturbo wagon (I have a thing for wagons). There's some older vehicles I'd want as well. I'd want to get another Honda del Sol. I miss the one I had, and it was just too much fun to give up permanently. My wife would probably love to have the CRX she never had as a teenager, too.

See what I mean? I'm already up to six vehicles, and I haven't even started to scratch the surface of all the really excellent vehicles that are out there. Porsche, Lotus, BMW, Mercedes AMG, and a handful of worthy hand-built low-number rare exotics would all be up for inspection and spirited testing. Heh, heh. Of course, maybe I shouldn't spread myself too thin, otherwise I'll just never be able to get the true feel for each vehicle, and lose out on the appreciation of the individual attributes of each machine.

Speaking of machines, I'd want a plane. My father and stepmother took up flying while I was in university, and most of my wife's immediate family is involved with airplanes somehow. With the time and money to do it, I'd love to get my pilot's license. One of my far-fetched and more-than-unlikely dreams has been commuting to work in an ultralight. With scads of money, I wouldn't have to work, but tooling around on an ultralight would still be a lot of fun. So would flying my family to vacation spots in our own plane. Well, so long as my wife can get over her small-plane queasiness, and assuming that my children don't share that trait with their mother.

But where does one go on vacation? Friends of my mother have a cottage an hour south of Sudbury. It's a small cottage, not many amenities, and it's very hard to get to. Why? It's in the middle of a body of water on its own island. Many years ago we were invited to stay for a week, and let me tell you, it was great. It was a perfect place to vacation if you enjoy doing nothing but relaxing or swimming. So, if I could find something like that (maybe with a small airport nearby or space to land a float plane) I'd probably turn that into a nice summer home.

OK, I think I'm getting into the reaches of snobbery now. Point is, if I win it, I won't be stuck wondering what to do with it all. Lottery winnings aren't all about fulfilling all your childhood dreams through massive purchases, however. I would hope that I would be able to retain enough rational though to use the money for future good as well as immediate gain. With $34 million it should be fairly easy to set up a lucrative trust or endowment fund for my family, so that they are comfortable for many years, and possibly generations, to come.

Even assuming interest rates stay abysmally low (say, 2%), with sufficient initial investment an endowment fund should be able to care for even a large family quite easily. Say I set aside $10 million (leaving me only $26 million to play with) in an endowment fund, where nobody is allowed to touch the original principle, only the interest. Without compounding, 2% annually of $10 million is still $200,000. Gee, I think we could live on that fairly well. Should interest rates climb, and if we start leaving part of the interest in there, an endowment fund can grow to scary big proportions quickly. Ah, the magic of compounding.

I once heard a scary statistic about lottery winners. If I remember correctly, something like 90% of all winners spend their entire winnings within a year of winning them. That seems kind of... well, undisciplined, to say the least. One would think that people would want to maximize their good fortune and seek the advice of a financial advisor, or an accountant, or at least your banker so that you're putting your money where it will do the most good. I've heard tales of winners taking all their friends and family on vacation, buying anything and everything, indulging any whim that comes to mind, oblivious to the fact that their winning ticket was worth a finite amount of money, and is not a bottomless pit of wealth for them. Maybe it's just me, but should I ever win any substantial amount, I'm going to try and stretch it out as far as I can!

The sad truth of it is that I don't have to worry about it. I don't need to decide what kitchen appliances we want, or how many cars need to fit in the garage, or whether the cottage should be near an airport or if I should just get a pontoon plane for getting back and forth. The odds are stacked well against me, and against all of us, when it comes to lotteries. They are labeled by some "Tax on the Stupid", or "Tax on those who Can't Do Math". Yes, people do win lotteries, but you don't realize exactly how many people don't win. Yes, you can increase your chances by purchasing more tickets, or forming a pool of your friends, co-workers, family, and anyone else who wants to win and purchasing a huge pile of tickets. Unless the lottery you're playing is like one of the Superball lotteries in the States that can get to be over $100 million, your share will be much smaller than the total payout. Still large, yes, but you probably won't be retiring.

Will that stop us? Nope. Not at all. In fact, I won two free tickets during this recent Super 7 escalation. So, I just have to bide my time and wait for the jackpot to grow a bit...


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