What I’m going to do if I win the lottery
In the spirit of the upcoming Chinese New Year, I’d like to write on something fun today.
Being someone from a Chinese family, there is no avoiding the “4D” phenomenon. Even if you don’t partake, every now and then you’d hear a relative shout out “buy number!”.
If you’re a Chinese or know a Chinese, you’d probably know what I’m talking about:
- Someone gave birth – look for birthdates, IC numbers, ward number
- Someone moved into a new house – look for house numbers, postcodes
- Someone got their license / IC issued – the ID numbers, please
- EVEN when someone got into a car accident – rather than “Is it serious” or “Is everything ok?”, the first thing will be “What’s the number plate?”
You know it’s true…
So, what is 4D?
4D (i.e. 4-Digits) is a super popular lottery game in Malaysia (this is probably an understatement).
There are various variations of the 4D lottery but they all revolve around betting on numbers in return for a chance of winning the cash prize. There are 3 main lottery houses in Malaysia – Sports Toto, Magnum 4D and Da Ma Cai. Of which, 2 are listed on the local stock exchange – Berjaya Sports Toto Bhd and Magnum Bhd.
(So convenient, 1 set of numbers 3 chances)
Pay a minimum of RM1 to bet on the numbers you choose – the classic one is 4 digits and it goes up to 16 digits (8 pairs)! Disclaimer: I don’t really know how it works because I have never bought numbers before.
As of writing, the highest prize is RM15 million from Magnum’s 4D Jackpot (4+4 digits).
So let’s work with that.
Winning the RM15 million Lottery
RM15 million is a big sum of money for a lot of people. Me included, of course.
Have you heard of the lottery curse? This refers to winners who became worse off after they won the lottery (An example article here (US) or here (Singapore)). Usually it’s caused by the careless overspending and the greed of others… more of the former in most cases.
These stories are understandable. When one has never gotten their hands on a big sum of money, there are a lot of “wants” that one will feel the urge to get fulfilled to the detriment of their own financial planning.
But… we’re all master financial planners, yes?
Let’s just assume so.
Now, for the fun part
If I won the RM15 million lottery, the first thing I’m going to do is to make a customised bucket system for the lottery winning (per the last part of my previous article here).
This stems from the learning of my own personal finance planning (or the lack thereof), whereby not planning forward will tend to result in overspending (foreshadowing the curse) and attracts a terrible mental stress.
3 main buckets:
- Spending (10%)
- Do good (10%)
- Investing (80%)
Spending (10%) – RM1.5 million
THAT IS A LOT OF MONEY TO SPEND AT ANY TIME!
Well, that is both true and false at the same time. There are so many ways to spend money nowadays that spending even RM15 million can be a breeze.
This spending bucket is meant to satisfy that dream wants we’ve been aiming for. After all, what’s the point of winning a lottery if I can’t spend on what I want?
- Upgrade my house (pay for downpayment) and renovation (movie room, library, sky gazing ceiling) – this will take the bulk of this bucket
- Get a supercomputer (because I’m a gamer and trader, more the former really)
- Splurge on dining in super expensive places
- Travel to the US / Europe / UK for a month at least (if the pandemic ever ends and borders open again)
Do good (10%) – RM1.5 million
Donate, charity, foundation, build a home… is what I’d like to say.
But for those who know me, that is not where my passion lies. I’d prefer to create impact in lives that are closest to me.
It’s a good allocation for a bunch of things that I can contribute to.
Investing (80%) – RM12 million
The bulk of the money will be sent to work to churn more money! I’ve got a few ideas here.
The safe haven of Fixed Deposits & Money Market Funds
If I deposit the entire bucket into this with current interest rate of about 2%, that would generate RM240,000 per year.
The interest from this will nicely work to cover my current annual basic living expenses. However, it hasn’t taken into account of getting a family and kids or upgrading lifestyle.
Dividend Investing
Here’s an idea:
Rather than relying on fixed deposits’ low rates, take on some risk and invest in the equity market in companies that pays dividends.
This can be defensive stocks (e.g. utilities, telecommunication) or REITS (Real Estate Investment Trusts).
Assuming that dividend yield averages at 5%, that would yield us a return of RM600,000 per year. On top of that, there is a potential for capital gains (and losses, of course), as well.
Not bad.
Capital gains investing
There is also the option to load the investing buckets into momentum / capital gain investments. The range of choices here is abundant:
- Momentum equities
- Cyrptocurrencies
- Forex trading
- US options trading portfolio (Refer to here)
- Robo-advisors (e.g. StashAway, MyTheo, etc)
Bearing high risk – high return, this can go both ways. Making loads of money or losing them all.
My decision on this…
As you may have guessed, it’s a mixture of all the above. At this point, I’m thinking of a split of:
- Safe Haven = 10% (RM1.2 million) As a buffer for anything in life and can get premier wealth status in a bunch of banks
- Dividend Investing = 60% (RM7.2 million) Generating passive income with dividends and eliminating my GAP of RM360,000 per year. Good annual allowance, I’d say.
- Capital Gains Investing = 30% (RM3.6 million) The potential upside that can later be channeled to getting more passive income.
The foundational principle
Whilst this article was for fun, there’s an inherent importance in this.
Regardless of whether receiving a windfall or an increase in wages / profits, the planning phase for the finances is very important. The only thing that is more important than that is sticking to the plan all the way.
As can be seen in the scenario above, by setting aside the money for spending, I can avoid overspending. On top of that, the bulk of the investing bucket will enable me to generate income for the long term – thus achieving financial freedom.
This principle is the same for RM15 million, or RM150,000 or RM1,500.
Now, what numbers should I buy?
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