What I'd do with a $20 million lottery win

Note: I will be starting college again March 1st.  I will be attending Western Governors University.  I originally wrote this for a scholarship from Yakezie.com to help pay for college. but was about 3 hours late turning it in.  I think I did a pretty good job so I figured I’d post it here.

I believe that if I would to win a $20 million dollar lottery, while portions of my life would change, overall, my life wouldn’t change very much.  Upon winning the lottery, I would immediately call my dear sweet wife.  She is a stay at home mom to our three beautiful children.  My wife and I would go out to dinner so we could discuss our financial plan.  The next day, I would write a check and pay off the mortgage.    I would also write a check to my Church for 10% of the winnings.  Of course, the government would also take 30-40% in taxes.  This would leave me with about $10 million dollars. I would take the money and divide it up into various bank accounts so that no one bank was above the FDIC coverage limit (I have had several banks that I have dealt with fail).   I would tell my family, but I don’t think I would tell many, if any, other people.  There just isn’t a smart reason to tell non-family members.  They would either think I’m bragging, or want to borrow money from me.   I do think I would take a weeks’ vacation from work and go on a nice trip with my family.  When we got back (or perhaps before we go), I would setup trust accounts for each of my 3 children for college, fully funding, with some extra, their anticipated college expenses.  I would then purchase some real estate and rent out the properties, to help bring long term income into my family.  I would talk to my parents and my wife’s parents about paying off their home mortgages, thus bringing some financial peace to them.  I would keep $5 million dollars in good growth mutual funds to allow this money to keep growing.  By having this money grow at 6%-10% annually, I would bring in at least $300,000.00 annually that we can live on without touching the remaining $5 million.

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The Dave Ramsey Plan

The Dave Ramsey Plan

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

Common Sense Plan.

I. INSURANCE

A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET

A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX

A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.