Can you blow through $100,000 like a rock star? Jacob over at I Heart Budgets blew through $100,000 before he was 21 like a rock star. I remember having jack shit between the ages of 18-21 as I drove around in a beat up Toyota Corolla with one shiny driver's side door because my friend had bashed into it by mistake. That door was the only thing new on my beater with 160,000 miles, a broken muffler, and a wrongly calibrated gear box!
Despite my beater car and having only a couple of thousand dollars saved up from gifts and slave labor, I still had a ridiculously good time in college (don't tell my parents)! It might sound ridiculous to spend $100,000 before the age of 21, but if you read Jacob's post, you'll see that he actually got a lot of value for his money, contrary to what it might seem!
Possible To Be Financially Disciplined So Young?
I'd like to think that if I got a nice $100,000 inheritance at that age, I would have invested $95,000 of it in Yahoo stock. It would become a 10 bagger then I would have sold. With the $800,000 in after-tax proceeds I would then use $500,000 to leverage up and buy two, $1,000,000, two bedroom, two bathroom condos in New York City which are now worth north of $2,500,000.
I wouldn't sell the condos despite the 150% return in 10 years because income producing assets is now KING in this low interest rate environment. Instead, I'd just collect rent so I can focus my efforts elsewhere.
Of course, hindsight is always 20-20 and obviously my scenario is a fantasy. The real question Jacob's post asks is, “Will you be able to resist not blowing yourself up if you received $100,000 at such a young age?” I'd like to think that I would be disciplined, but I doubt it.
Blow Through Money Quick!
If I had $100,000 at 18, here is how I would blow through money.
* Fancy car. At the age of 18, I was already infatuated with nice cars. The problem is, it takes a damn long time at $3.25 an hour to buy anything but a heap of junk! I would use $11,000 of the $100,000 to buy a sweet 1989 Mustang 5.0 GT. I'd rumble the six year old car to college and go for joy rides every evening.
* Nice watch. I've appreciated a nice watch since I was 8 years old interestingly enough. I loved the old black Casios. The interest grew to the Seiko Kinetic watches by middle school. In high school, I always longed from a Tag Heuer watch but could never afford the one I like for $1,500. I'd buy that one for sure, and hopefully nothing more expensive.
* Retro Kicks. I'm a shoe fanatic and love all the old Air Jordans and Andre Agassis. The shoes cost $120 at the time, so I could hardly ever afford to buy one new. I bought hand me downs for 1/3rd the price from my wealthier friends! I'd probably spend $500 and buy me the AJ5 and AJ6, and the hot lava Agassi's.
* Tuition. Tuition back then was amazingly cheap at only $2,890 a year! If you take on General Fees, Room, and Board, the total comes out to around $10,000. Not bad at all! Even my parents back in the late 90's thought that was a good deal. I'd use my remaining $87,000 to pay for all my expenses for the next four years.
* Seeing the world. Back then, going on Eurotrips was all the rage. With my remaining $40,000, I'd probably take two trips to Europe for a month each at a total cost of $5,000. I'd take another two trips to Asia for a similar amount of time for the same amount of money. Nothing is more educational than seeing the world!
* Gift to my parents. I would spend $5,000 and buy them a two week cruise anywhere in the world, airfare included. Knowing them, they would probably encourage me to save my money and just thank me for the gesture, but I would insist. I remember purposefully NOT going to a private college. A total annual cost of $28,000 a year felt nuts. Besides, the state school I attended was one of my target schools.
* Invest. I had very little concept of investing up until my junior year in college. There was no way I'd invest more than $5,000 in the market at the time. I didn't know the first thing about the markets back then! I'd punt around, but keep the remaining $20,000 safe.
You see how easy it is to blow through money?
Not Much Left After
In four short years I just blew through $80,000 of my $100,000 inheritance! It's evident the reason why I did is because I was a student with no real income. So in that sense, spending $100,000 from the between the ages of 18-21 is really not that big of a deal. With new income upon graduation, I'd have a $20,000 buffer to help get an apartment in NYC and be on my way.
Ever blow through money like this before?
Related post: Revenge Spending Time!