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How MacArthur Geniuses Handle Their Money Windfalls
- S_A_P 9y agoThe TLDR of this is basically that the MacArthur Geniuses have a solid trajectory/purpose in life so the sudden windfall does not seem to affect them in the way that the lottery does to some people. However, while this is certainly a windfall and I wouldn't turn it down its not a lifestyle changing windfall. I would say this is enough money to do anything for at least a short amount of time, but it is certainly not enough to do nothing. I think that combined with the fact that the awards are given to people who are pursuing their passion is a large differentiator to those who've won the lottery and aren't rooted in some cause.
- chrisparton1991 9y agoFor me—in my 20's living at home—this kind of money would mean I could buy a house/apartment without needing a mortgage. It would be a huge kickstart to my independent adult life, and the savings over the decades from not having a mortgage would absolutely be lifestyle changing. I'm not talking about yatchs and lamborghinis, but it would certainly provide the freedom to live on less income in exchange for more free time to pursue hobbies and side projects. Not that I have any reason to complain, I'm very grateful for who and what I have in my life right now.
- cantrip 9y agoI get the sentiment, but I'd just like the point out that with current interest rates it makes sense put 20% down and invest the rest in mutual funds. You get mortgage interest deduction and are paying 4% interest while making 7% market gains. Buying a house all cash is not the way to do it.
- Retric 9y agoYou get an interest deduction, but you need to pay taxes on capital gains. The added flexibility is probably worth more in theory but risks spending that money on other things. A larger issue IMO, is condo's / houses have large upkeep costs and reduce mobility. So, simply renting while investing 90% of the money for a very early retirement is probably the best bet.
- astura 9y agoThey, yes, the nebulous "they," say you should expect to spend around 1% of the house's value a year for repairs, upkeep, and maintenance. This rule of thumb doesn't quite work when the local housing market is in a bubble though. Of course, there will be years you spend much less and years your roof needs replacing so you'll spend much more, so that's why you amortize.
- Retric 9y agoNot just repairs. Depending on what you get your facing everything from condo fees, taxes, lawn care, etc and it can all add up quickly. The real savings from renting is the flexibility to up size, downsize, relocate etc as needed and with minimal transaction costs. Thinking of starting a family some day? That does not mean you need to pay for more space today, unless your planing to stay put for 15+ years.
- astura 9y ago>You get mortgage interest deduction People say this but do they know what it means? It's not like the "woooo, free money!" people make it out to be. You are spending a lot of money and saving a little bit of money. It's only a very significant decrease in taxes if you pay a real lot in interest and have high property and income tax. In my experience buying a house saved me only about a whopping $500 in taxes the first year. And you better fucking believe that $500 went right back into the house in the form of maintenance and upkeep. Furthermore, You don't get the mortgage interest deduction if you don't itemize and take the standard deduction instead. Due to new tax laws the standard deduction after 2017 is so high it will be taken by 97% (IIRC) of Americans. So mortgage interest deduction is totally irrelevant from 2018 on. One of my biggest concerns with putting the vast majority of my wealth in my house is a lack of asset diversion and if it causes you to negligent the tax advantages of contributing to retirement account. ESPECIALLY when your in your 20s, that's when compound interest work most of it's magic.
- pc86 9y agoSo let's look at the mortgage interest tax deduction on a theoretical $3k/mo mortgage ($635,000 loan at 3.92% for 30 years). The first twelve months payments total $36,028.44, of which $24,689.72 is interest. At the top marginal tax rate of 37%, that's $9,135.20. For married couples your HHI has to be above $600k to be in that marginal bracket so your household is pulling in at least $630k+ in this example. Does a household making $53,000 a month get anything by saving $9,000? Especially if they need to spend $36,000 to get it?
- chrisparton1991 9y ago>Buying a house all cash is not the way to do it. It's _a_ way to do it though. My argument isn't that buying a house with the cash is the optimal way to spend it, simply that having a house fully paid for is a massive financial burden taken off one's shoulders. In Australia where a typical house can easily sell for $800K-$1M AUD in desirable locations, the repayments on a mortgage (or rent) can be crippling. I would be more than happy for that to be a non-issue for me!
- sudhirj 9y agoThe article misses the point that people who’ve achieved enough to warrant the award needed to have a financial system in place already that allowed them to focus on whatever they’re doing. For people with such a system the award money itself is a relatively minor change, which is pretty much what the article reports.
- Asparagirl 9y agoThere was no mention in this article of Lin-Manuel Miranda (who won a MacArthur genius grant in 2015), but he reported on Twitter at the time that he had used his grant to pay off his and his wife's student loans.
- blinkingled 9y agoMaybe because they covered one case of a grantee repaying their $180k(!) student loan.
- labster 9y agoThe doesn't seem all that large for someone with a professional degree, like a M.D. or J.D. America is the land of the free until you get to university.
- TheAdamAndChe 9y agoReally? This is an incredible amount IMO, regardless of profession. That is a massive amount of debt that can't ever be absolved without paying, and an incredible amount of interest.
- ABCLAW 9y agoIt seems like a tremendous amount when you consider that the amount of prestige "BigLaw" jobs that can shoulder that debt burden are a fairly small portion of the average graduating cohort's employment. In contrast, I completed my professional degree and a masters in law at the two best universities in my country for a total out of pocket tuition cost of approximately $9,000. That's around 1.3 orders of magnitude apart. I'm sure there will be replies about the quality of the alumni networks or the level of scholarship (which would be very poorly founded), but that misses the point: the magnitude of debt is shocking.
- blinkingled 9y ago>Steve Coleman, a saxophonist who won last year at age 57, said he had created a life over decades that required little money to maintain and could be supported with even less when times were tough. I spend quite a bit of time thinking about this but it doesn't appear to be a solveable problem for people with kids/family even if their earnings as an IT/SDEV person are well above average.
- njarboe 9y agoCheck out Mr Money Mustache[1] for one example of solving this problem. [1]https://www.mrmoneymustache.com/ https://www.mrmoneymustache.com/
- humanrebar 9y agoOne half of his solution is having two professionals earning good money for a while. His initial savings rate would have been very different if his initial circumstance was more blue collar, there was a serious illness in the family, and any number of other things. The principle of not wasting money is well taken, though.
- pc86 9y agoMMM is a charlatan whose entire ethos can be boiled down to "make a lot of money initially to pay off all your debt (debt is an emergency), then do little things that make very little difference (no air conditioning), then make a ton of money off of credit card affiliate offers (his entire business)." Yes his stuff works in the same way that Amway works for the people making a lot of money off of it - it's not realistic for the majority of people who want to do it.
- njarboe 9y agoHave you read his blog entries? He did not start out making money on his blog. Maybe he is a bald faced liar and is drinking bottles of Dom Perignon in a secret penthouse apartment in NYC, but he reports his spending for 2015 for a family of 3 was $23,941 and ballooned up to $30,193 in 2016 due to Obamacare caused rises in healthcare costs[1]. He is almost the antithesis of an Amway salesperson. His philosophy is mostly don't buy stuff you don't need and you need way less than our consumerism based world tells you to need. He also is very much "find your own way". [1]http://www.mrmoneymustache.com/2017/05/19/2016-spending/ http://www.mrmoneymustache.com/2017/05/19/2016-spending/ PS - When you are trying to live on $25,000 a year so you can choose what you work on, a $200-$500 a month air conditioning bill some people have for half the year is significant.
- Kyragem 9y agoWhat a nonsensical article. Similar to Malcolm Gladwells revisionist podcast (episode: My Little Hundred Million) these awards predominantly go to well connected faculty at elite schools who are already well funded and who don't need the money (other than to add to their palmares). Many of these awardees are already millionaires. They should just split this award into smaller grants and give it to faculty/teachers at smaller unknown schools in the midwest. You don’t have to be a genius to see this would do more good.
- alister 9y ago> other than to add to their palmares I learned an interesting, though obscure, word today: palmarès: a list of races a (bicycle) rider has won. (French, meaning list of achievements or list of winners).
- ambivalents 9y agoThank you! You saved me a) a quick Google search myself, and b) the attendant self-conscious wondering about whether this is a word everyone knows and that I too should know by now.
- jdmitch 9y agoI don't think it's that obscure in British english usage, even outside of cycling contexts (source: American living in the UK)
- FabHK 9y agoInteresting. It's not in the Oxford Dictionary of English powering the Dictionary bundled with macOS, and it's not known to dictionary.com, so I'd say it's fairly obscure. http://www.dictionary.com/misspelling?term=palmares http://www.dictionary.com/misspelling?term=palmares
- jacobolus 9y agoI’ve known a few MacArthur grant winners, and none of them were wealthy, or even upper middle class. Most were stably employed, but some extra money with no strings attached can really help a lot if people want to set aside time to work on their own projects, not beholden to some employer or grant agency expecting quarterly or yearly status reports with well-defined short-term project goals. Personal art projects, long-term research projects, etc. are often difficult to get funded because they are risky and may not have an immediate path toward revenue. There is surprisingly little money available in the world designated to fund people’s green-field creative work, with project leads allowed to just hire smart people and tell them to work on whatever interests them for 5+ years without worrying about immediate payoff.
- teddyh 9y agoMost people who randomly get a windfall of money were previously poor. If you’re poor and suddenly get lots of money, you most probably can’t handle it; “#4. Extra Money Has to Be Spent Right Goddamn Now!”: http://www.cracked.com/blog/the-5-stupidest-habits-you-develop-growing-up-poor/ http://www.cracked.com/blog/the-5-stupidest-habits-you-devel... MacArthur winners have two advantages: First, they are probably good at something, and therefore are likely not poor. Secondly, even if they are poor, they are probably very focused on their thing which made them get the prize, and any money goes to their thing, not to themselves, which makes most people a little more rational when deciding things.
- logicallee 9y agoOne and two are usually true of Darwin award winners too, but even if that came with a cash prize, the other thing MacArthur geniuses have going for them (by comparison) when it comes to managing the windfall is that they're MacArthur geniuses... surprised this didn't make your list!
- Jack000 9y agoI think this depends on your poverty culture. Growing up poor as an Asian immigrant, my experience has been "Extra money must go in the savings account, no luxuries EVER!", which is bad in its own way.
- teddyh 9y agoI’m not sure I would call it bad. http://www.mrmoneymustache.com/ http://www.mrmoneymustache.com/
- jgamman 9y agothe very first example in the story was a dancer that paid off $180k in loans - almost a textbook example of someone that's 'poor'. this grant is literally a lottery win for some of them
- jmathai 9y agoMost people who are passionate enough about something to receive these fellowships will take the opportunity to pursue their passion. I had a Shuttleworth Fellowship for 2 years which is very similar to the MacArthur Genius grant. They are both often enough to not worry about having to work a job to pay your bills and feed your family. (The Shuttleworth fellowship includes enough to pay for legal, financial, travel, contractors, etc) I worked harder during my fellowship than I can recall otherwise. I knew it was a once in a lifetime opportunity and that I only had a finite amount of time to do something great. I wrote about my experience as a fellow here. http://jaisenmathai.com/articles/shuttleworth/ http://jaisenmathai.com/articles/shuttleworth/
- cantrip 9y agoThese seems like very different programs to me. The MarArthur Fellowship is a no strings attached financial grant to nominated individuals in any field, they do not allow applications. The Shuttleworth is by application and specifically funds individuals working on projects related to "openness".
- scoobydoo12345 9y agoRichard Stallman made good use of his $240,000 grant when he used it to fund the Free Software Foundation.
- oceanghost 9y agoIn all seriousness, what does it take to get a Macarthur grant?
- dsr_ 9y agoYou don't apply. You get nominated; and nominators are invited by the foundation. https://www.macfound.org/fellows-faq/ https://www.macfound.org/fellows-faq/
- chengiz 9y agoI found it a little disconcerting that the most selfish usecase (spent it on "her children") among the 5 or 6 reported got a picture. Apparently looks matter even in the genius world.
- cantrip 9y agoI don't follow this at all, what are you saying? First off, there are two pictures in the article, so the idea that "looks matter" as pertains to selfishness, whatever that means, is in question. Secondly, the idea that "looks matter" doesn't make sense. She seems rather regular looking, not picked out specifically because of her looks. Lastly, spending money on your children to me is far less selfish than paying off your personal debt, which did not get a photo.