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Ask HN: What did you do when you suddenly got rich?

• mhh__ 7y ago
  Woke up
• Spellman 7y ago
  Not exactly the same, but here's the advice for if you win the lottery: https://www.forbes.com/sites/deborahljacobs/2012/02/11/10-things-to-do-when-you-win-the-powerball/#106f4e037755 https://www.forbes.com/sites/deborahljacobs/2012/02/11/10-th... Much of it involves don't make big lifestyle changes, invest smartly, get lawyers/financial planners together to protect yourself, and pay off any debt you have.
• mixmastamyk 7y ago
  Standard advice: - Set aside money to pay taxes FIRST. - Invest in mostly conservative instruments, as if you were a retiree. - Keep a small position in risky stuff to capture some growth and get it out of your system. - Diversify - Keep quiet about it, don't get talked into crazy investment schemes. Think "old money" rather than "new money." - Treat yourself a bit, recognize when you've hit "enough." i.e. more doesn't bring happiness. The number is lower than most realize. - Remember mom, and others instrumental in your success. Everyone else can apply to your scholarship foundation, haha. If your expenses are "reasonable" you could live off interest/dividends for the rest of your life. Donating time and charity to whatever causes you see fit.
  • ThrowHitJackpot 7y ago
    Agree re: put money away for taxes - I've made the mistake of not doing that in the past and it leads to more problems. As for conservative - general plan is to put enough money into 3-fund portfolio to be 'set for life' - then be a bit more aggressive with the rest. Agree with diversify. Keeping quiet is good - agree re: think like old money. I do need to figure out how to treat a bit. Today we decided to splurge on $120/visit weekly housekeeping - too extravagant? I plan to work for the next 30 years because I like it. I'm around 40 - but we'll see how it all goes.
    • mixmastamyk 7y ago
      > too extravagant? Doesn't sound too bad if you've got millions. Those little things add up though in the long term. Just ask MC Hammer. ;-)
• bfieidhbrjr 7y ago
  https://m.youtube.com/watch?v=rJjKP8vYjpQ https://m.youtube.com/watch?v=rJjKP8vYjpQ Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fing solitude. That puts you, for the rest of your life, at a level of f you. Somebody wants you to do something, f* you. Boss pisses you off, f* you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks? Jim Bennett: Yes. Frank: I guarantee he did it from a position of f* you. A wise man's life is based around f* you. The United States of America is based on f* you. You have a navy? Greatest army in the history of mankind? F* you! Blow me. We'll f* it up ourselves.
• dhruvkar 7y ago
  I'm not in this position, I've thought a fair bit about it since it's in the realm of possibility. This is what I'd like to believe I would do: Buy 30yr Treasury Bonds with enough of the cash to generate ~$200K/year passively for the next 30 years. Then proceed to continue my normal life. I'd treat the extra income from the bonds like a raise, invest it smartly, buy things as I would normally. Except now I have an immense buffer to stop current work and/or the freedom to pursue other interests. But I wouldn't change anything in the first year of such a cash influx.
  • mobilefriendly 7y ago
    Wait. You'll need closer to $8 million invested at 2.57% (30 yr current yield) to earn $200,000 a year. And consuming that every year means you'll destroy much of the real value of your hoard over 30 years (you're not reinvesting something to cover inflation). Further putting it all into Treasuries is actually riskier than diversifying across multiple assets - foreign stocks, real estate, etc. If we go into an inflationary period and you're locked into a 30 year at 2.6%, you'll watch your fortune collapse and your stipend's buying power crumble.
  • marcrosoft 7y ago
    You might want to consider inflation into this strategy. 100% allocation to 30yr Treasury Bonds at the current rate will continuously lose money until your 200k (plus yield) becomes a buying power of < 40k in 30 years. US stocks should be part of your allocation.
• Arcuru 7y ago
  I don't have personal experience with a windfall of that size, but I've found that Bogleheads usually has decent advice: https://www.bogleheads.org/wiki/Managing_a_windfall https://www.bogleheads.org/wiki/Managing_a_windfall
• outside1234 7y ago
  First off, unless you were really early, you are going to need about 1.5-2M of that for taxes, so plan for that. That said, I put the remainder of a similar outcome in 60% stocks (VTI 75% + VEA 25%) and 40% short term bonds (VCSH). The stocks give you growth and the bonds give you stability. Rebalance this once a year and you are done. You are financial secure. Don’t get sucked into crazy complicated schemes - simpler and more diverse is better
• whitepoplar 7y ago
  1) https://www.bogleheads.org/wiki/Managing_a_windfall https://www.bogleheads.org/wiki/Managing_a_windfall (the Bogleheads community is great) 2) Read this book: https://www.amazon.com/Investors-Manifesto-Prosperity-Armageddon-Everything-ebook/dp/B002U3CBY8 https://www.amazon.com/Investors-Manifesto-Prosperity-Armage... (or anything else by Bernstein, for that matter) 3) Try to steer clear of people/firms who want to manage your money for a hefty percentage fee. They're one step above crooks, sometimes not even. In the wise words of John Bogle, "you get what you don't pay for." Good luck, and congratulations!
  • ThrowHitJackpot 7y ago
    Very familiar w/ Bogleheads and agree that it's a great resource. Will check out the book. The advisor I'm looking at is 0.35%-0.7% depending on lots of things. Is that 'hefty?' The Bogleheads mentality is certainly that one can do it themselves. I'd like to believe that this particular RIA is plugged in to certain investment opportunities, but not sure it's worth the risk. If I did do that, I might allocate 10% of post-tax money to speculative things like private investments etc.
    • elamje 7y ago
      From what I understand, private funds, especially hedge funds traditionally charge 2% of assets under management and 20% of profit. As far as financial advisors go, that doesn’t sound insane, but remember if the advisor is investing your money into mutual funds, etfs, private equity, or hedge funds, those will each charge a nice fee on top of that seemingly small .35%.
      • ThrowHitJackpot 7y ago
        Good point. However, as I understand it Vanguard's funds have < 0.2% management fee, so hopefully smaller than .35, e.g. https://investor.vanguard.com/etf/fees https://investor.vanguard.com/etf/fees But you're right. If manager charges 0.5% and fund charges 0.2% I'm still losing 0.5% of principal and 0.2% of my gains per year. I don't see a reason for hedge funds. In my mind those are folks who have a proprietary edge on the market due to location, information, or experience. To me, private equity ("PE") are folks who know how to reshape companies. I spent a fair bit of time working w/ and for and sort of as a VC - that is a fun lifestyle but their risk adjusted and fee adjusted return is not impressive: http://www.industryventures.com/2017/02/07/the-venture-capital-risk-and-return-matrix/ http://www.industryventures.com/2017/02/07/the-venture-capit... The weighted average of table "Early Stage Venture Returns" shows about 2.5X on money with an assumed period of 10 years. That's about 10%. When I invested $400k in venture capital in 2000 [timing...] it was worth $250k total return by 2018 - so not as great.
• enraged_camel 7y ago
  The standard advice that is recommended for windfall recipients is to stash it in a savings account and sit on it for 3 months. The goal is to avoid making any rash decisions based on euphoria. You can use that time to read some books on wealth management. Two classics are The Four Pillars of Investing and The Bogleheads' Guide to Investing: https://www.amazon.com/Four-Pillars-Investing-Building-Portfolio-ebook/dp/B0041842TW https://www.amazon.com/Four-Pillars-Investing-Building-Portf... https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore-ebook/dp/B00JUV01RW https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lar... It is also a good idea to not tell anyone, unless you want to be bombarded by requests from family and friends for loans, invitations to invest in weird ideas/schemes, and so forth.
• davidjnelson 7y ago
  When did you join the company? What percentage did you own? That’s a nice payday, congrats.
• strikelaserclaw 7y ago
  Bought myself a yacht
• simonebrunozzi 7y ago
  I am moderately successful, and thankfully I have accumulated some wealth over the years, as opposed to a single big hit like in your case. Despite I can't claim to be rich, I have been fascinated by understanding how to manage my money better, and hopefully I can offer some advice here. In random order: 1) Take it slowly. You don't need to rush into investing, buying stuff, getting a new house, etc, all in two weeks. Slow, thoughtful decisions will usually be better than rushed ones. 2) If you are not financially literate, try reading some good books on the subject, and IMHO, not necessarily the most popular ones. Picking the right ones is NOT easy. There are several lists of "best financial books" or "best personal finance books", and reality is that you should read 15-20, and stick to the 2-3 that you really liked. Financial literacy will allow you to take much more informed decisions about everything. 3) Depending on your age, where you live, and if you have kids or not, you might want to consider "estate planning", a broad category that includes, among other things, establishing "trusts" (legal entities) or similar and granting some amount of money to the trust, in order to get some tax advantage, and clarify what's going to happen to that money when you will eventually die of very very old age. 4) If you know a few friends who are also rich, talk to them and ask them to share their experience with you. 5) Don't tell others about your wealth, or don't be too specific about how much you have. A >$5M wealth creates issues, and provides strong incentives for people to try to manipulate you. 6) If you are married, share this burden with your spouse - I think it's a good idea to keep her posted, to tell him/her NOT to share too many details with friends and family, and possibly to get both of you financially literate. 7) There's a lot of BS around. Be very wary of any advice, including mine. (especially mine!) Be really, really skeptical about any claim by anybody. Remember there's no free lunch out there. If you are considering investing in a 12% guaranteed annual return, well, let me tell you, it doesn't exist on Earth (both guaranteed and 12% together). As a rule of thumb, take inflation + GDP * (1 - long term capital gain taxation) as the threshold beyond which you should start to be wary of any claim. For US, currently: 1.6% inflation + 3.10% GDP[0] * ~0.75 = 3.92%, which means: any investment that is both guaranteed and above a 4% annual return, you should start being skeptical. 8) Try to invest in things that you understand well, or otherwise try to invest in things that are tax-optimized and dumb-proof (e.g. investing in an index is relatively simple to understand, can be done in a tax-smart way). 9) understand diversification. Key to this is that diversification should apply to your goal in life, and your risk-aversion. E.g. if you're 25, you might want to take a bit more risk, as riskier bets tend to pay slightly better over the long run, if you can take several of them (because comparatively less people are willing to play in risky territory). If you are 55, you might want to settle with a more conservative approach. Etc. 10) Big mistakes are usually made when investing in real estate. Try to separate the "emotional", irrational purchase of your main home, with the "investment" part. I wrote about the "rent vs buy" dilemma last year, it might be a useful read to get started. [1]. Finally, if you want this money to make you happier, the thing is, it probably won't, unless you're really really disciplined about it. Mae West used to say "Money isn't everything, if you have it". Once your basic needs are met, it's very hard to use money properly to be happier over a long period of time. I personally try not to obsess too much about money, I try to use it to buy me "time" more than anything else, and I also try to use it to relieve me from issues that would make me anxious. I also try to remember that I won't bring any money with me in my grave. I am not great at doing all of this, but I keep trying. Hope this helped. [0]: https://tradingeconomics.com/united-states/gdp https://tradingeconomics.com/united-states/gdp [1]: https://medium.com/fabrica/the-rent-versus-buy-dilemma-12-important-questions-5f5a7d1815f https://medium.com/fabrica/the-rent-versus-buy-dilemma-12-im...
• jasonhong 7y ago
  - Maxed out insurance (home, car) - Set aside a large amount for taxes, invested it in US Treasury Bond (get an estimate of your taxes from an accountant) - Got an accountant - Read up on QSBS (this can save you a lot of money if you got stock when the company was small enough) - Got a last will and testament drafted and signed. Also asked our probate lawyer about stupid things people do with money, so as to avoid those mistakes. - Got a financial planner. Also asked about stupid things people do. (At your scale, probably ok to just do standard ETFs and bonds. Note that don't buy in all at once, diversify not just the investments but also by time, so you're not buying all into the stock market at once. This also gives you time to think and reflect about how you want to use your money and what legacy you want, while also getting some returns on investments) - Set up a donor advised fund (you can donate stock directly to one and get a big tax break) - Made a donation and got something cool named after two of my long time mentors - Read book Silver Spoon Kids on how to talk to one's children about money (our financial advisor gave this to us) - Read a lot about wealth and power in the United States, in particular sociologist and psychologist William Domhoff's "Who Rules America?" https://whorulesamerica.ucsc.edu/power/wealth.html https://whorulesamerica.ucsc.edu/power/wealth.html (I stumbled on this by accident, but found it a fascinating read) Time is on your side here, so don't rush into anything. I was really lucky to have a brother who already had high net worth, so he was able to give a lot of guidance and discussion of tradeoffs.
  • foobiekr 7y ago
    Umbrella Policy if you live in California.
  • roenxi 7y ago
    > Maxed out insurance (home, car) This isn't a problem I'm ever likely to deal with, but what was the thinking behind this one? I'd have thought >$1 mil in net worth is the time to cancel any insurance you have (maybe not health) on the basis that you can self insure now.
    • shortandsweet 7y ago
      The point of insurance is to protect your wealth in an accident. You actually buy more insurance as your wealth increases, at least I do.
• deleted 7y ago
  [deleted]
• gwillen 7y ago
  There is some really good basic guidance on dealing with windfalls, available on Reddit's personalfinance board: https://old.reddit.com/r/personalfinance/wiki/windfall https://old.reddit.com/r/personalfinance/wiki/windfall I recommend you read it all and take some time to digest it. Don't do anything rash -- in fact, don't rush to do anything right away unless it's necessary. Necessary things include: * Figuring out what your tax obligations are. - You should get someone to recommend you a competent CPA who has dealt with this situation before. You want someone who will proactively help you sort out your tax situation starting NOW, not wait until tax time. But I would _not_ suggest a "wealth manager", or even a "financial advisor" at least to start with -- find someone who will just help you with the immediate tax consequences, and who will deal with you on a flat-fee basis with price given up front. A competent CPA should probably be able to handle this on a bare-bones basis for less than $1000, but _if_ you can get someone who comes highly-recommended and has significant experience with the specific issues you're facing, and can help you navigate the situation, paying a small multiple of that for more good advice won't kill you. - Note that you are going to owe estimated taxes, which need to be paid quarter-by-quarter, not at tax time. At the federal level, you will not be subject to penalties, regardless of your income this year, as long as you prepay (in payroll withholding plus estimated tax payments) 110% of _last year's_ tax obligation. However, if you are in the state of California there is no such safe harbor for _state_ taxes if your income exceeds $1 million in a given year (which it will). (See https://www.bdcocpa.com/resources/articles/43 https://www.bdcocpa.com/resources/articles/43 .) So make sure you pay California estimated taxes as promptly as you can manage. (But also, don't panic if you end up being charged penalties. For stuff like this (i.e. not fraud) they are generally quite small relative to the amount of taxes owed, especially if you aren't that late.) * Figuring out your liquidity situation: - Are you getting the money in cash, or liquid securities (i.e. that you will be able to sell easily), or illiquid securities (i.e. that you cannot reliably sell?) If your employer has been thoughtful towards you, you won't be in the third situation, which can be very messy come tax time. (If you are in that situation, there are people who can help advise you, but you'll want to start thinking _now_ about how you'll pay the taxes.) - If you're getting securities (i.e. stock shares) that come to you in some sort of brokerage account, it's fine to _leave them there_ while you decide your next steps. Make sure you're able to sell enough to cover your tax bill, but you don't need to actually sell anything until you discuss it with your tax advisor. - If you're getting cash, you will probably want to open a brokerage account to put it in (don't stick it in your checking account.) Charles Schwab and Fidelity are fine general-purpose brokers. Vanguard is good if your plan is to invest the money in low-fee index funds and then not touch it, which is generally a wise idea.
• _bxg1 7y ago
  I like this finance website. Some of the advice surrounds improving your financial standing, but much of it is just about how to live well, and how money does and doesn't play into that. https://www.mrmoneymustache.com/blog/ https://www.mrmoneymustache.com/blog/
• anonu 7y ago
  It depends on your goals and lifestyle. $5mm+ is tremendous. Could last you a lifetime. You could try an annuity. Pop this formula into Excel or Google Sheets: =pmt(3%/12,50*12,5000000). A very conservative 3% annual growth rate can afford you $16k in monthly withdrawals for 50 years. The downside is, of course, you'll be drawing down on your wealth til zero. Purchasing real estate for the rental income can yield more attractive returns. First off, you can leverage yourself up. Then cash-on-cash returns - in well selected locations - could be in excess of 10% (easily). Your principle in real estate is afforded some level of protection and may even grow as the economy and country grows ..standard investing caveats apply.
• sudden_wealth 7y ago
  I was in a somewhat similar circumstance via a very large inheritance. I'll start from the emotional side of things before moving into the financial side. Emotionally, I was very shocked as I did not see this situation coming. Like you, I was also scared about making stupid choices. You probably had some idea that your shares had upside potential, but the money I received dropped into my lap with no warning and was approximately the same amount as what you received. My immediate advice is...do nothing. Wait for the shock to wear off and for you to acclimate to the situation. Don't tell anyone, don't run out and buy things, don't move assets; just keep on with your day to day life until you are ready to proceed. Based on the fact that you are here asking these questions at all, my assumption is that the money likely will not change you much as a person. I still have the same friends and relationships that I had before I received my funds; my values are still the same; I'm still the same person. Most people who interact with me have no idea that I am as wealthy as I am. Who you were before you receive your money will largely be who you are now that you have received your money. Economically, my general spending patterns have remained largely the same. The main thing I've found is that money is less about buying stuff (which I think is how most people without money view money) and more about buying time, cutting through bullshit, buying access, and creating opportunity. I feel much more free to spend money on education, conferences, vacations with my loved ones and friends, once in a lifetime opportunities etc. I'd encourage you to think about your funds this way too depending on your circumstances as I think it brings a lot more happiness than buying tons of shit you don't really need, a big house, cars etc. I'm not saying you need to live a frugal life, but I think excessive consumption gets boring quickly. You have "fuck you" money which gives you enormous power over how you craft your career and your life. Think hard about what you want to do. I still work but I've had the flexibility to explore career arcs that I would not have otherwise been able to with almost no risk. I would be very careful about telling other people about your situation because it might alter your relationships. I think it's fine to say you are doing well at work, but definitely do not tell people you have 5 million dollars. You don't want people feeling jealous, resentful, etc. It can be helpful to have other wealthy people to talk to about issues and feelings. If other people you trust have money, feel free to talk to them. Alternatively, there are certain places that generally cater to the wealthy (eg social or country clubs, business associations, etc) where you can meet some people who will be in similar circumstances and will be happy to talk. Moving on to what to do. I don't know how old you are or what your future earning potential is (meaning is there another chance for a payout this size), but in general what you do with five million dollars will not be dramatically different than what you do with a few hundred thousand dollars. I would seek out a wealth management group for a consultation. Make sure this entity is a fiduciary and are legally obligated to act in your best interest. If you don't think you have more big payouts coming your way, then your strategy will likely focus on wealth preservation. If you think you can make more money you can be more aggressive. Either way, you will probably construct a well balanced portfolio of low cost index funds. Depending on your risk and needs, you could devote a portion of your portfolio to more exotic things like hedge funds or private equity or whatever. See what they say. You have generational wealth, so if you have kids or are thinking about kids, you need to focus on general tax minimization and avoiding inheritance taxes (within the law of course). There are a variety of strategies that can be employed here, and a good wealth management firm can help you with that. You also need to think about how you will teach your kids about money given your new situation so that they have the right values.
• treyfranciscoh 7y ago
  Check out the FIRE (/r/financialindependence) and FatFIRE (r/fatfire) communities on Reddit. FatFIRE is likely most relevant for your situation.
• treyfranciscoh 7y ago
  Check if your windfall qualifies for QSBS. Could save you TONS in federal taxes.
• thijsvandien 7y ago
  I'll just leave this here: https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_won_a_656_million_dollar_lottery_what_do/chba5nw/ https://www.reddit.com/r/AskReddit/comments/24vzgl/you_just_....
  • croo 7y ago
    The parent did not market this link enough but OP please read it! Especially if you are not already on your path to financial independence or not really bothered with investments. This is a writing about people suddenly got money and how they got destroyed by it and how can you avoid it. What can happen in your family because of it. How and why to be quiet about your wealth. Entertaining and great read and always the first thing I remember when somebody wishes for a jackpot.
    • thijsvandien 7y ago
      You're right, I could have done a better job explaining what this is about. Thanks for doing that part for me!
  • ThrowHitJackpot 7y ago
    I've read this before. And it's good, but it's more about what to do if you make >$100M. It strikes me as something somebody writes from hypothetical, not from experience.
• kalasoo 7y ago
  I got some hot cash several years ago unintentionally. After that, I set up 3 goals: 1. Maintain high quality life 2. Improve skills for my career 3. Meet more interesting friends With these three goals, I did these: 1. Maintain high quality life 1.1. I bought myself a lot of insurance, both financial and life 1.2. One nice apartment 1.3. Put about 20% to some low risk fund 2. Improve skills for my career 2.1. Best keyboard, chairs and ... as a developer 2.2. Books 2.3. Donate some open source projects and make friends with contributors 3. Meet more interesting friends 3.1. Host regular meetups of great developers in China 3.2. Go to a nice gym as I find people who work out hard and keep self-discipline are normally class-a players 3.3. Get much more opportunities when focusing on what's next than what you're paid
  • closeparen 7y ago
    These are all things you can (and should) do on a regular software engineer's salary, don't need to wait for a $5m windfall.
    • muzani 7y ago
      Depends on what regular software engineers in that area make. I had to basically sell a startup to afford a nice computer desk and chair, lol.
  • fanpuns 7y ago
    Maybe hot cash means something different, but it means stolen where I come from :)
• northwest65 7y ago
  - Paid off the mortgage - Bought another section, built an ideal house on that over a couple of years - Went to Disney World, took the nieces and nephews to Disneyland (yeah, I'm still cheap) - Sent mum to the UK for a holiday 10/10 would slave away at a startup again (actually that's a lie, once was enough). We didn't owe any money other than the original mortgage, so there wasn't really anything else pressing to spend it on. Already owned a number of guns, motorcycles, and a basic sports car. No real plans to spend the rest, it's in the bank/bonds. Basically I'm still living the life I always have, I just have a giant workshop now in which to play with my toys and pursue my hobbies. I think if this had happened 15 to 20 years earlier in my life, I'd be looking at things differently, but at this point I just plan to retire a bit earlier than I would have and not change much else. My father was also very savvy financially, I suspect he would have some pertinent ideas. I now work for a small company as an integral cog in a relatively low pressure environment. I get to build things every day, come and go as I please, and my contributions are respected and valued. It's lovely :-)
  • simonebrunozzi 7y ago
    Paying the mortgage is usually a bad idea. Assuming we are taking about the US, mortgage interests are tax deductible up to 750k (there are also deductions in most other countries), you already paid the mortgage origination fee, and usually you pay an interest rate that is not too high (if it is, you should consider renegotiating your mortgage, rather than paying it off).
    • kmano8 7y ago
      From a pure math perspective, sure. But clearing the mental weight of a mortgage off your list of liabilities has value in itself to a lot of people.
  • ThrowHitJackpot 7y ago
    I probably won't pay off the mortgage as the interest rate is 3% and I think I can probably get better return in the market. Startup is a neat idea. Agree re: banks/bonds. I like your approach - keep on doing what it means to be happy, and work in a good environment with people you like and who like you. Good for you!
• dawhizkid 7y ago
  I have not gotten quite that lucky, but still lucky to catch a unicorn early enough to have gotten to ~1m at a youngish age. Have you actually liquidated the funds? Or is that the value of your stock? I think a more interesting question for this audience is what to do when you have pre-IPO "unicorn" shares. On one hand, if you wait til IPO there may be a big "pop". OTOH, it could drop below what it's trading at in private markets. I think about diversification a lot too. I haven't felt the need to hire a professional at this point, just put most of my liquid NW into a robo advisor (I use the Schwab one) and forget about it.
• ninefigs 7y ago
  A couple years ago I came into about $200M (seriously), and let slip more than I should. Really it just turns every conversation into a roundabout request for money. People are definitely nice to you and ask you onto all kinds of boards, funds, etc.. but it’s a hassle. You start to worry a little bit at least about personal security, especially if you have kids. You also worry about ruining them forever. (Also, watch out for temptation that could ruin your happy family life... suddenly you’re extra “attractive” it seems.) On the bright side, you can try and get really big projects done, Elon musk-style. Just knowing you have the money helps a lot in getting meetings, raising more money, etc. I’d just put it all in an s+p 500 index fund. Though of course I haven’t followed my own advice. I wouldn’t worry too much about dripping it in either, maybe put half in over a month and the rest over six months. Long term you’re pretty likely to wish you’d invested sooner rather than later. Set up some estate planning stuff and buy a model 3!
  • Johnny555 7y ago
    I’d just put it all in an s+p 500 index fund That's a lot of money to invest in the health of one country's stock market -- a successful terrorist attack (think a dirty bomb in NYC or even multiple cities) could wipe out a significant portion of that overnight - it will likely recover eventually (as it did after 9/11), but that's a time when you'll want access to your money I'd diversify across countries, and maybe precious metals.
    • anaisbetts 7y ago
      Yep, foreign real estate is a good way to do this, and also gives you a passive'ish revenue stream
    • refurb 7y ago
      Many of the companies on the S&P500 are global businesses whose value is based only partially on the US market. Also, if something big happens in the US (9/11), stock markets tend to take a hit globally. That said, I’d still diversify into a few international indexes.
    • thekyle 7y ago
• throwaway848311 7y ago
  Congrats! I'm in similar situation couple of years ahead of you. There are good recommendations about the practical side of things in this thread. I like the bogleheads approach of simple index investing. The actual transition was thrilling for me especially because I never anticipated that my life would still change once more at this age. The joke is of course as I had heard before, but never truly believed, that actually nothing changes. I wish the possibility of finding out that money really does not make you happy to as many people as possible. I refrained from doing anything for almost two years. First big thing I did after that was to stop paying rent and got a decent apartment. Most sensible things to do with money are incredibly boring. And the fun things lose some of their charm if they become really affordable and common. The whole thing hinges on desire to have something you can't reach. So the choices are to either up your game or decide that maybe this is enough. For me the jump was so big that my hedonic treadmill maybe got damaged. I never was so materialistic, but I used to maybe value experiences and dream about ability to set my own schedules. Now I'm afraid that those as well are a mirage. Just a trendy pastime for people like me who have had always quite easy life. I think the less known secret about money is that nothing needs to be done about it. Sorry to everyone reading who are in a tough spot. I am aware that this is super tonedeaf.
  • simonebrunozzi 7y ago
    > Sorry to everyone reading who are in a tough spot. I am aware that this is super tonedeaf. This shows empathy, and it's not a given in your situation. I feel you might be a cool nice person :)
  • somberi 7y ago
    Quoting Dalai Lama's reply to a question by a journalist about if Dalai Lama would counsel a rich or a poor person - "Rich person, of course. They know wealth does not change anything." Warren Buffett Quote: “Money is not everything. Make sure you earn a lot before speaking such nonsense.”
  • ThrowHitJackpot 7y ago
    Great comment. I anticipate I'll agree that nothing really changes and it doesn't make you happier. The literature says after you make $70-$120k/year it doesn't get much better. Joe Rogan says once you can buy a nice dinner without checking your bank account you're rich, or something like that.
• dev_dull 7y ago
  First of all congratulations. The great thing about being rich is that you only need to get rich once, then you need to preserve it. I’ll focus my comment about things often overlooked: Insurance. Medical, home, car, and umbrella insurance. KEEP GOOD MEDICAL INSURANCE. Work hard on your privacy. People with deep pockets are juicy targets for lawsuits. Start an LLC (with a name not associated with you) and transfer things like real estate to it. Investments: there are tax-free investments such as muni bonds. Invest in rental properties (under your llc). There’s no shame in sticking a bunch of money into an S&P 500 index fund. Capital gains are wonderful. When you speak with an accountant, tell them specifically you’re interested in tax deferment and protection strategies. For your children’s education: look into front-loading their 529 plans. If your accountant doesn’t mention this type of stuff then find another.
  • ThrowHitJackpot 7y ago
    agreed re keeping it is harder than making it. Made a fair bit in the past and didn't keep it. Agree re: insurance - raised umbrella to +$3M and car to $1M. Perhaps raise home though umbrella helps that? Agree re: tax optimizing. For 529 front loading, there's apparently a way to do a 5 year- averaging that allows you to put 6 year's worth of 529 in. In my state a certain amount is tax deductible, so I'll factor this in. Accountants seem good at calculating - not so good at ideas. I'm expecting my RIA/Advisor will help here, but I'm on a track consistent with what you've said - thanks!
• egypturnash 7y ago
  It was an order of magnitude or two less but: Stopped chasing external jobs. Started working on aggressively non-commercial personal projects while living simply. My main splurging has been that my laptop upgrade cycle got faster than every five years for a little while. Also a couple of cross country moves, once to Seattle because I missed the west coast and it was a compromise my SOs would make, then back home to New Orleans because Seattle’s cost of living was skyrocketing and I missed the sun and wanted to live somewhere I could pay the rent with what I make off those personal projects.
• holdenc 7y ago
  Welcome to the world of high consequence tax filing! As you may already know, penalty severity for tax mistakes are pegged to the dollar amount. This includes very large fines and possible prison time for "willfully" incorrect taxes, or not disclosing a foreign bank account, for example. I read the tax code, and do my own taxes first. Then send them to an accountant for verification and filing.
• SenHeng 7y ago
  Some good tips about managing a windfall from the Bogleheads froum. https://www.bogleheads.org/wiki/Managing_a_windfall https://www.bogleheads.org/wiki/Managing_a_windfall With that amount of money, you're set for fatFIRE as well. https://www.reddit.com/r/fatFIRE/ https://www.reddit.com/r/fatFIRE/
  • dennisgorelik 7y ago
    > https://www.reddit.com/r/fatFIRE/ https://www.reddit.com/r/fatFIRE/ Thanks - fatFIRE is a great reading recommendation. FatFIRE stories are insightful and help to re-evaluate my goals.
• wsaryoo 7y ago
  buy land get farming secure your food & home relax
• Animats 7y ago
  Most people who get a lot of money all at once blow through it in 7 years. There are many broke lottery winners and NFL players. $5M is not rich today. $5m is a lifetime of moderate income if you're really careful. The classic advice was that you could spend 4% of your net worth per year. Today, it's probably only 3%. Yields are lower. You don't have to do anything immediately. You can park it in T-bills, brokered CDs up to the FDIC limit, and big index funds. Any investment where they call you is lousy. If it was any good, it wouldn't have paid marketers. Avoid financial advisers who want you to trade a lot. Trading for individual investors is, overall, a lose. Don't buy a restaurant.
  • anaisbetts 7y ago
    The 4% rule also only applies to people at retirement age => death (i.e. 30-40 years). If OP is only 20-30, that's not going to be guaranteed to work, you probably want to think 2.5-3%, though also keep in mind that your taxes when living off of capital gains / dividends (at least in the US) are going to be way lower - if you do it Right you probably will pay less than 5% federal taxes (CA state is a different story, though you can always move)
    • my_username_is_ 7y ago
      It also assumes that you're not going to bring in any more income for the rest of your life too. While the OP could retire and live on a beach somewhere for the rest of his life... By the nature of being someone who posts on HN, I'm betting that that's not the case.
      • oiasdjfoiasd 7y ago
        this.
  • mensetmanusman 7y ago
    A majority of American millionaires do not think they are wealthy. In fact...
  • rambojazz 7y ago
• codeisawesome 7y ago
  Hey congrats man. Congrats.
• anaisbetts 7y ago
  Keep in mind that you almost certainly now need to pay taxes 4x/year because your taxable income just jumped by a significant amount this year. Get an accountant to make sure to avoid paying $1000s in IRS penalties for underpayment
• deleted 7y ago
  [deleted]
• lubujackson 7y ago
  As everyone has said, the first thing to do is nothing. Well, that's not exactly right. You may think "No sweat, I'm in no rush to spend it" but recognize that most people that go broke... from bad investments. There's no dumber way to lose your money than investing in some stock that sounds good or becoming an angel investor or buying a bunch of rental properties or whatever "safer than the bank" idea you have right away. Ok, that's easy enough... but pretty quickly you will realize that money is ALWAYS invested, whatever you do with it. Keep it in cash? Ok, you are investing in the U.S. dollar. And where should you put your pile of cash? FDIC only insures bank accounts up to $250k, so if someone grabs your login most of your money is just gone. So it needs to go somewhere - index funds, CDs, mutual funds, etc. There are a lot of boring options with minimal differences and most financial advisers will encourage you to diversify money all over the place. I know some investment bankers and they say most of their high-end clients are more focused on trying not to lose money than make it with investing, so there is a very well-trod path to doing all this. Recognize that diversifying rarely protects you much from a sudden market downturn (check out 2008) as the economic engine is pretty well intertwined, so there is no need to go nuts trying to spread money everywhere. Another reason to keep your diversification simple: pay close attention to the vig (the cut going to an adviser/investment vehicle). Not all index funds are the same and certainly not all financial advisers all the same. Especially when trying to be safe with money, too much can be scraped off by advisers. Flat fees are best for what you want, or you can do some research and do it yourself with some help from your bank. If you want to keep things basic for a while without any fuss, talk to an investment bank (like Schwab) and ask them to walk you through a simple distribution with cash equivalents and index funds. You can always adjust things later but please don't let your cash just sit in an under-insured deposit/savings account. If you do feel the need to invest in stocks/business, read Warren Buffett's advice and make slow moves - a good rule of thumb is if you invest in a thing, make sure you would be comfortable if you couldn't touch it for 5 years. Anything less is not an investment but a gamble. In CA, I also recommend umbrella insurance, not sure how it works elsewhere. The idea is if someone slips on your staircase and breaks their butt they could theoretically sue you for all your money - umbrella insurance covers your from that and most other things. Take small protective measures from unlikely but cataclysmic losses. Finally, what to actually spend money on? There is one thing I read that has proven true at any price point: spend money on things that improve your everyday life. That might be getting something pricey for what it is, like an Ember mug that keeps your coffee warm, or something bigger like moving closer to work so you have an easier commute and gain more free time.
• chx 7y ago
  Much financial good advice here. Let me give you some life advice. Cut the sugar. I presume you are American and your entire culture pretty much made you a sugar addict so this will be hard but do it. Your health depends on it. Yes, all diet advice is suspect but this is not: stop eating anything with refined sugar and high fructose corn syrup in it. With much less money than that you can already afford to hire a chef if you don't like cooking/baking. Slow down. Destress. Learn to enjoy for real a fresh, local strawberry. Enjoy every bite. Grab a book, read on the beach at sunset. These things won't take a lot of time but now you can afford that little time and you don't need to stress on your next mortage payment, job etc so you can really enjoy these moments.
  • kleer001 7y ago
    add regular (3x a week 1/2 hour each time) strenuous (and sustainable AND fun) exercise and enjoy a comfortable and enjoyable aging process
  • ThrowHitJackpot 7y ago
    agree. now that the pressure isn't there to get cash/retirement taken care of, it is a great idea to invest more time and energy into diet, exercise and health!
• farazbabar 7y ago
  I went through it all in less than 2 years and ended up hoarding the things I enjoy very much to this date. I have no regrets (never), coming into millions in thirties is an incredible life experience and the vacations, scotches, watches, cars, homes and other toys are all things I have enjoyed very very much. I also learned to buy forever things which has changed how I see consumption completely. It also led to some amazing opportunities to meet very interesting people in strange places. Overall, I cannot emphasize how much fun it is to spend a few million dollars in 12-18 months without being fixated with savings.
  • whitepoplar 7y ago
    What were the "most worth it" items for you?
    • deleted 7y ago
      [deleted]
  • rofo1 7y ago
    > Overall, I cannot emphasize how much fun it is to spend a few million dollars in 12-18 months without being fixated with savings. Not sure if I understand you right, so I'll just ask. Did you just spend your millions? And you still presumably have to work?
    • ThrowHitJackpot 7y ago
      I'm not the poster, but in my case, I don't plan to spend the Millions, I absolutely plan to work. You might have some folks working you worth >$20M if you work in Silicon Valley.
    • deleted 7y ago
      [deleted]
  • ThrowHitJackpot 7y ago
    I did that too 15 years ago. I still have some of the 25 and 30 year MacAllan left :-) Agree with buying quality - sometimes spending 2-3 times as much lasts 5-10 times longer. Agree it's a lot of fun, but I've sowed those oats and out for keeping more of it. And I already have a lot of those things!
• lukaszkups 7y ago
  Nothing spectacular: Pay off flat mortgage & rent it off, build a house in the neighborhood (parcel prices gone crazy here now), buy a new second car (nothing fancy, like some Renault or other) and keep living as nothing happened (work, but less stressful etc.) Maybe I would also buy 1 or 2 small flats to rent near the university at nearest city etc.
  • ThrowHitJackpot 7y ago
    How has the real estate investment turned out?
• gingabriska 7y ago
  When this happened nothing changed, no Hollywood style lifestyle change happened for me. I was still the same person, I took the money and invested some in SP500 and Tbills and bought a 20,000 sq ft land in India (my wife is from North India). Started a business of branding and selling items in India (there is huge money to be made on Amazon India, you can't even find 10% of the inventory that's actually in the US)
  • ThrowHitJackpot 7y ago
    Wow that sounds super smart! Good for you!
• purplezooey 7y ago
  I wake up
• taway_hjpot_too 7y ago
  Couple of years ago, Big payout: - Paid / Allocated money for all taxes - Legal tax evasion planning for future, a lot planning prior to transaction, I don't want to give $1-10M in tax. I would rather move to a country that I can avoid tax completely or lower it significantly. There is no country in the world that's worth paying $5M extra to just to live IMHO. - Separated wealth into multiple banks and 2 countries (reduce risk of investment) - Went to an expensive holiday and flew first class for the first time :) - Bought a lot hardware, treat myself with simple things. Like hobby hardware, cutting edge hardware. I realized buying an expensive car cost $300K buying hundreds of hobby stuff doesn't even cost $50K and brings me more joy. I was a nerd I guess now I'm just a rich nerd. - Helped relatives a lot, just gave plenty of money - A lot of Sadakah (charity) & Zakah (mandatory in Islam, 2.5% of wealth goes to poor every year) - Invested a lot in real estate, all in cash. Safe long term investments (if you know what you are doing, I have family who does this) - Invested in 4 companies. 2 early stage tech companies and 1 brick and mortar old school business. 2 are very risky and expected to give a return in 5-10 years, if any. Many countries - I'm going to give a very unpopular advice, spend your money. I mean really spend it. I'm not saying burn it (i.e. parties, private jet and yacht) but spend it on stuff that makes your daily life better with the right economical balance. For example fly in first class but don't get a private jet. - Put something like $2M cash aside, for whatever the future brings Most satisfying thing I've done was to help less fortunate. To me $0.5M is couple of percentages in a rich person's increasing wealth but splitting that money to tons of people in 3rd world countries means hundreds of people's live will be so much better. If I were to spend it for myself my life quality might have gotten better by 2% but spending that for other people means hundreds (or even thousands) of people's lives will be 20-100% or infinitely better. (What's the % of life quality improvement when you can start drinking healthy water? or afford food?). Did you know $30 can make someone see again through cataract surgery? [0] When I learned it kind of shocked me and made me question my life and where I spend my money. AMA about charity :) And if you hit jackpot please go and help someone unfortunate, I don't mean someone who cannot afford a new iPad for uni, I mean someone who cannot afford food, clean water, or life changing operation. Think about numbers and efficiency before doing charity and deciding where that money goes. P.S. I'm a Muslim therefore I don't use interest. Which means majority of the traditional investment models don't work for me. That's why I invest a lot in real estate and businesses (who doesn't use interest) rather than stock market, funds, bonds etc. [0] https://www.cbmuk.org.uk/get-involved/donate/ https://www.cbmuk.org.uk/get-involved/donate/
• OneFamousGrouse 7y ago
  I woke up, and realized that I was actually still poor.
• muzani 7y ago
  * bought an Alienware, work chair, and 4K monitor (for work purposes I swear) * spent about 20k renovating a home office * subscribed to Joox/Spotify and purchased all the games I once pirated * donated 10% to charity * gave a fat envelope full of cash to my wife (she was so shocked that she suspected me of having an affair) * gave money to my mom * bought bitcoin and other crypto * got a will done because bitcoin isn't covered by inheritance laws (also for religious reasons) * considered investing into a restaurant, but it was too much work * invested most of the rest into startups which all failed * paid for funeral fees for dead companies when partners passed the ball * looked for a job after burning through it all
  • dirktheman 7y ago
    Would you do it this way again?
    • muzani 7y ago
      Background story: did a startup as a CEO+CTO. 100 hours a week, mostly because I had to play two roles. It seemed easier to find a CEO than CTO. So we were burnt out. Sold the startup. Made 750% ROI in a year, which is a good investment. Planned to reinvest that money into startups for maybe even a 300% ROI. The plan was to go CTO route and rely on someone else to play CEO. It didn't work out - most people were decent at business skills, but terrible with product. Some could build a million dollar traditional business, but couldn't make it in the startup space - they were too cautious, too scared of committing, or wanted passive income. There people with sales experience, who are great at forming strategic partnerships with big corporations, but don't dare talk to the customer. So that was a mess. I regret expecting others to do well when given the trust and opportunity, even if they had done well in the past. I regret following logic over instinct, and following people who were not "animals" like Paul Graham suggested. I'm working on a startup now, but it's the unsexy idea I had 3 years ago. At least I get full control over product and customer development.
      • ThrowHitJackpot 7y ago
        Betting on the come with all the winnings is dangerous. Sorry you lost things. Good to put some away for sure. Glad you are working on something you enjoy and have the level of control you're looking for!
• bobxyz 7y ago
  That's great, but when your great country brings the whole world to its knees, when the financial system collapses, all you have left is your eyes to cry. In the future, it will not be good to be too rich... Don't put your money in, buy a pair of air max to run fast;)
• shifto 7y ago
  You guys wanne be my friend? I need rich friends...
  • ThrowHitJackpot 7y ago
    At Buck's Restaurant in Woodside, CA there's a postcard on the wall (or there used to be) from a lady somewhere "else" who said since everyone there is wealthy - could they send her some money. Let me ask you, shifto, if I can.. Why would you like to have, or as you say 'need' rich friends?
    • shifto 7y ago
      It was a tongue in cheek remark. I'm pretty well off as I at least have decent job in IT. I try and make life better for friends and family by spending my money. I just wonder how it would be to be on the receiving end of it all. Also, my very rich friend will bootstrap my company no strings attached. He/she's the best! :)
• ajcodez 7y ago
  I have a friend who received a similar windfall at a young age. He bought multiple super cars for himself, paid off his parents mortgage, bought his sister and girlfriend a high end SUV, bought a house, spent a lot partying for two years, then invested most of it in a new business that is struggling. He’s renting out his supercars now. He told me that it’s not as much as you think and it’s not easy to reproduce that kind of result.
• 5mthrowaway 7y ago
  Almost a decade ago I made a similar amount in an IPO event being an early employee. Company of said IPO dropped fairly hard in less than a year (you may be able to guess which one). I'm still not poor by any means but seeing $5~6M turn into $1~1.5M doesn't feel great. Especially since, $5M is retirement money, and $1M is not, so I was literally looking at myself going from being able to retire to not being able to retire. My advice would be that if this asset of yours could be volatile at all by any means (e.g. is a stock of your employer or even your own company), liquidate and diversify as much as possible as soon as possible. Then do everything else that everyone else on this thread said about investing, insurance, etc. (using throwaway because my main account is somewhat recognizable)
  • ThrowHitJackpot 7y ago
    I agree with you. I'm trying to decide how quickly to diversify, and also if I want to buy stock for LTCG (conclusion, I don't). Agree - 'life' money change to 'car' money is disheartening. Good perspective, thanks!
• mhkool 7y ago
  Move to Ireland for 2 years to become a resident, there you only pay 10% tax over the capital gain if you meet the "entrepeneur relief" criteria. Not sure if this works as a US citizen, but works for many.
  • ASalazarMX 7y ago
    I'm upset by this. Why is it paying taxes so repelling after you acquire wealth?
    • ThrowHitJackpot 7y ago
      3 Reasons: 1. The taxes wealthy people pay is both higher in amount and higher in percentage that non-wealthy folks. 2. The way the tax money is spent is inefficient 3. Because it is legal to minimize taxes, and to waste money is bad. Lots of wealthy people are charitable. It's preferred to spend money through charity versus give it to the government to spend in their preferred way, which can often include buying votes.