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Ask HN: I just won $150k. What do I do?
I just won $150,000 in cash, and I have no idea what to do with it. This is about a year's worth of salary for me, and I have no outstanding debts or big expenses other than rent.
I'm in my early twenties, have never had this sort of money in the bank before, and I am totally lost.
How do I best use my tiny jackpot?
EDIT: To clarify, I _also_ have a job where I make ~$150k/y, regardless of this jackpot.
- arkis22 6y agoKeep working and dump all of it into a basket of etfs. high quality stocks that pay dividends. the sp500. a little in the russell. those are retirement and extreme emergency funds. dont feel bad about buying something fun. just make sure it isnt stupid and fun.
- thesuit 6y agoI'm in my early 30s but participate in a few communities (old BMW motorcycles, vintage clothes, jazz music) where I interact and with a lot of successful men in their 50s/60s from various walks of life. The advice presented here is a pretty common theme among upper-middle class men living comfortably and who will retire early and comfortable. Playing the long game is a solid choice. Another good choice might be investing in property for long-term renting.
- tinyjackpot 6y agoWhat's the process for investing in S&P500/Russel2000? Do I need to pay someone or can I do it myself through my bank?
- arkis22 6y agoprobably a good time to open a brokerage account. Schwab is a solid broker that also has a pretty well regarded consumer bank. Most brokers just dropped trading fees, so investing is almost free.
- tinyjackpot 6y agoOh, managing my normal bank stuff and my investments in one place seems neat, I'll look into Schwab! On another note, how "flexible" (not sure what the right terminology is) are these brokerage accounts? Is it like savings where you can withdraw when you want, or like a 401K where once the money goes in it's super hard to get it out?
- arkis22 6y agoThey're flexible. Once you put in money the broker will give you margin. That lets you buy, sell, or send money out without having actual cash. They'll charge you for it and obviously you need to eventually settle the positions by putting cash where it's supposed to be.
- tinyjackpot 6y agoUnderstood, thank you!
- GaryNumanVevo 6y agoVanguard / Fidelity are also good options. Look for a low-fee index fund. Also congratulations!
- tinyjackpot 6y agoThank you!
- zozbot234 6y agoYou got a one-time windfall, the source and form of it doesn't really matter. Use it to pay down high-interest rate debt (e.g. credit card and the like) if you have any, and save the rest.
- DamnYuppie 6y agoAfter calculating your taxes I would do something kind of nice for yourself and after that put the rest and put it away in an index/mutual fund.
- tinyjackpot 6y agoI don't have _any_ debt. Which index should I use? What are the differences between using an index and a mutual fund?
- GaryNumanVevo 6y agoA stupid simple approach: use a Boggle 3-fund portfolio [1] [1]: https://www.bogleheads.org/wiki/Three-fund_portfolio https://www.bogleheads.org/wiki/Three-fund_portfolio
- zozbot234 6y agoThe nicest thing OP could do for themselves if they've "never had this kind of money in the bank" is build a rainy-day fund. It can save them a lot of stress down the line. For that matter, depending on employment situation and the like, it's not even unheard of for people to keep one year's expenses or more in highly liquid rainy-day/emergency funds.
- rvz 6y agoSince you 'won' this cash (well done btw) and didn't work or earn it, I suggest you save most of it and use some of it in investments. Otherwise you'd be more likely to spend it on expensive things at once which doesn't sound very good if you're not earning any extra income.
- tinyjackpot 6y agoI still have my usual income (~$150k/y). What kind of investments would you recommend?
- tomato2juice 6y agoEstimate your tax obligation and pay the IRS before you lose it or spend it all: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes https://www.irs.gov/businesses/small-businesses-self-employe... Then invest the remainder into an index fund or retirement fund. If you don't know where to start, then look here: https://investor.vanguard.com/mutual-funds/target-retirement/#/ https://investor.vanguard.com/mutual-funds/target-retirement...
- tinyjackpot 6y agoThe $150k was already post-tax, and the withholdings are (expected to be) higher than my actual tax rate EOY, so I should get some more in my returns.
- surfsvammel 6y agoIf you are putting this into any kind of security, be that equity or fonds, spread the investment over time to minimise the risk of temporary flux on the markets. Spread it out over a couple of years. Also, there are even lower risk alternatives you can go for, if you are anything like me, who does not sleep well knowing your investments move with the markets. Another tip I got for you, is to spend some of the money. As you said, it's a jackpot, you should celebrate. Spend some of it. Travel maybe?
- gshdg 6y agoThis but before investing put 3 months living expenses (or 6mo if you’re feeling conservative) into a savings account as an emergency fund.
- mydongle 6y agoCould you give me $5000 so that I could have a roof for like 4-5 more months?
- deleted 6y ago[deleted]
- libx 6y agoInvest in p2p lending. Maybe you can get between 4 to 10% of interest per annum.
- foobarbazetc 6y agoI like tax free Muni bond funds. Or a high interest savings account. Or just put it into SPY.
- tinyjackpot 6y agoHow risky are municipal bonds? I feel like I always hear about cities going bankrupt.
- wcerfgba 6y agoDonate a chunk to your favourite charity/cause. Personally I am a fan of GiveDirectly because their model is simple and efficient.
- tinyjackpot 6y agoI'm planning on giving $1000 to the EFF and $1000 to the FSF.
- zozbot234 6y agoBe careful though, donating is not for everyone and charity should begin at home. By their own admission, OP has never handled this kind of money before so prudence should be the first priority. Maybe they can donate a chunk of it in a few years after it's been sitting in the bank for a while, but not right now.
- JoeAltmaier 6y agoIts 'free money'. Some folks would consider it outside normal obligations, and spend it freely. Others will advise relieving normal financial pressures. It's really up to you!
- iJohnDoe 6y agoGeneral advice without knowing anything about your life. Your nice $150k a year job could disappear tomorrow. Put $100k in your savings account. Put $50k in one of the investment recommendations given here. Index fund, etc. Save it for a rainy day. Forget about it and move on with your every day life. You’re young. You have your whole life ahead of you. That money could come in handy one day. Congrats!
- smabie 6y agoWhy would you put 100k in a savings account that has a real negative yield? It makes no sense, and I'm just going to say, savings accounts are for suckers. The only point is for your bank to earn some extra cash on the money you decided to loan them.
- quickthrower2 6y agoYou first need to decide what your plans are for the future and what your appetite for risk is, if you desire to own real estate one day, or not, etc. Research all the different ways you can invest it and come to your own conclusions. Or blow it on a 5 star round the world trip. Stock market is volatile and is at all time highs during a pandemic, so think about that and only invest if you are prepared to hold for many years to ride out a big crash. Not saying there definitely will be, but it's a risk.
- saluki 6y agoy, I would hold off on investing it till we get a little closer to the end of the pandemic. Now seems like a risky time to invest. Buy your parents or a mentor something nice. Buy yourself something nice. Save the rest and invest once things are more stable. Congrats!
- quickthrower2 6y agoIt is not necessarily "don't invest" but do it with eyes open. The problem is stocks are valued based on macro factors (interest rates, money supply and demand, lack of anything else good to invest in) and sentiment as much as the intrinsic value of the company itself. So a great company could drop in value if money stops being cheap. Let alone will corona virus cause a depression? People say stock market is not the economy, but who will be spending money on Google Ads in a depression, and if they are, what are they selling and who is buying it? OTOH this could be a cheap time to buys stocks looking back from 2030. I think if you can hold for a long time and ride it out it's a good time to buy (is that always the case though?). But a better time than January!
- rowawey 6y agoInvest wisely. You're young so diversify and take reasoned risks. Or buy a cheap plot of land in Oregon, build a cheap OTG microhouse homestead (grow crops, get some hens, and maybe some goats), and WFH. Screw living in SF, NYC, etc. and pissing money away on insane rent and cost-of-living. Also, with the coming climate change droughts, famines, mass migrations, and wars, you're better off having a SHTF Plan B. Also, reduce your long-term expenses by investing in lightly-used, lowest TCO durable goods that can reduce your living costs, improve quality-of-life, preventatively reduce risks, and automate your life. Toyota Corolla (if driving), Reverse Osmosis water filter, water softener, air quality monitor, robotic vacuum and mop, and so on. (ProTip: avoid Ikea sawdust future-landfill furniture.) Dress for the job you want. Get some awesome suits. Your look defines how people treat you and creates implicit, subconscious respect and status. If I go out in sweatpants, a tie-dyed shirt, and a beat-up, dirty car.. that's going to get me pulled over and car searched. If I go out in a suit and clean car, the seas part and I can get a warning for doing 100 mph. Take a vacation. Rent a massive, cheap villa in Brazil and have a zillion happy endings that will knock on your door and can bring a friend. My friend who owns a mediterranean fast casual restaurant on Univ Ave in Palo Alto did this a number of times before getting married; according to him, it was the same price as an average vacation but a million times more fun.
- dontdieych 6y agoDon't do anything. Don't touch it until you sure about what should do with that money. Do not bet or spend money at you don't know well. Just hold it.
- dontdieych 6y agoIgnore about how to bet/spend about that money. Hold it till to 6? month or more.
- ksherlock 6y agoTake $5k or so and buy yourself something nice to get that out of your system then save/invest the rest.
- codegeek 6y agoDon't try to over optimize it immediately. My suggestion is to park it in a high yield savings account (e.g. capitalone360 gives almost 2%). Then sit on it for a month or so while you research the best options for YOU.
- EvanWard97 6y agoCongrats! There's been a lot of solid object level advice here...I'll just repeat some basic & meta advice in case anything resonates: - you can't lose it if you don't spend it (aside from the real small negative yield from inflation outpacing banks' savings interest rate). - this is enough money to really provide a lot of investment opportunities, be extremely picky about a number of the first 'good' opportunities that come your way. There's a very good chance that you'll find better opportunities just by waiting a bit longer (where rate of return will make up for the opportunity cost of not investing). - this is enough money that's it's probably worth reading at least a few books about investing and wealth management. You spend thousands of hours a year to otherwise earn $150k, it probably makes sense to spend at least 1/100th of that amount of time to really become informed about how to manage an additional $150k. - the majority of non-profits and charities suck in terms of their impact/dollar efficiency. If you are actually trying to maximize your impact rather than donate to feel good (which is okay too! Just recognize when you are doing so), I'd hold off on donating to charities until you've done at least X hours of research per say, $1000k that you donate. Considering you make around $100 an hour, a few hours of research per $1000 donated probably isn't unreasonable. Additionally, the best charities aren't just 5 or 10x more impactful than the average ones, but probably 100's, 1000's, or even more times more impactful. - don't ignore the peace of mind that a solid runway from a variety of uncorrelated, fairly liquid assets may provide. Regardless of what happens--a solar flare knocks out our electric grid for months, the US defaults, banks can't let you withdraw cash for whatever reason--you want to know that you'll be able to incentivize other's labor and buy goods from other people. Cash, gold, BTC/ETH/Monero/Zcash/etc. in cold storage wallets, and perhaps even other 'currencies' like common caliber bullets or cigarettes in a safe deposit box and/or a safe at home, might be worth storing $5k or even more in. - consider using getguesstimate.com, www.causal.app, or at least Excel/Sheets to try to quantify the different risks and returns of all the options you are considering. The first two apps allow you to easily include uncertainty in your estimates of values, as well as do sensitivity analysis, which can help you decide which model inputs are probably most worth reducing your uncertainty about by researching them further. - when in doubt about a spending decision, especially if you haven't exhaustively researched and thought about it, just wait a day and sleep it off. And if you don't feel good the next day, just wait again. For most people, it's too easy to spend money and too hard to save it. Don't be like most people.
- askafriend 6y agoSpread the $150k across a basket of FANG stocks and hold that for 5-10yrs. Those companies will continue winning and you can afford to take this relatively minor risk at such a young age.
- ApolloRising 6y agoIf you want some risk put it all in FB and Google and just hold it for 10 years. If you want less risk put it all in VFIAX Mutual Fund and hold it for 50 years. If you want even less risk put it all in a Vanguard Targeted retirement fund and hold it for 50 years.
- matt_the_bass 6y agoI agree with saving most of it. Plus make a budget. I like YNAB.
- chrisbennet 6y agoPut it in Vanguard and forget it. https://ritholtz.com/2014/02/the-best-investment-advice-youll-never-get-2/ https://ritholtz.com/2014/02/the-best-investment-advice-youl...
- deleted 6y ago[deleted]