I won the Lottery. Need sound advice.

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ThrustVectoring
Posts: 398
Joined: Wed Jul 12, 2017 2:51 pm

Re: I won the Lottery. Need sound advice.

Post by ThrustVectoring » Thu Sep 21, 2017 3:52 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt.
How much it takes to be financially independent depends on how much you need to have "enough" to live off of. $500k would be enough for some folks, and $5M wouldn't be enough for others. Figure 30 times your annual expenses if you can't or won't cut back from that number or go back to work, 25 times if you can.

denovo
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Re: I won the Lottery. Need sound advice.

Post by denovo » Thu Sep 21, 2017 3:53 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm

The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
You're in luck. No one reads the newspaper. Please don't advertise the fact you won. It may get out anyway, but limit exposure. If people find it, ask them to be quiet about it. Your "friends and family" will put you on guilt trips to help them with their troubles or invest in their business. I put friends and family in quotes, because if they were real friends and family, they wouldn't do this.

Your colleagues and bosses may be resentful, and pass you up on promotions and disreputable people may find you to try to scam you out of your money. Jealousy is human nature, unfortunately. The meanness on this thread is an example of it.
"Don't trust everything you read on the Internet"- Abraham Lincoln

barnaclebob
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Re: I won the Lottery. Need sound advice.

Post by barnaclebob » Thu Sep 21, 2017 3:55 pm

Thanks for coming back and I'm glad you weren't scared off by this bastion of fiscal conservatism.

If anyone ever hits you up for $ you can half honestly tell them that it went to paying off debt and you don't have much cash to hand out. (because it should mostly be invested)

If you get rid of the debt and invest the rest then you will have some amazing montly cashflow. Save half of what comes in after tax, spend the rest on bills and fun and you'll be having a pretty good time.

denovo
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Joined: Sun Oct 13, 2013 1:04 pm

Re: I won the Lottery. Need sound advice.

Post by denovo » Thu Sep 21, 2017 3:58 pm

DrHotLunch wrote:
Wed Sep 20, 2017 10:13 pm
I'm hiring an accountant. Our current financial advisor, while very nice, is through Edward Jones. I've read a little on Bogleheads and their investment books/advice in the past few weeks to know that I'd like to work with Vanguard wherever possible and embrace indexing strategy. My wife is adamant about keeping a financial advisor, and she likes our current one. She feels this is too complicated of a situation and wants it in the hands of a professional. I'm not keen on paying all those fees for managed funds. Everything I've read in the last 2-3 weeks has really steered me towards the Boglehead's priciples.

You don't need an accountant. Stop spending money for no good reason. There's a good way to compromise with wife. Vanguard has Advisory Services.

https://investor.vanguard.com/financial ... ial-advice

They charge a small fee (relative to Edward Jones) only .3 percent, and won't stick you in garbage funds. It will satisfy your wife's need for a professional at minor cost. I assure you that if EJ finds about the money you have, they will use their best tactics to convince your wife to load you guys with horrible investments. Get out,out now.
"Don't trust everything you read on the Internet"- Abraham Lincoln

Easy Rhino
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Re: I won the Lottery. Need sound advice.

Post by Easy Rhino » Thu Sep 21, 2017 4:16 pm

Assuming you take teh lotto in a lump sum, I think a good tax accountant could help for this year. for instance maybe you want to max out your 401k's and any other possible tax deductions.

And I recommend stop playing the lottery. You can literally quite while you're ahead.

learning_head
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Re: I won the Lottery. Need sound advice.

Post by learning_head » Thu Sep 21, 2017 4:28 pm

I'd suggest in this situation to pay off all (540k of) your debt first. That will net you ~640k of true net worth.

Early retirement depends entirely on your true out-of-pocket expenses (in retirement) + some buffer to make you sleep at night. You can try estimating by keeping close track of all ongoing current expenses for couple years and then thinking longer term (higher medical costs and other larger items / deprectiation of house/cars/etc).

If you want to do it in early 50's, multiply those yearly expenses by 30 to give you the ball park number.

With ~140k/yr income and so much debt in your 40s, I am guessing your spending has been pretty high, but I could be wrong - e.g. because what you spent money on could be one-time things that won't repeat, bad circumstances that won't repeat going forward, or perhaps you did not make ~190k combined for long. Either way, only you will be in control of how much savings you can do in the next 10 years to make it to your number above.

640k is a good start for sure, but your spending/saving will have to change a lot going forward from what it was in the past.

Another way of thinking about it: it does not matter much how much money you have. What matters more is how much money you are generating every month to cover your expenses. You can only retire early when your generated (passive) income stream is comfortably larger than your expenses.

I would not recommend cutting back to 100k income until you have a sound plan in place AND try to live at least for a year or two with the spending goal to see if it's working out.

In the mean time, others had good suggestions for what to do with remaining 640k.

In any case, welcome to the forum - it's a great source! You are in the right place! Best of luck - only you can make this win to be a real life-changing win... You got a second chance at those financial dreams you have had; now you have to not let it go.
Last edited by learning_head on Thu Sep 21, 2017 4:36 pm, edited 2 times in total.

ResearchMed
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Re: I won the Lottery. Need sound advice.

Post by ResearchMed » Thu Sep 21, 2017 4:29 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
I want to thank you all for the advice. Many of you pulled no punches, so thank you.
I agree that the underlying problem has been our spending habits and general lack of financial discipline. This windfall is the "reset button", I know. Nothing will change until we learn to live within our means, and learn from the past. I don't feel "rich", I don't think "I'm a millionaire now!", because clearly, I'm not. My poor financial choices in my 20's and 30's created that. I've started reading the Bogleheads guides and everything I researched pointed me towards these forums for honest, objective answers. I opened a Vanguard account, now I just have to get the wife on board and ween her off the financial advisor. I think she's reluctant to leave the advisor, because she doesn't trust me or us to do it "all on our own". Judging by our financial picture, you can see why.

Yes, it was an Office Space reference.

Somebody also asked - about 65k of the 215k of "bad debt" is student loans. I plan to pay off all the 215k, and then decide on the mortgage, the advice here seemed somewhat mixed on that as to whether to pay it off immediately or not.
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
I already started 529's some time ago, and contribute regularly.

I think that once the debt is gone, and we can really see how much we're able to save every month, and able to break down exactly how much we're spending every month, and where all the money is going, we can get a clear picture moving forward and create a liveable budget and plan of action.

Again, I knew this would be a place for honest advice. Thanks again for your time, and I'll try to update you on my progress. I don't want to be one of those stories so often heard about lottery winners blowing through it. I appreciate the "tough love". I'm not quitting my job, but I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt. Thanks again, everybody.
Thank you for returning with some additional details.

Regarding a post above, I don't think the negative posting was from jealousy.
There were some aspects to your first post that some of us found alarming (assuming it was "real", and you now appear to be real :wink: ) that suggested you'd handle to new money is a not particularly wise fashion (and there are several flavors of "wise", but far more of "unwise").

Things like already planning to stop work early, having two residences, and that hint about gambling (hopefully in the past).
Once you get things on track, there will be plenty of time to see how it all goes, and then start making "plans".

You WILL be surprised at how quickly it can just drain right through your fingers, given your spending in the past.
--> Work very carefully not to let that happen!

So how about trying to start immediately with a very strict budget. (Yeah, I know. Doesn't sound like getting a sudden million, right? But you want to use it to "fix the future", not continue the past/present.)

I happen to think that IF you can get on a strict budget, it is okay for some sort of limited and ONE TIME special purchase, such as a modest vacation.
Otherwise, you are likely to feel deprived when you "feel like" you should feel "richer".
However, you will quickly feel "richer" as soon as the high interest debts are paid, and your cash flow is much improved.
I'd suggest not paying the mortgage off just yet. You can do that in a few months or a year IF you decide that makes sense.
And be *strict* about not charging anything you don't plan to pay off immediately, or just pay cash until you get the spending under control.
Don't (repeat "don't") run up new credit card bills that aren't paid off right away, in full, each month, from the regular cash flow.

And "pay yourself first" in terms of putting money into savings from your now "nicer" monthly cash flow.
Just be VERY careful not to let it get out of hand again. That will be all too easy... to slide right back... until you get a real feel for a new way of managing money on a daily/monthly/annual basis.

And you and your wife should practice saying "No!" to any and all requests for financial help, no matter what.
People can be very creative about why they need help, and that doesn't even include the scammers.
Don't invest in any "special opportunity". None.

Good luck, and I hope that you can learn to manage money better, have a good savings plan (and investment plan, at Vanguard/Fidelity/Schwab, etc.), and then relax without those horrible debts hanging over you all the time. :happy

RM
This signature is a placebo. You are in the control group.

FeesR-BullNotBullish
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Re: I won the Lottery. Need sound advice.

Post by FeesR-BullNotBullish » Thu Sep 21, 2017 4:30 pm

Of your original post, I don't know how much of it was in jest, but I think it's imperative to focus on your marriage and make sure you and your wife are on the same page with financial decisions. It's not you and her; you're a team. It can be frustrating being a team, but in the end I think we're better for it.

That said, I'm going against the grain and suggesting that you don't rush to fire your financial advisor. Your wife is probably scared to go this without professional help and for good reason based on your past financial life. Getting her on board with firing the financial advisor might be a long process and will involve you showing her and not merely telling her it is the right thing to do. You can go over charts and explain the numbers until you're blue in the face. However, her reluctance is about more than numbers and logic. She feels a sense of comfort with the financial advisor and leaving him will be like jumping out of a plane without a parachute.

When I started talking about firing our financial advisor and switching to Vanguard, my wife was also hesitant. Even though I handle our finances, I wasn't going to make the switch without her on board. I know with my wife how to sense whether or not she's 100 percent on board with something I want to do. If it's something like hanging an ugly poster in the basement or buying too many Christmas lights, I might do it anyways. However, when it is a big deal, like firing our financial advisor, neither one of us will be happy if she's not on board.

Over the course of a few months, I was persistent in talking about Vanguard and low cost index funds, but I was careful not to push or pressure her. What finally made things click for her was a conversation she had with her dad. I think she brought up that we were looking into Vanguard. He said he was with Vanguard and discussed his positive experience and all of a sudden she was on board. If you keep the conversation going, I suspect eventually your wife will have a similar experience when she'll be on board.

inbox788
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Re: I won the Lottery. Need sound advice.

Post by inbox788 » Thu Sep 21, 2017 4:36 pm

Easy Rhino wrote:
Thu Sep 21, 2017 4:16 pm
Assuming you take teh lotto in a lump sum, I think a good tax accountant could help for this year. for instance maybe you want to max out your 401k's and any other possible tax deductions.

And I recommend stop playing the lottery. You can literally quite while you're ahead.
I'd look into the tradeoffs between lump sum vs. payments. You'll pay the highest tax bracket this year with the lump sum, but might be in a lower tax bracket later (depending on earnings/dividends). On the other hand, if you take the payments, you might stay in a lower tax bracket this first year and might stay in same or only one tax bracket bump in the future years. In addition, the income stream may be more stabilizing than getting a big lump sum that might distort your thinking.

http://www.lotterypowerpicks.com/financ ... inGame=slp

After taxes and paying off debt, it doesn't leave much to spend or invest. It's a life changing amount, but you're far from set for life. So how much of the $200k is student loans? Car? Rest? And over how many years did you accumulate these loans, especially the rest? What did you spend it on?!?

GoldenFinch
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Re: I won the Lottery. Need sound advice.

Post by GoldenFinch » Thu Sep 21, 2017 4:42 pm

You have been given a wonderful opportunity to be financially secure. You came to the right place to get good advice. Keep reading the Wiki and I recommend the book The Richest Man in Babylon.

JBTX
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Re: I won the Lottery. Need sound advice.

Post by JBTX » Thu Sep 21, 2017 4:47 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
I want to thank you all for the advice. Many of you pulled no punches, so thank you.
I agree that the underlying problem has been our spending habits and general lack of financial discipline. This windfall is the "reset button", I know. Nothing will change until we learn to live within our means, and learn from the past. I don't feel "rich", I don't think "I'm a millionaire now!", because clearly, I'm not. My poor financial choices in my 20's and 30's created that. I've started reading the Bogleheads guides and everything I researched pointed me towards these forums for honest, objective answers. I opened a Vanguard account, now I just have to get the wife on board and ween her off the financial advisor. I think she's reluctant to leave the advisor, because she doesn't trust me or us to do it "all on our own". Judging by our financial picture, you can see why.

Yes, it was an Office Space reference.

Somebody also asked - about 65k of the 215k of "bad debt" is student loans. I plan to pay off all the 215k, and then decide on the mortgage, the advice here seemed somewhat mixed on that as to whether to pay it off immediately or not.
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
I already started 529's some time ago, and contribute regularly.

I think that once the debt is gone, and we can really see how much we're able to save every month, and able to break down exactly how much we're spending every month, and where all the money is going, we can get a clear picture moving forward and create a liveable budget and plan of action.

Again, I knew this would be a place for honest advice. Thanks again for your time, and I'll try to update you on my progress. I don't want to be one of those stories so often heard about lottery winners blowing through it. I appreciate the "tough love". I'm not quitting my job, but I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt. Thanks again, everybody.
I'm glad your thick skinned ! I think in many cases based upon the history of peoplemblowing though windfalls and your first post it raised a lot of red flags. I hope hope you really do take this opportunity to reevaluate. What may be helpful if you posts more complete information as described in the pinned threads at the top of the forum.

My guess is you need to shave $25k-$30k off of your spending per year but that is a wild guess based upon limited info. Getting to $2.5 million in 10-12 years is mathematically possible but I would say highly unlikely.

I second the recommendation of reading the book millionaire next door. It is an easy read. Then after that go on to more advanced stuff.

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onthecusp
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Re: I won the Lottery. Need sound advice.

Post by onthecusp » Thu Sep 21, 2017 5:08 pm

Financial Advisor
Would your wife be comfortable with putting the "new money" in Vanguard, with their advisory service, for a year and comparing results? Something very simple like the Three fund portfolio. Enough to discuss asset allocation with the advisor and get a feel. Its just one idea. She may see the claws and fangs come out of the current nice guy when he figures out what you are doing. The difference between a .3% fee and a 1.3% fee on $500,000 is $5,000/year each and every year. That is $5,000 that is not compounding in your savings, in 10 years that is $50,000 plus compounding that will simply be missing from your account.

Financial Independence.
It is more complicated than this, but for purposes of "where can we be in 10 years" understand that 4% = 1/25 and that 3.33% = 1/30. Some use 25 times expenses and others use 30x expenses as a target for total conservative investments for independence; either one is an approximation.

If you want to go with 30 that means that $1,000,000 should provide for a consistent $33,300 / year before tax income that you can increase every year with inflation and continue to the end of your life with low chance of running out. If you think that sounds low, it is why people say a million is not what it used to be. So $500,000 (left after paying your debts) should provide for a consistent $16,650 / year before tax income.

Spending a big part of the windfall, or tapping that income now means giving up the growth that could make this a true nest egg for a conventional or maybe early retirement if you get the rest of spending under control. Leaving it there to compound (and to ride through the markets ups and downs to achieve average returns greater than 3.33%) is the right thing for your future selves. It should double in about 12 years at 6%; way more than double if you save rather than raise more debt.

I'm not sure the advisor is even talking about such basic truths, probably more like "believe in me and you will be rich!"

Cruise
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Re: I won the Lottery. Need sound advice.

Post by Cruise » Thu Sep 21, 2017 5:16 pm

OP:

You might want to read a book written by someone who won "the big one" and what happened afterwards:

https://www.amazon.com/Did-My-Life-Afte ... 0971168210

chicagoan23
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Re: I won the Lottery. Need sound advice.

Post by chicagoan23 » Thu Sep 21, 2017 5:30 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
I want to thank you all for the advice. Many of you pulled no punches, so thank you.
I agree that the underlying problem has been our spending habits and general lack of financial discipline. This windfall is the "reset button", I know. Nothing will change until we learn to live within our means, and learn from the past. I don't feel "rich", I don't think "I'm a millionaire now!", because clearly, I'm not. My poor financial choices in my 20's and 30's created that. I've started reading the Bogleheads guides and everything I researched pointed me towards these forums for honest, objective answers. I opened a Vanguard account, now I just have to get the wife on board and ween her off the financial advisor. I think she's reluctant to leave the advisor, because she doesn't trust me or us to do it "all on our own". Judging by our financial picture, you can see why.

Yes, it was an Office Space reference.

Somebody also asked - about 65k of the 215k of "bad debt" is student loans. I plan to pay off all the 215k, and then decide on the mortgage, the advice here seemed somewhat mixed on that as to whether to pay it off immediately or not.
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
I already started 529's some time ago, and contribute regularly.

I think that once the debt is gone, and we can really see how much we're able to save every month, and able to break down exactly how much we're spending every month, and where all the money is going, we can get a clear picture moving forward and create a liveable budget and plan of action.

Again, I knew this would be a place for honest advice. Thanks again for your time, and I'll try to update you on my progress. I don't want to be one of those stories so often heard about lottery winners blowing through it. I appreciate the "tough love". I'm not quitting my job, but I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt. Thanks again, everybody.
I think your projections on financial independence are about right, although as noted it depends on your spending. If you keep your lifestyle pretty much the same as it is now, you'll be adding an extra $50k in savings due to no longer having to service any debt, plus the double max ($36k) on the retirement accounts. Do the math and that's plenty for you to get to financial independence in 10 years given this windfall. Make that your goal and STICK TO IT!!

And don't beat yourself up on past financial mistakes. The mean retirement savings of families between 38 and 43: $67,270. The median retirement savings of families between 38 and 43: $4,200. You have a mortgage, car loans and student loans, which aren't even bad and are very common. Credit card debt and 401(k) loans are symptoms of too much spending, so you will always want to avoid those in the future.

Good luck and again, congratulations!

WanderingDoc
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Re: I won the Lottery. Need sound advice.

Post by WanderingDoc » Thu Sep 21, 2017 5:38 pm

simmias wrote:
Thu Sep 21, 2017 3:16 am
As someone mentioned earlier, the "two chicks" quote was definitely a reference to Office Space. It sounds like some of you need to drop whatever you're doing and watch it.

OP, read "The Millionaire Next Door." Then start reading the Mr. Money Mustache blog. I agree with most everyone else about your spending problem.

I have to admit that I started reading your post thinking, "Hey, a lottery winner who may keep it! He's reading Bogleheads, he's already saving for retirement, good for him!" Then I got to your income, debt and spending. You've already won the lottery twice - once with the 1.2 million, and again with the high income. Don't squander either opportunity. Get your spending under control.
I don't think there is any problem with the OP. The amount of self-righteous individuals on this thread is staggering. I read that book, nice read. But the stingy, live like a pauper mindset on MMM is not for everyone. It is damaging in my opinion. Soo much save this and that, don't travel, it's too expensive, don't drive a lot, don't eat out is ridiculous. Living that way will make sure you live the dullest, most boring life possible.

I never had a budget, traveled 3-4x international per year, ate out 10-15X per week (in the cities that had good restaurants), and I still achieved my financial goals. I am on track for financial independence and then some by age 35.

It is a lot easier to learn how to make more money than it is to scrounge and save $1-2K a month. It seems like people are jealous that they had to work their ass off to make $1M while the OP didn't. I am happy for him and proud of him. I hope he does travel the world, go for a motorbike ride across Vietnam, and stay at the Marina Bay Sands in SG.
Rent where you live, buy where others pay your mortgage for you. | I'm not looking to get rich quick, I'm not looking to get rich slow, I'm looking to get rich.. for sure.

Mr.BB
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Re: I won the Lottery. Need sound advice.

Post by Mr.BB » Thu Sep 21, 2017 5:39 pm

One more note about your financial advisor. Once they find out you got this windfall, if they start pitching annuities and any other "lifetime income" products at you, that should be a huge warning sign!
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

AntsOnTheMarch
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Re: I won the Lottery. Need sound advice.

Post by AntsOnTheMarch » Thu Sep 21, 2017 5:47 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
I want to thank you all for the advice. Many of you pulled no punches, so thank you.
I agree that the underlying problem has been our spending habits and general lack of financial discipline. This windfall is the "reset button", I know. Nothing will change until we learn to live within our means, and learn from the past. I don't feel "rich", I don't think "I'm a millionaire now!", because clearly, I'm not. My poor financial choices in my 20's and 30's created that. I've started reading the Bogleheads guides and everything I researched pointed me towards these forums for honest, objective answers. I opened a Vanguard account, now I just have to get the wife on board and ween her off the financial advisor. I think she's reluctant to leave the advisor, because she doesn't trust me or us to do it "all on our own". Judging by our financial picture, you can see why.

Yes, it was an Office Space reference.

Somebody also asked - about 65k of the 215k of "bad debt" is student loans. I plan to pay off all the 215k, and then decide on the mortgage, the advice here seemed somewhat mixed on that as to whether to pay it off immediately or not.
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
I already started 529's some time ago, and contribute regularly.

I think that once the debt is gone, and we can really see how much we're able to save every month, and able to break down exactly how much we're spending every month, and where all the money is going, we can get a clear picture moving forward and create a liveable budget and plan of action.

Again, I knew this would be a place for honest advice. Thanks again for your time, and I'll try to update you on my progress. I don't want to be one of those stories so often heard about lottery winners blowing through it. I appreciate the "tough love". I'm not quitting my job, but I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt. Thanks again, everybody.
:thumbsup :thumbsup :thumbsup

I love this response! Your odds for success went up 100 fold in my book. Not that I'm advocating gambling. :D

ccf
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Re: I won the Lottery. Need sound advice.

Post by ccf » Thu Sep 21, 2017 6:28 pm

DrHotLunch wrote:
Wed Sep 20, 2017 10:13 pm
This is life-changing.

Hi DrHotLunch,

You've received a lot of great advice and I'm glad to see that you came back and posted.

I don't disagree with all of the people that have said "pay debt and put the rest into (several) savings accounts and leave it for a while" but I'll offer this anyway.

I have a family member that is in your (pre lottery) situation and I want to share what I would tell them.

This person has always had trouble saving money and staying out of debt so that's where I am coming from with this advice. This is life changing in that it hits the reset button and gets you back on track (and then some). I don't think you should be thinking about financial independence right now.

1. you and your wife take 10 or 20 or 30 thousand each for your personal piggy banks. In your situation, this windfall is not enough money for a permanent lifestyle (house, car, whatever) upgrade but you should still enjoy it!
2. pay off all 215,000 in debt. If you are bad with credit cards, close all cards.
3. pay off your 325,000 ARM mortgage
4. fund a single 529 to the max - ie. make the once in five years $70,000 contribution*
5. figure out how much your retirement savings is short to have you "on track" for retiring at the age that you'd like to retire with the contributions that you are making. Put that amount into a Vanguard Target Retirement fund or similar. Not Edward Jones.
6. the rest goes into a savings account for now. I'm guessing you have 100-300k left at this point? I don't know how much you have saved for retirement. If you don't have enough for a good emergency fund (say 100k) revisit step 5.
7. make a family budget. I like You Need a Budget and I got all of my siblings on it.
8. do not remodel or buy a new house. Make improvements using money from your budget (not your winnings) if you like.
9. keep visiting Bogleheads


It might help if you share your current 401k/403b savings.

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CyclingDuo
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Re: I won the Lottery. Need sound advice.

Post by CyclingDuo » Thu Sep 21, 2017 6:48 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
Again, I knew this would be a place for honest advice. Thanks again for your time, and I'll try to update you on my progress. I don't want to be one of those stories so often heard about lottery winners blowing through it. I appreciate the "tough love". I'm not quitting my job, but I would like to be financially independent in the next 10 years - is that reasonable? I figured it would take 2.5M in the bank and zero debt. Thanks again, everybody.
Whoot, whoot! We are all rooting for you.

Now, what were the numbers you played so we don't play them (odds are against us if we do)? :sharebeer

TSWNY
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Re: I won the Lottery. Need sound advice.

Post by TSWNY » Thu Sep 21, 2017 7:04 pm

Chuck wrote:
Wed Sep 20, 2017 11:56 pm
In OP's defense, "2 chicks at once" is a movie quote, and didn't sound like a serious objective.
I think some of these guys have a case of the Mondays.

BanditKing
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Re: I won the Lottery. Need sound advice.

Post by BanditKing » Thu Sep 21, 2017 7:07 pm

In addition to the advice here, and what you've been planning, the best advice I can give is to figure out how to happily live on $60,000. If you continue to earn at your rate, even cutting back a little, you'll still have a good amount going to retirements.

kjvmartin
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Re: I won the Lottery. Need sound advice.

Post by kjvmartin » Thu Sep 21, 2017 7:26 pm

I'd recommend finding someone to help with a small portion of the windfall. Much more blessed to give than to receive.

An anonymous $5-$10,000 money order to a relative, friend, or coworker you know that has had a tough circumstance. You won't miss it in the grand scheme of things.

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FamousWalrus
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Re: I won the Lottery. Need sound advice.

Post by FamousWalrus » Thu Sep 21, 2017 7:41 pm

1. Tell no one
2. Do nothing with your winnings for at least 6 months, perhaps even longer, park your cash in a CD. Your exuberance is quite evident, and while justified, could be detrimental. You don't have THAT much money, and it will go away quickly.
3. Relieve the EJ advisor of his duties.
4. Office space reference is classic, well done sir. For those of you who missed it: https://www.youtube.com/watch?v=A939QRRSNV4
I have just described to you the Lochness Monster, and the reward for its capture? All the riches in Scotland. So I have one question, why are you here?

motorcyclesarecool
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Re: I won the Lottery. Need sound advice.

Post by motorcyclesarecool » Thu Sep 21, 2017 7:51 pm

Switch to a fee-based Certified Financial Planner, who will charge by the hour. Have your wife interview three of them and let her choose the one she wants. That way you get her buy-in. The CFP designation is the gold standard, do not settle for a knockoff with a similar sounding title. A CPA/CFP will help you navigate the taxes, and help you setup a plan for your goals.
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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Re: I won the Lottery. Need sound advice.

Post by bottlecap » Thu Sep 21, 2017 7:55 pm

Thanks for coming back and updating. It sounds like you "get it". But getting it and doing it are a little different, so be careful.

I still advocate taking only a small amount to celebrate and waiting 6 months to a year before doing anything other than pay your non-mortgage debt. However, you will have to get rid of the ARM at some point. Whatever you do, don't do anything rash. However, if you do, make it be paying off debt!

I'm happy for you and that you found this forum. It's cool to see someone in a position to turn things around so quickly.

Good luck,

JT

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Re: I won the Lottery. Need sound advice.

Post by donaldfair71 » Thu Sep 21, 2017 8:00 pm

denovo wrote:
Wed Sep 20, 2017 10:29 pm
1. Tell no one.

2. Read No.1 Again.
Not much more to add except that, if you don't learn better money management skills, you'll be right back here in a few years with the same amounts of liabilities and assets with a few life experiences in between. Money doesn't solve money problems. It only delays them a little while, but the root of the problem persists.

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Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 8:23 pm

Again, thanks, everybody. Here's what I'd like to do ideally in the next few months. Am I doing the right thing?

-Immediately pay off all the "bad debt", and never use credit again. (215k). Again, I realize that this is a lifestyle and psychological process about learning and realizing how to truly deal with income and spending. I'm hoping that without the burden of debt, my mindset towards money and saving and spending will alter. I realize this is the hardest obstacle I face, and it all hinges on this.

-I've gone back and forth on this, but I'd prefer the security and peace of mind of having a paid mortgage (325k)
total=540k

-After taxes, my prize will be about 1.2M. However, they are only witholding 25% now, so I will get a check for 1.5M. I plan to invest this in a short term CD or something for 6 months to help it grow and offset some of the tax bill next April. I will max out our allowed retirements in 401k, etc. for 2017.

So, 1.2M (-540k debt) = 660k left.
After paying off my 401k loan (36k), which will be added to my current 401k (128k), that's another 164k at my 401k in Fidelity.

This leaves me, if I'm looking at it correctly, at having zero debt and a paid mortgage in 2018 with 824k as my nestegg to begin really investing. I'd like to take 12k and split it between my kids' 529's, and take 12k to just "piss away" like a Rockstar. I won the lottery. I'm going to celebrate one time. Considering where I was a few weeks ago, that's a nice start.

That puts me at 800k and no debt. Wife and I make 9800 a month after taxes. If we can budget and honestly stick to it, which I realize is the biggest hurdle, I think we can save 5000 a month, and live on the other 4800, thereby saving 60k per year if we are disciplined.

Since my wife is reluctant about leaving Edward Jones, she's fine with me taking my 401k (the 164k), and moving it from Fidelity into Vanguard (in the recommended 80/20 or 70/30 allocation that many recommend. Index funds of course). Once I'm able to show her the amount we can potentially save in fees, etc. I think I'll have a solid argument for my case. She also has a friend who uses Schwab and Fidelity, so she's open to them as well. I think once myself and some friends told her about how we're potentially getting murdered in fees, she was receptive. She still would like the guidance of a professional, which I get, because clearly we're a trainwreck having gotten ourselves into this situation in the first place. But if she could talk to somebody at Vanguard or Schwab on the phone, or meet in person, I think there's potential.

Again, I consider myself an intelligent person, but I made dumb financial moves. I can't make these mistakes anymore, so I thank all of you for your help and honest advice. I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak. But I realize that it's a behavioral choice that I have to be committed to. As for the beer, I'm not giving that up.

I will also read "The Millionaire Next Door" as many recommend. I am reading both Boglehead guides (retirement/investing) now, and I just finished "The Simple Path to Wealth" last week.

So, again, thanks for bearing with me and for all of your help. I came to the right place, and it will be a fun challenge to make this count.

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Cycle
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Re: I won the Lottery. Need sound advice.

Post by Cycle » Thu Sep 21, 2017 8:25 pm

WanderingDoc wrote:
Thu Sep 21, 2017 5:38 pm
The amount of self-righteous individuals on this thread is staggering. I read that book, nice read. But the stingy, live like a pauper mindset on MMM is not for everyone. It is damaging in my opinion. Soo much save this and that, don't travel, it's too expensive, don't drive a lot, don't eat out is ridiculous. Living that way will make sure you live the dullest, most boring life possible.
I agree living like a pauper is not for everyone. The MMM blog is more about getting a grip on how we value things than about pinching pennies. By selling my car this year, I added value to my most important possession, my body, because I'm forced to bike 5 days a week to work.

From reading "vagabonding," we've put more emphasis on travel. When we see cheap flights to a cool place, we go. We're flying MPLS to Copenhagen for $311 rt w/t taxes per person next week and are going to stay in an air bnb ($50/nt). We'll eat out once a day and picnic / cook the other meals. Bike and public transit everywhere.

We've gone to five out of town weddings this year and used points for the flights from credit card bonus schemes, a la travelmiles101.com.

There are ways to live richly and still have a 60-70% savings rate. The finacial independence blogs, 4hr work week, vagabonding, they all have good pointers for how to live an efficient and happy life. This self-righteous pauper is spending three weeks this January climbing mountains in Ecuador.

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bottlecap
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Re: I won the Lottery. Need sound advice.

Post by bottlecap » Thu Sep 21, 2017 8:26 pm

I think you have a good plan.

Take care,

JT

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Re: I won the Lottery. Need sound advice.

Post by gmc4h232 » Thu Sep 21, 2017 8:36 pm

DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
I'm hoping that without the burden of debt, my mindset towards money and saving and spending will alter.
I think it's gonna take a little more than just hope to alter a mindset that has developed over the course of your lifetime. Need to learn good financial habits and practice them daily. You are in the right place. Read the getting started wiki

WanderingDoc
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Re: I won the Lottery. Need sound advice.

Post by WanderingDoc » Thu Sep 21, 2017 8:44 pm

gloss151 wrote:
Thu Sep 21, 2017 8:25 pm
WanderingDoc wrote:
Thu Sep 21, 2017 5:38 pm
The amount of self-righteous individuals on this thread is staggering. I read that book, nice read. But the stingy, live like a pauper mindset on MMM is not for everyone. It is damaging in my opinion. Soo much save this and that, don't travel, it's too expensive, don't drive a lot, don't eat out is ridiculous. Living that way will make sure you live the dullest, most boring life possible.
I agree living like a pauper is not for everyone. The MMM blog is more about getting a grip on how we value things than about pinching pennies. By selling my car this year, I added value to my most important possession, my body, because I'm forced to bike 5 days a week to work.

From reading "vagabonding," we've put more emphasis on travel. When we see cheap flights to a cool place, we go. We're flying MPLS to Copenhagen for $311 rt w/t taxes per person next week and are going to stay in an air bnb ($50/nt). We'll eat out once a day and picnic / cook the other meals. Bike and public transit everywhere.

We've gone to five out of town weddings this year and used points for the flights from credit card bonus schemes, a la travelmiles101.com.

There are ways to live richly and still have a 60-70% savings rate. The finacial independence blogs, 4hr work week, vagabonding, they all have good pointers for how to live an efficient and happy life. This self-righteous pauper is spending three weeks this January climbing mountains in Ecuador.
I agree to an extent with you. But MMM himself did not have a budget for eating out. And biking to work only works if you live in a place that is >30°F year round, among other things. Telling someone not to do things that she enjoys is self-righteous and bad advice, IMO. One can drop dead tomorrow with their 60% savings rate.

The responses I was referring to were like these individuals were a father scolding a child, telling him not to take a nice vacation (only a modest one), and not buy another home or solar panels. What is up with this high horse mentality? Like I said you cannot save your way to wealth if you earn anything near an average salary. Even if you earn $5K per month and save $1K, to save an additional $1K would be a significant reduction to quality of life. If you say its not then you are just rationalizing.. no one said you cannot be happy if you live like a pauper. I practice poverty as part of stoicism experiments myself. It is MUCH easier to learn how to make a extra $3K a month than it is to save an extra $1K.

4HWW is decent but it becomes too robotic an existence if you follow it to strictly. Anyway, I have reached FI in my early 30s and I never had to sell a car, eat brown bag lunches, and walk around telling people I am happy to live on $30K a year. No one really cares, since that word is nebulous and not helpful to conceptualize (your hero Tim F. says so as well ;)
Rent where you live, buy where others pay your mortgage for you. | I'm not looking to get rich quick, I'm not looking to get rich slow, I'm looking to get rich.. for sure.

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CyclingDuo
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Re: I won the Lottery. Need sound advice.

Post by CyclingDuo » Thu Sep 21, 2017 8:46 pm

DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
Again, thanks, everybody. Here's what I'd like to do ideally in the next few months. Am I doing the right thing?

-Immediately pay off all the "bad debt", and never use credit again. (215k). Again, I realize that this is a lifestyle and psychological process about learning and realizing how to truly deal with income and spending. I'm hoping that without the burden of debt, my mindset towards money and saving and spending will alter. I realize this is the hardest obstacle I face, and it all hinges on this.

-I've gone back and forth on this, but I'd prefer the security and peace of mind of having a paid mortgage (325k)
total=540k

-After taxes, my prize will be about 1.2M. However, they are only witholding 25% now, so I will get a check for 1.5M. I plan to invest this in a short term CD or something for 6 months to help it grow and offset some of the tax bill next April. I will max out our allowed retirements in 401k, etc. for 2017.

So, 1.2M (-540k debt) = 660k left.
After paying off my 401k loan (36k), which will be added to my current 401k (128k), that's another 164k at my 401k in Fidelity.

This leaves me, if I'm looking at it correctly, at having zero debt and a paid mortgage in 2018 with 824k as my nestegg to begin really investing. I'd like to take 12k and split it between my kids' 529's, and take 12k to just "piss away" like a Rockstar. I won the lottery. I'm going to celebrate one time. Considering where I was a few weeks ago, that's a nice start.

Absolutely!

That puts me at 800k and no debt. Wife and I make 9800 a month after taxes. If we can budget and honestly stick to it, which I realize is the biggest hurdle, I think we can save 5000 a month, and live on the other 4800, thereby saving 60k per year if we are disciplined.

Since my wife is reluctant about leaving Edward Jones, she's fine with me taking my 401k (the 164k), and moving it from Fidelity into Vanguard (in the recommended 80/20 or 70/30 allocation that many recommend. Index funds of course). Once I'm able to show her the amount we can potentially save in fees, etc. I think I'll have a solid argument for my case. She also has a friend who uses Schwab and Fidelity, so she's open to them as well. I think once myself and some friends told her about how we're potentially getting murdered in fees, she was receptive. She still would like the guidance of a professional, which I get, because clearly we're a trainwreck having gotten ourselves into this situation in the first place. But if she could talk to somebody at Vanguard or Schwab on the phone, or meet in person, I think there's potential.

Fidelity and Schwab are great firms and get thumbs up from most BH's! Especially if you live close to a walk in branch.

Again, I consider myself an intelligent person, but I made dumb financial moves. I can't make these mistakes anymore, so I thank all of you for your help and honest advice. I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak. But I realize that it's a behavioral choice that I have to be committed to. As for the beer, I'm not giving that up.

As we said before - a windfall is an excellent (and very normal) opportunity to get up to speed with your financial learning to move forward with a new direction. It happens all the time to those who receive windfalls. (As does going the opposite direction of spending it all, but we don't see those posting on BH. Our hopes are you fall into the former category.)

I will also read "The Millionaire Next Door" as many recommend. I am reading both Boglehead guides (retirement/investing) now, and I just finished "The Simple Path to Wealth" last week.

So, again, thanks for bearing with me and for all of your help. I came to the right place, and it will be a fun challenge to make this count.

Show your wife that chart we linked earlier in this thread and website of what fees of 2% or more do to one's returns over the years. Edward Jones would be happy to take 2%+ (combined AUM fee and fees for each individual fund) - or you could go to Fidelity, Schwab, Vanguard and pay a lot less. However, most of us here on the BH forums would suggest that you and your wife can seriously DIY and save any AUM fees. :beer

Ah heck - below is the chart for your wife again....


Image

The top line of the low-cost funds and DIY strategy. Or the lower lines where you have to save nearly twice as much over your life to equal the top line due to those management and ER fees eating up your gains. Which looks better?

DrHotLunch
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Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 8:56 pm

This chart will be very helpful, thank you!

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celia
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Re: I won the Lottery. Need sound advice.

Post by celia » Thu Sep 21, 2017 9:08 pm

I wanted to remind you about a couple of points that have not yet been discussed very much:

* Can you estimate how much you have spent over the years in lottery tickets and gambling to get to this pay-out? As others have mentioned, it likely wasn't a single ticket you purchased one day or a single ticket you received as a gift. If you have been spending $100 a week, let's say, that is $5200 a year that you could have been putting in a Roth each year. If you had done that consistently for 20 years and had a typical growth in the stock market, that Roth could now be worth $250,000. It would belong to you, without any "chance" involved. It would have been a "sure" thing you held. (I'm not talking about the volatility of the stock market, but about investing vs. gambling.) If you had been investing $500-$1,000 each week, you would have had $1.2M in an investment account and wouldn't have had to rely on "chance". So if you have been spending anywhere near this amount on lottery or gambling, you can see that it would have been better to have invested all that money instead!

* I estimate that you likely won $1.6M and that $400,000 was withheld for taxes. But your federal taxes on $1.6M plus $200,000 of earnings this year will be closer to $650,000, of which $400,000 has already been paid, along with what has been withheld from your paychecks so far. So you need to be prepared to turn over additional money to the IRS. This does not even address your state income taxes as we don't even know what state you live in.

So, obviously, since you are in the highest tax bracket for this year, you both should max out all the tax-deferred retirement accounts that you can at your employers and each contribute to a traditional IRA. I've heard that you should also hold onto those "loser" lottery tickets as they indicate an expense that was made to obtain this income. In order words, you can use them to lower your taxable income.

* As you go about making a budget, "pay yourself first" by directing some of your paycheck into savings (or directly from your checking account if the paychecks are deposited there). Once the non-mortgage loans are paid off, the amount of those monthly payments can be saved along with another $20K-$50K a year. By setting this on automatic, it will get saved without you having to think about it and being tempted to spend it.

* Also put credit cards and other household bills on automatic monthly payment and be sure there is always enough money in the account to cover the entire balance.

DrHotLunch wrote:
Wed Sep 20, 2017 10:13 pm
Earlier this year, I won the lottery. Literally. I won about 1.2M (after taxes). This is life-changing.
I agree that this is life-changing, but probably not in the same way you see it. Your original post led me to believe that you think you now have the ability to buy anything you wish. And you can retire early. And you can pay off your house. And you can pay for college for your kids. And....

But I see this as life-changing by the fact that you have been given a great opportunity for a do-over. You can now learn from the past and change the way you save, invest, and meet your family's goals. You may have the luxury of looking at life differently in how this money can impact your family as it goes through all its stages (pre-kids, kids, empty nesters, retirees, helping out parents(?) in their final years). You can control what kind of financial role model you will be for your kids (and by implication, what kind of role model they will be for their kids, etc). You can donate some of your winnings to help others in this world, through whatever cause(s) are important to you.

In other words, this can be life-changing not only for you and your wife but for others, some of whom you may never meet. It will be up to you and the choices you make, especially early on. Make your changes thoughtfully and with an eye to the long term.

bcc1234
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Re: I won the Lottery. Need sound advice.

Post by bcc1234 » Thu Sep 21, 2017 9:21 pm

Around 200K in income and around 200K in Bad Debt. I'm sorry to say you'll end up blowing it all. It seems you can't control your spending, and having 1M at you finger tips isn't going to change your habits.

I hope I'm wrong and I wish you luck.

JBTX
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Re: I won the Lottery. Need sound advice.

Post by JBTX » Thu Sep 21, 2017 9:35 pm

DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
Again, thanks, everybody. Here's what I'd like to do ideally in the next few months. Am I doing the right thing?

-Immediately pay off all the "bad debt", and never use credit again. (215k). Again, I realize that this is a lifestyle and psychological process about learning and realizing how to truly deal with income and spending. I'm hoping that without the burden of debt, my mindset towards money and saving and spending will alter. I realize this is the hardest obstacle I face, and it all hinges on this.

-I've gone back and forth on this, but I'd prefer the security and peace of mind of having a paid mortgage (325k)
total=540k

-After taxes, my prize will be about 1.2M. However, they are only witholding 25% now, so I will get a check for 1.5M. I plan to invest this in a short term CD or something for 6 months to help it grow and offset some of the tax bill next April. I will max out our allowed retirements in 401k, etc. for 2017.
Be careful on this. It sounds like you are saying they will take out $300k too little in taxes. You just want to be sure you don't end up paying any penalties if your payment lags when you received the money. So if you received the money in Oct-Dec I suspect you should make an estimated tax payment by Jan 15th 2018. You will need to have a decent idea of what your income and tax liability will be. It may be worth talking to a tax accountant if you have one.


So, 1.2M (-540k debt) = 660k left.
After paying off my 401k loan (36k), which will be added to my current 401k (128k), that's another 164k at my 401k in Fidelity.

This leaves me, if I'm looking at it correctly, at having zero debt and a paid mortgage in 2018 with 824k as my nestegg to begin really investing. I'd like to take 12k and split it between my kids' 529's, and take 12k to just "piss away" like a Rockstar. I won the lottery. I'm going to celebrate one time. Considering where I was a few weeks ago, that's a nice start.

That puts me at 800k and no debt. Wife and I make 9800 a month after taxes. If we can budget and honestly stick to it, which I realize is the biggest hurdle, I think we can save 5000 a month, and live on the other 4800, thereby saving 60k per year if we are disciplined.

Since my wife is reluctant about leaving Edward Jones, she's fine with me taking my 401k (the 164k), and moving it from Fidelity into Vanguard (in the recommended 80/20 or 70/30 allocation that many recommend. Index funds of course). Once I'm able to show her the amount we can potentially save in fees, etc. I think I'll have a solid argument for my case. She also has a friend who uses Schwab and Fidelity, so she's open to them as well. I think once myself and some friends told her about how we're potentially getting murdered in fees, she was receptive. She still would like the guidance of a professional, which I get, because clearly we're a trainwreck having gotten ourselves into this situation in the first place. But if she could talk to somebody at Vanguard or Schwab on the phone, or meet in person, I think there's potential.
Try to find a video that shows an example of the impact of fees over the long term. It still even startles me when I see the actual numbers. I recall it being discussed in this.

Here is excerpt

https://youtu.be/6AHEMpRf6iM

This is whole video:


http://www.pbs.org/wgbh/frontline/film/ ... nt-gamble/


Again, I consider myself an intelligent person, but I made dumb financial moves. I can't make these mistakes anymore, so I thank all of you for your help and honest advice. I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak. But I realize that it's a behavioral choice that I have to be committed to. As for the beer, I'm not giving that up.

I will also read "The Millionaire Next Door" as many recommend. I am reading both Boglehead guides (retirement/investing) now, and I just finished "The Simple Path to Wealth" last week.

So, again, thanks for bearing with me and for all of your help. I came to the right place, and it will be a fun challenge to make this count.

Cruise
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Re: I won the Lottery. Need sound advice.

Post by Cruise » Thu Sep 21, 2017 9:40 pm

DrHotLunch wrote:
Thu Sep 21, 2017 8:56 pm
This chart will be very helpful, thank you!
I'll let you know what I once did for my wife to help her understand a very important investment decision which we faced: I made a Powerpoint presentation.

In the presentation, I laid out the options we had, and the risks and benefits. Seeing it all (visual learning) helped my wife to grasp the brilliance of the investment decision. We are now 15 or so years removed from that time, and the decision was the right one, and I am glad that I spent the time organizing the relevant facts to help my wife understand them as I did.

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Re: I won the Lottery. Need sound advice.

Post by Cycle » Thu Sep 21, 2017 9:56 pm

WanderingDoc wrote:
Thu Sep 21, 2017 5:38 pm
And biking to work only works if you live in a place that is >30°F year round, among other things.
The average high for Dec, Jan, and Feb in Minneapolis is below 30F, and the morning bike is usually around 10F, on a balmy day. There are many bikers throughout the winter, afterall MPLS has 5% of commuters biking with a goal of 25% by 2025. The other factors are noteable in most cities, like lack of bike lanes or the dutch reach.

For me making an additional 3k/month at my corporation would require a ton more work and stress, and "it's not that I'm lazy, it's that I just don't care." It would be extremely difficult for us to trim another k of our spending, it would be an extremely stoic life, but certainly easier than moving into administration or side hustling $3k.

We also reached Fi in early 30s, per 4% rule, but the event was not momentous. Similar experience when we paid off the mortgage... meh. Having financial goals is critical, but the moment they are achieved you realize that not only does money not love you, it won't even talk to you. I think this windfall has the ability to catch OP up to a healthy spot, but the real life-changing event will have to come from the new habits he will have to develop to ensure their family reaches their financial goals. I think he will, after all he's crossed the event horizon of the boglehead forum and once you learn of the 3 fund portfolio, you never go back.

supersecretname
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Re: I won the Lottery. Need sound advice.

Post by supersecretname » Thu Sep 21, 2017 10:07 pm

DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak.
I think it's great that you realize the changes that need to be made.

However this line worries me. Investing is not gambling. It's boring. It won't give the high of gambling. Don't fall in to the trap of try to pick winning stocks (e.g. gambling) and thinking you are investing.

DrHotLunch
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Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:07 pm

bcc1234 wrote:
Thu Sep 21, 2017 9:21 pm
Around 200K in income and around 200K in Bad Debt. I'm sorry to say you'll end up blowing it all. It seems you can't control your spending, and having 1M at you finger tips isn't going to change your habits.

I hope I'm wrong and I wish you luck.
I know I've made mistakes. Can't deny it, my financial portrait was and is a dumpster fire. But no more. I have been given a new lease on my financial life. That's why I'm trying to appreciate this blessing for what it is. It's a "reset" for me. That's why I came here, to learn and get it right. To take the criticism, the advice, and to learn. Everything I've read and researched over the past 4 weeks has led me to this forum. Everything I'm reading has been telling me that the Bogleheads strategy is the path to take. I wouldn't be here if I wasn't serious about getting this right. 85% of the posts I've read have been honest, forthright, and seem to come from people in a good place, looking to help the "new guy" OP with my questions.

So, thanks for your blunt honesty, and joining the 15% of posters who have a sweet, borderline condescending pessimism about my situation.

On that note, I hope I prove you wrong and I wish you the best. I don't need you to wish me "luck". I won the lottery, remember?

I'm printing out this post and hanging it on my bathroom mirror to read every morning. Right after I take my morning BM.

Thank you for the motivation.

DrHotLunch
Posts: 23
Joined: Wed Sep 20, 2017 9:29 pm

Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:11 pm

supersecretname wrote:
Thu Sep 21, 2017 10:07 pm
DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak.
I think it's great that you realize the changes that need to be made.

However this line worries me. Investing is not gambling. It's boring. It won't give the high of gambling. Don't fall in to the trap of try to pick winning stocks (e.g. gambling) and thinking you are investing.
I probably should have phrased that a little better, you're right. I'm not looking to do the 'individual stock' thing.

hushpuppy
Posts: 140
Joined: Fri Dec 18, 2015 2:33 pm

Re: I won the Lottery. Need sound advice.

Post by hushpuppy » Thu Sep 21, 2017 10:13 pm

Jack FFR1846 wrote:
Thu Sep 21, 2017 7:40 am

- Learn the 4% rule. You're talking about retirement in 10 years. Rough numbers: with the winnings as lump sum, say $500k at 4%, that would give you $20k a year. That's 10% of what you and your wife currently make. Don't look at the big millions number. It's not so big when it has to last for 30 years of retirement.
+ 1
I was reading this thread looking for this response before I posted. There are a ton of useful responses in this thread, but I am afraid you may not fully appreciate them. If you only consider 1.2 million of your windfall and disregarding your current and future debts/liabilities many here would say you can only spend $48,000 the first year and then adjust each year only enough to keep up with inflation. Needless to say that is only about a fourth of your current annual income.

I rarely advise anyone on anything, because I am just a guy on the internet and many on this forum are more qualified than I am to advise others. However, I have saved and invested and survived the school of hard knocks.

For your and your family's sake take your time and use your windfall wisely to improve your quality of life with carefully considered actions. You and your wife should probably continue working. If after a year or two one of you want to cut back you will be better able to judge just how much your windfall is helping your situation.

Regards,

hushpuppy
Two dogs are better than one. One dog needs to have at least one companion that can consistently measure up to standards. Humans need not apply.

Texanbybirth
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Re: I won the Lottery. Need sound advice.

Post by Texanbybirth » Thu Sep 21, 2017 10:14 pm

Wow, I'm fairly shocked: this seems to be a legitimate post from a real person.

OP, I honestly don't envy your situation. How I see it: you've got seemingly two decades worth of bad financial decisions to make up for, and an attitude change to effect in not only yourself but possibly your wife and children. I do not know the amount of money that can really fix that, and I can't imagine how much worse it would be to have this windfall and spend it terribly.

That being said, this is a great blessing and opportunity, and I'm sincerely hoping it works out well for you and your family! There is, as always on this forum, some really solid advice that will help you tremendously if you choose to heed it.

:D :moneybag :beer

DrHotLunch
Posts: 23
Joined: Wed Sep 20, 2017 9:29 pm

Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:15 pm

gloss151 wrote:
Thu Sep 21, 2017 9:56 pm
WanderingDoc wrote:
Thu Sep 21, 2017 5:38 pm
And biking to work only works if you live in a place that is >30°F year round, among other things.
The average high for Dec, Jan, and Feb in Minneapolis is below 30F, and the morning bike is usually around 10F, on a balmy day. There are many bikers throughout the winter, afterall MPLS has 5% of commuters biking with a goal of 25% by 2025. The other factors are noteable in most cities, like lack of bike lanes or the dutch reach.

For me making an additional 3k/month at my corporation would require a ton more work and stress, and "it's not that I'm lazy, it's that I just don't care." It would be extremely difficult for us to trim another k of our spending, it would be an extremely stoic life, but certainly easier than moving into administration or side hustling $3k.

We also reached Fi in early 30s, per 4% rule, but the event was not momentous. Similar experience when we paid off the mortgage... meh. Having financial goals is critical, but the moment they are achieved you realize that not only does money not love you, it won't even talk to you. I think this windfall has the ability to catch OP up to a healthy spot, but the real life-changing event will have to come from the new habits he will have to develop to ensure their family reaches their financial goals. I think he will, after all he's crossed the event horizon of the boglehead forum and once you learn of the 3 fund portfolio, you never go back.
Thank you for the encouragement. And for including one of my favorite Office Space quotes as well...

youngin87
Posts: 21
Joined: Sun Feb 19, 2017 12:25 am

Re: I won the Lottery. Need sound advice.

Post by youngin87 » Thu Sep 21, 2017 10:18 pm

DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
Can't you create a revocable trust to claim the winnings under and remain harder to identify? I would hire a good attorney and financial planner. I would sit on the money for a month to cool down from the adrenaline.

DrHotLunch
Posts: 23
Joined: Wed Sep 20, 2017 9:29 pm

Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:19 pm

Texanbybirth wrote:
Thu Sep 21, 2017 10:14 pm
Wow, I'm fairly shocked: this seems to be a legitimate post from a real person.

OP, I honestly don't envy your situation. How I see it: you've got seemingly two decades worth of bad financial decisions to make up for, and an attitude change to effect in not only yourself but possibly your wife and children. I do not know the amount of money that can really fix that, and I can't imagine how much worse it would be to have this windfall and spend it terribly.

That being said, this is a great blessing and opportunity, and I'm sincerely hoping it works out well for you and your family! There is, as always on this forum, some really solid advice that will help you tremendously if you choose to heed it.

:D :moneybag :beer
Thanks - As others have said as well, this is one of those things where I couldn't live with myself if I messed this up. I have been given the ultimate "Get Out of Jail Free" card, and that's one of the reasons I'm here. I can't waste this opportunity, because it isn't happening again.

DrHotLunch
Posts: 23
Joined: Wed Sep 20, 2017 9:29 pm

Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:23 pm

youngin87 wrote:
Thu Sep 21, 2017 10:18 pm
DrHotLunch wrote:
Thu Sep 21, 2017 3:46 pm
The other advice of "tell no one". Yes, in a perfect world, I completely agree. However, my state has to "right to know" law and unfortunately the newspapers publish anyone who wins the lottery over $1000 on a monthly basis. So, I have no choice on that one, unfortunately.
Can't you create a revocable trust to claim the winnings under and remain harder to identify? I would hire a good attorney and financial planner. I would sit on the money for a month to cool down from the adrenaline.
We explored that idea, and basically were told that at some point the newspaper would research and find who the trustees/beneficiaries/whatever were. My info is/was going to be published whether I like it or not. I hired a lawyer, got a will/POA/living will, etc. and hired a tax accountant to deal with the upcoming complexities this year, but our local papers are like tabloids. Word around town spreads fast, it was inevitable. It sucks, but it is what it is. I'm very good at saying "no" as far as handouts and donations. I've just been bad at saying "no" to bad financial decisions over the last 15 years. That's why I'm here.

DrHotLunch
Posts: 23
Joined: Wed Sep 20, 2017 9:29 pm

Re: I won the Lottery. Need sound advice.

Post by DrHotLunch » Thu Sep 21, 2017 10:31 pm

JBTX wrote:
Thu Sep 21, 2017 9:35 pm
DrHotLunch wrote:
Thu Sep 21, 2017 8:23 pm
Again, thanks, everybody. Here's what I'd like to do ideally in the next few months. Am I doing the right thing?

-Immediately pay off all the "bad debt", and never use credit again. (215k). Again, I realize that this is a lifestyle and psychological process about learning and realizing how to truly deal with income and spending. I'm hoping that without the burden of debt, my mindset towards money and saving and spending will alter. I realize this is the hardest obstacle I face, and it all hinges on this.

-I've gone back and forth on this, but I'd prefer the security and peace of mind of having a paid mortgage (325k)
total=540k

-After taxes, my prize will be about 1.2M. However, they are only witholding 25% now, so I will get a check for 1.5M. I plan to invest this in a short term CD or something for 6 months to help it grow and offset some of the tax bill next April. I will max out our allowed retirements in 401k, etc. for 2017.
Be careful on this. It sounds like you are saying they will take out $300k too little in taxes. You just want to be sure you don't end up paying any penalties if your payment lags when you received the money. So if you received the money in Oct-Dec I suspect you should make an estimated tax payment by Jan 15th 2018. You will need to have a decent idea of what your income and tax liability will be. It may be worth talking to a tax accountant if you have one.

Yes, we are meeting with one solely for this purpose.
So, 1.2M (-540k debt) = 660k left.
After paying off my 401k loan (36k), which will be added to my current 401k (128k), that's another 164k at my 401k in Fidelity.

This leaves me, if I'm looking at it correctly, at having zero debt and a paid mortgage in 2018 with 824k as my nestegg to begin really investing. I'd like to take 12k and split it between my kids' 529's, and take 12k to just "piss away" like a Rockstar. I won the lottery. I'm going to celebrate one time. Considering where I was a few weeks ago, that's a nice start.

That puts me at 800k and no debt. Wife and I make 9800 a month after taxes. If we can budget and honestly stick to it, which I realize is the biggest hurdle, I think we can save 5000 a month, and live on the other 4800, thereby saving 60k per year if we are disciplined.

Since my wife is reluctant about leaving Edward Jones, she's fine with me taking my 401k (the 164k), and moving it from Fidelity into Vanguard (in the recommended 80/20 or 70/30 allocation that many recommend. Index funds of course). Once I'm able to show her the amount we can potentially save in fees, etc. I think I'll have a solid argument for my case. She also has a friend who uses Schwab and Fidelity, so she's open to them as well. I think once myself and some friends told her about how we're potentially getting murdered in fees, she was receptive. She still would like the guidance of a professional, which I get, because clearly we're a trainwreck having gotten ourselves into this situation in the first place. But if she could talk to somebody at Vanguard or Schwab on the phone, or meet in person, I think there's potential.
Try to find a video that shows an example of the impact of fees over the long term. It still even startles me when I see the actual numbers. I recall it being discussed in this.

Here is excerpt

https://youtu.be/6AHEMpRf6iM

This is whole video:


http://www.pbs.org/wgbh/frontline/film/ ... nt-gamble/


Again, I consider myself an intelligent person, but I made dumb financial moves. I can't make these mistakes anymore, so I thank all of you for your help and honest advice. I do love to gamble, so I think if I can channel that energy into investing, and watch my money grow, that will "scratch the itch", so to speak. But I realize that it's a behavioral choice that I have to be committed to. As for the beer, I'm not giving that up.

I will also read "The Millionaire Next Door" as many recommend. I am reading both Boglehead guides (retirement/investing) now, and I just finished "The Simple Path to Wealth" last week.

So, again, thanks for bearing with me and for all of your help. I came to the right place, and it will be a fun challenge to make this count.

aristotelian
Posts: 4136
Joined: Wed Jan 11, 2017 8:05 pm

Re: I won the Lottery. Need sound advice.

Post by aristotelian » Thu Sep 21, 2017 10:31 pm

How awesome is it that a guy wins $1M in the lottery, comes to Bogleheads, and is convinced rather quickly that he needs to spend less and live within his means!

NYC_Guy
Posts: 224
Joined: Fri Mar 10, 2017 2:23 pm
Location: New York

Re: I won the Lottery. Need sound advice.

Post by NYC_Guy » Thu Sep 21, 2017 10:34 pm

TomatoTomahto wrote:
Thu Sep 21, 2017 7:31 am
DrHotLunch wrote:
Wed Sep 20, 2017 10:13 pm
I am just over 40 years old. We have 2 children who have about 10-15 years before College. I'd like to fund about 75-80% of their college education. I don't want to give them a "free ride", I'd like my kids to learn the value of money, and work for it.
Comedic genius. :D

Almost every sentence in your post got a reaction from me, mostly shaking my head and rolling my eyes, but the expectation that your actions (or inaction) should teach your kids the value of money made me literally give an audible chuckle.

If your post is real, and not something The Onion rejected, good luck. If it's not real, you have a gift for satire, so see if you can get paid for freelance writing.
+1

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