$2 million at a young age

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Charlie307
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Joined: Wed Jan 22, 2020 8:42 pm

$2 million at a young age

Post by Charlie307 »

My family received a huge settlement after a loss in the family and a month from now I will be getting $2,100,000.

I'm 22 years old and I'm living with my girlfriend of a year. I make about $18,000 a year working a part-time minimum-wage job. I don't have any savings, only $150 in my bank account. I have $900 in credit card debt but other than that no student loan debt or any other debts. My car is paid off but it is a junker and I'm concerned it will break down on me soon. My rent is $675/month plus ~$60 in utilities and my lease ends in September.

It's all a little overwhelming but I've had a couple months to let it sink in. I don't plan on using any of it for a while, I know that when most people get a large sum of money they will lose it within 3-5 years and I don't want that to happen to me. My plan is to just live my life like normal and keep working my job and living in my apartment until my lease is up. I do want to take some classes over the summer to learn more about financing.

I've read online I need to talk to lawyers and fee-only personal financers to figure out what to do. I also have a connection to a family personal financer. I do have this idea in my head of putting down money on an apartment building and hiring a property manager for passive income.

Part of me does want to withdraw 1% of the money to put down for a new car, go on a week-long vacation, and for some breathing room. On the other hand I realize it's going to be tempting to use a lot the money without concern and that's a slippery slope to losing it all.

I'm looking for any advice, I'm clearly unexperienced when it comes to wealth but I'm willing to learn anything to insure that I don't lose it all before I'm 30.
Leesbro63
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Re: $2 million at a young age

Post by Leesbro63 »

Well, you are already on the right track by posting here. This money could vastly improve your life, but could also seriously mess it up if you make common “quick wealth” mistakes.

You should learn about The Three Fund Portfolio. Simple and probably appropriate for your situation. Doesn’t require lawyers or financial planners and will be very tax efficient. Also you might go to college or trade school to improve your lifetime earning power and self esteem. The one thing to NOT do is to blow a chunk of your new stash and become unsustainably more comfortable.

I’m sorry for the loss that caused this windfall but hope you turn it into an opportunity to vastly improve your remaining 70ish year life expectancy experience. Make this last for life.
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Stef
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Re: $2 million at a young age

Post by Stef »

Congratulations, you are financially independent!

Check out the Three-Fund-Portfolio here. You could probably withdraw 5k/month (also adjusting for inflation) for the rest of your life and never run out of money.
zeal
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Re: $2 million at a young age

Post by zeal »

I took a personal finance class in college and Dave Ramsey's Financial Peace University at my local church. Before those two classes, I knew next to nothing about money. Shortly afterwards, I found Bogleheads which helped me understand the finer details of managing my finances. Spend some time here and take some classes as you proposed. Once you've done that, you will likely know enough to not even need a financial planner. In the meantime, I recommend not spending a penny of your settlement. You'll have a lot of ideas of what to do with it, but wait until you've heard all the possibilities.
DarthSage
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Re: $2 million at a young age

Post by DarthSage »

My sister's husband received a medical settlement in a similar range. Their lawyer sent them to a financial planner--a good idea in this case, because, like you, they had no clue as to what to do with it. They were older (50-ish) when they got the settlement.

Sis ran the planner's advice by me, because she was concerned he might be a shyster. It seemed to me that he had their best interests at heart. They don't touch the principle, but use some of the income from the settlement money to travel and do other things.

I think a financial planner could help you, but it would be good for you to also gain knowledge. Reading here is a great start! It would be best if you can let the principle grow, leaving that alone, and only spending the earnings as you want/need. Even then, it won't grow further if you take out the earnings every single year --maybe save it for that new used car, a house down payment in the future, education expenses, etc. Invest in yourself and your future.

If it's not too late, I wouldn't even mention this to your girlfriend. You're young and not married--this is YOUR money, not hers. In fact, I wouldn't mention it to anyone. In my sister's case, we actually communicated by snail mail, as we have a "grifter contingent" in our family, and she didn't want to leave any kind of trail.

Beyond that, I will tell you what I tell my kids, who have money inherited from their grandmother: This money is a gift, a family legacy. It's not to be squandered. When you use it, you should think of your grandparents, who worked hard to leave you this legacy. They placed a high value on education and travel.

In your case, think about the family member whose loss led to your windfall. They would want you to use it to better yourself and your circumstances.
Longdog
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Re: $2 million at a young age

Post by Longdog »

I'm sorry for your loss. This is a life-changing amount of money for you, and most likely a once-in-a-lifetime opportunity. Realize that whatever loss you suffered, this windfall was a result of that loss. Please be respectful and always aware of that fact.

To start with, except for some very minor items which I'll mention, you shouldn't do anything other than put the money in an extremely safe place while you learn about finances and how best to manage this windfall. The only exception is that you should immediately pay off your $900 credit card debt and never carry a credit card balance again for the rest of your life. It is reasonable for you to consider the purchase of a new car, but do NOT be tempted to buy a fancy sports car - that is a slippery slope that could eventually get you into trouble. Use cash to buy a decent, reliable, vehicle that you like and plan to keep it for at least 8 years, but possibly even longer than that. And read, read, read about finances. And don't feel rushed to make any major life changes.
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FIREmeup
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Re: $2 million at a young age

Post by FIREmeup »

Sorry for the circumstances that got you this money. Now that you have don't mess it up.

Most important thing...do not tell anyone. Probably told your GF already, hopefully she hasnt told people. If you tell your friends they will expect you to pick the bar tabs.

Read this site nonstop. Read the herring started. I dont think financing classes will teach you as much as you will learn here.

If you dont touch this money at 50 years old assuming 5% returns it will be over $8 million. At 7.5% aggressive returns it will be over $16 million. And at an unrealistic 10% returns it will be $33 million. If you blow half of this $2 million now halve those figures and that's only if you then dont touch it.

Be careful of financial advisors. Some guy charging you 1% AUM is $20k a year he is taking from you. Hell send you on dinners and send you gifts yearly because hey, hes got 20k a year coming from you. And if it grows to that $5 million...at 1% he'll be taking 50k off you a year

Live within your means. Plan your next few years to improve your life and salary and live within your salary parameters. Maybe withdrawal 0.5% per year to do what you want. Maybe this year take your vacation. Next year get your car. Or maybe start with classes to improve your employability.

Again, most important, dont tell anyone.

Sorry again for the circumstances but as others have said this is an opportunity to be financially independent and be very comfortable for life.
Cousin Eddie
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Re: $2 million at a young age

Post by Cousin Eddie »

Sorry for your loss. You have come to the right place to seek advice on a windfall. You have a great opportunity to provide for yourself for the rest of your life and I'm glad you are taking it seriously. I don't know if I would have at that age or if I would have even known where to go to for help, but that was before the internet age.

You will get lots of good advice here. I would say take your time and read as much as you can in the forum and in the wiki. Your top priority now should be how to properly invest and protect your windfall to last you a lifetime. Don't give in to other people asking for handouts, just let them know you are not doing anything with the money right now until you figure everything out. If you don't already, learn how to say no to people. Trust me, they will get used to it and will accept it.

Personally, I would send all the money to Vanguard/Fidelity/Schwab as 70/30 Stocks/Bonds, live on no more than the median US household family annual income, 3% of total or $60k/year, and call it a day. I would not spend more than that in any year for the first 10 years until I had a better feel for how the windfall would last.

Good luck!
wilked
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Re: $2 million at a young age

Post by wilked »

What is your education level? What do you want to do professionally in life?
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Brianmcg321
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Re: $2 million at a young age

Post by Brianmcg321 »

I would do nothing for a year.

You need to take more time with this than you think.

Being a landlord is NOT passive income. That's not a good idea at all at this point.

Be wary of any "friends" that are financial planners. I would not invest with friends or family. It makes it harder to fire them.

Read a lot of books this year.

Look up all the stories of lottery winners or pro athletes that went bankrupt within a few short years.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
Laundry_Service
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Re: $2 million at a young age

Post by Laundry_Service »

Before you make any decisions or give any person or company your money or signing anything consider coming back here first to bounce it off of the members of the forum.
student
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Re: $2 million at a young age

Post by student »

I agree with others who said don't touch it for a while. My suggestion will be something along the line.

1) Open a brokerage account https://wallethacks.com/best-new-broker ... romotions/ For example Etrade gives $2,500 for bringing $1 mil. TD Ameritrade gives $1,000 for $250k. I think you can get Etrade to give you $5,000.

2) Buy $2 mil worth of FDIC insured CDs at your brokerage firm. Make sure each CD is under $250k, FDIC limit. You should get at least 2% for a 1 year CD. This way, it takes away the temptation to use the money. Use this one year to learn. Then determine what to use the money for and how to invest.

3) Determine whether you need to pay tax on this $2 mil. If so, you may need to make adjustment in 2.

4) Use the $5,000 (bonus) to pay off your credit card debt and put the rest in an emergency fund.

5) Use one year to think about pursuing a career that you enjoy. You may need to go back to school.

6) In the long term, once you have a job that pays more. You still should not spend any money from this pot of money directly but you can afford to not contribute money to retirement except enough to get the match from your 401k. Do this until you reach financial independence.

7) As others have said, DO NOT tell anyone.
Last edited by student on Thu Jan 23, 2020 8:05 am, edited 2 times in total.
wolf359
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Re: $2 million at a young age

Post by wolf359 »

Follow this Wiki article. It was written for people in your situation.

https://www.bogleheads.org/wiki/Managing_a_windfall
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Sandtrap
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Re: $2 million at a young age

Post by Sandtrap »

1. Read and do:
MANAGING A WINDFALL
https://www.bogleheads.org/wiki/Managing_a_windfall

2. Read and learn:
GETTING STARTED
https://www.bogleheads.org/wiki/Getting_started

3. Free reading, learn:
Free Reading: "If You Can" by Bernstein
https://www.google.com/url?sa=t&rct=j& ... -SB3S580I5

4. Some may differ. One of the most important things to accomplish in your situation:
a)further your education, career, certifications. IE: professional career
IE: Evaluate where you want to be 10 years from now. Go back to school. Find your passion and pursue it.

5. Stay away from "helpful" financial advice from friends, friendly bankers and wealth managers, etc. For now, open brokerage accounts at Vanguard, Fidelity, and/or Schwab. Deposit the funds in the money market accounts, some in short term CD's if you care to. Then. . . "do nothing". Don't go wild with spending on others, "helping", etc. Even if "doing nothing for a year", just be patient, learn about personal finance, living frugal (yes, still do that for now), and develop a long term personal life strategy.

6. Read:
a) "Life Code" by Dr. Phil (memorize "BAITERS")
b) "Life Strategy by Dr. Phil.

7. Pay down all of "your debts" not others, and resolve to not make any more.

8. Caution. Friends. Girlfriends. etc, etc, etc. This amount of money attracts all the bees in the field. It's a large flower indeed. :annoyed

*You've been given an opportunity to build a solid financial and, more importantly, job and life foundation, that will reap benefits forever.
*Consider yourself a responsible custodian of this money that others have sacrificed for your benefit. Remember this and you'll be vigilant and careful with it.
Wiki Bogleheads Wiki: Everything You Need to Know
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Stinky
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Re: $2 million at a young age

Post by Stinky »

Brianmcg321 wrote: Thu Jan 23, 2020 7:21 am I would do nothing for a year.

Being a landlord is NOT passive income. That's not a good idea at all at this point.

Be wary of any "friends" that are financial planners.
Three excellent points.

Especially the landlord point. You’re definitely not prepared for that at this point in your life. (Trust me, I know from personal experience.)
It's a GREAT day to be alive - Travis Tritt
HomeStretch
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Re: $2 million at a young age

Post by HomeStretch »

Welcome!

The $2 million can set you up for a lifetime of financial independence if handled properly. I sincerely hope you manage it well so it does that for you.

You have received good reading suggestions and advice above including keeping quiet about the money. Here is my advice:

1. Put $25,000 in a high-yield bank account as an Emergency Fund in case of job loss, etc. Open a brokerage account at Vanguard, Fidelity or Schwab and initially put the remainder in a money market fund (like Prime or Treasury) while you decide how to invest it.

2. Pay off your $900 debt. Do not carry debt going forward (except a reasonable mortgage). Debt means you are living above your income. Setup a reasonable budget based on your salary and stick with it. YNAB (You Need A Budget) is an app often mentioned here to help you stay on track with your spending versus budget.

3. Buy yourself a solid reliable car.

4. Make and execute a plan to land a well-paying job with benefits. Do you need more education, help with interviewing skills/clothes, move to an area with better employment opportunities, etc?

5. Carry adequate insurance to protect yourself and your assets. For now that means car insurance, renters insurance and $1 million umbrella insurance.

6. Set up beneficiary designations on your bank and brokerage accounts. See if your state department of motor vehicles allows you to add a transfer-on-death (TOD) designation for your car title. This is a rudimentary estate plan saying who inherits your assets if you die. In the future, see an estate attorney for a will, financial power of attorney (POA) and healthcare POA/directives.

7. Educate yourself on investing. This site’s wiki is a great place to start. After you have mastered the basics, consider learning how to do your own taxes with the help of a tax preparation software package like TurboTax.

8. Avoid anyone who wants you to lend them money, pickup bar tabs or financial planners who manage your money for a % of your assets. This includes planners who are family friends.

9. If your W-2 for 2019 has $ in Box 1, you are eligible to contribute to a Roth IRA and should do so before the 4/15/20 tax filing deadline for tax year 2019. Open a Roth IRA at the same brokerage. Once you have earned $6,000 in 2020 W-2 income, make another contribution of $6,000 to the Roth IRA for 2020 tax year. Invest 100% in a US Total Stock Market fund or ETF (we can help you pick one if you let us know the brokerage you use)

After 6-12 months, make a plan to invest the $2 million in the brokerage money market fund. If you can find a good hourly fee planner and you are educated enough to decide if the proposed plan is aGood one for you , great. Otherwise, consider simply putting 90% in US/International Total Stock Market funds or ETFs and 10% in a bond fund or money market fund.

Best of luck. Please ask questions about anything you don’t understand. This board can be an invaluable source of feedback on whatever plan you develop.
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JoeRetire
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Re: $2 million at a young age

Post by JoeRetire »

Charlie307 wrote: Wed Jan 22, 2020 10:40 pmI make about $18,000 a year working a part-time minimum-wage job.

My plan is to just live my life like normal and keep working my job and living in my apartment until my lease is up.
You plan to work a minimum wage part-time job for the rest of your life?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
MotoTrojan
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Re: $2 million at a young age

Post by MotoTrojan »

Does your girlfriend or close friends know about this?

If it were me I’d setup a 3-fund portfolio once I understood the market (it will go down) and picked an AA I could live with, and withdraw 1-2% of starting value pre-tax annually. Sounds like a nice income to support you bettering your life in numerous ways, including education.

I’m sorry for your loss but congrats on being financially independent.

Do not use a financial advisor! A 1% annual fee would be 50-100% of the amount I just suggested you withdraw; it’s not an insignificant drag.
Freetime76
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Re: $2 million at a young age

Post by Freetime76 »

Charlie307 wrote: Wed Jan 22, 2020 10:40 pm My family received a huge settlement after a loss in the family and a month from now I will be getting $2,100,000. […]

It's all a little overwhelming but I've had a couple months to let it sink in. I don't plan on using any of it for a while, I know that when most people get a large sum of money they will lose it within 3-5 years and I don't want that to happen to me. My plan is to just live my life like normal and keep working my job and living in my apartment until my lease is up. I do want to take some classes over the summer to learn more about financing.

I've read online I need to talk to lawyers and fee-only personal financers to figure out what to do. I also have a connection to a family personal financer. I do have this idea in my head of putting down money on an apartment building and hiring a property manager for passive income.

Part of me does want to withdraw 1% of the money to put down for a new car, go on a week-long vacation, and for some breathing room. On the other hand I realize it's going to be tempting to use a lot the money without concern and that's a slippery slope to losing it all.

I'm looking for any advice, I'm clearly unexperienced when it comes to wealth but I'm willing to learn anything to insure that I don't lose it all before I'm 30.
I’m sorry for the loss that resulted in this settlement. The biggest risk to you is not losing this money. The biggest risk is that the (potentially temporary, potentially life course changing) money eliminates your drive and ambition to be your own person and make your own contribution to society-whatever that may mean for you. It is a responsibility and satisfying to do something constructive with yourself.

You work part time. Are you in school, or what is the rest of the time being used to do? What are your long term plans?(I.e what do you want to be when you grow up? :happy )

To echo and add to others:
1. Do not use a family/friend adviser. :oops:
2. Do not co-sign or loan anyone anything. :oops:
2a. Do not fund your new best friend, cousin, girlfriend’s brother or anyone else’s brilliant business idea. :oops:
2b. A general rule in life is to not mix business or finances with family or friends. It takes great skill to do this effectively, and most can’t.
3. Read this blog. Notice that intelligent people still do not always agree, and absorb the general theme here.
4. I don’t think you need a lawyer just to hold onto money. You can move money to Vanguard or Schwartz etc. yourself. You might buy simple liability insurance (now that you have something worth suing you over), and you might get a simple will done. Keep it very simple for now.
5. Do not buy anything so ridiculously large as an apartment building. You have no idea what you’re doing and can lose your shirt. Before you *do* anything, please read (books! Quality ones about people and life, not get rich quick gurus, and not only what google feeds you), research, talk with and maybe shadow people who are successful in the business -any business. Preferably someone older who’s got some experience and is honest about failures, not a slick dude who just says how much of a killing he’s made in his rentals, but he’s never been through economic downturns - those people will eventually lose their shirts (at minimum, they’re not being truthful with you - nothing is 100% successful all the time. People tend to talk about their wins, and gloss over losses).

You mentioned wanting to use some of the money. Here is the very important thing: 1% sounds like nothing, right? :D After all, you’ll still have 99% left. If you've ever taken a statistics class, you’ll know that percentages can be very misleading. :shock: 1% is about $20,000, more than your annual income right now. Personally, it’s not an issue with me about buying a better $5000 car or whatever.** The issue is lifestyle inflation. **

Imaginary Example 1: If I’m earning $19,000 a year- Maybe a “vacation” would mean pack a bunch of food, hop in a friend’s car and caravan 3 hours to share a buddy’s uncle’s house (uncle is a Boglehead with a fabulous beach house) with 10 people at the beach for a weekend and roast marshmallows around a fire with a case of beer - total cost per head, maybe $100. Suddenly there is ample money, and a vacation becomes ...spend $2500 on a trip to the Caribbean, oh, and you’re a great guy, so you pay for a significant other’s ticket, plus add on renting a Jeep, ziplines, scuba (full package), a few rounds of drinks for my new friends, and $4795 is gone - poof- along with the extinction of any taste for marshmallows and house sharing on vacation.

Example 2: I get 20K in cash. I’m frugal, so I only spend 15 of it on a car. Now I have to pay more for insurance vs my crap car, more for maintenance because I picked an expensive to maintain car (oops), wash it once every two weeks at the car wash..etc. now my annual budget is up over $1000 a year. My income didn’t change, so now what? I’d also like to dress a little better, eat a nicer place, hey let’s get Thai takeout (again) etc. etc.

I wish you the best -you’re ahead by asking the question!
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FlyAF
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Re: $2 million at a young age

Post by FlyAF »

wilked wrote: Thu Jan 23, 2020 7:18 am What is your education level? What do you want to do professionally in life?
This. You mention not having student loans which sounds like you went to college, but then say you work for min. wage which would lead me to believe that you haven't.
jpelder
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Re: $2 million at a young age

Post by jpelder »

First, my condolences for the loss that led to this settlement. Whatever you do, remember what the family member would have wanted.

The other posters' advice is sound. Don't do anything drastic for 6 months to a year. I would immediately put $35,000 of it into a bank savings account, and use $900 more to eliminate the credit card debt. $15,000 will be used to buy yourself a 3-year-old used car when the next big breakdown arrives on your current one. Around here, you can get a used Honda or Toyota small SUV or midsize car for that price. Get something reliable with good safety features. No loan, pay for it outright. The other $20,000 will be a 1-year emergency fund to use if you want/need to leave your job, pay a security deposit on a new apartment, or do a minor car repair that doesn't warrant a replacement.

The rest of the settlement should go into a money market fund at Vanguard, Fidelity, or Schwab (I'm partial to Vanguard myself). This is a safe investment that will earn a little interest while you figure out a long-term plan.

Figuring out if you want to change jobs, go to college, or a similar path will help determine how you should spend the money. With the amount that you have, you should be able to live comfortably and debt-free for the rest of your life.

As others have suggested, a Three-Fund Portfolio is a good choice for a simple, long-term plan. An allocation of 40%-60% stocks, with the balance bonds, is often recommended as a starting point for a "perpetual" allocation.

You will need to figure out if the settlement is taxable. A little reading suggests that wrongful death settlements are not taxable: https://smallbusiness.chron.com/pay-tax ... 31261.html You should probably consult a tax accountant to be sure.

You have come to a good place to learn how to manage your finances. The Wiki and forums here are a great source of information.

If you really don't trust yourself to not spend all of the assets, you could establish a revocable trust with yourself as beneficiary (I think...). Vanguard offers this service, as do other places. They will manage the investments and pay you an "allowance" on a set schedule. This costs money to set up and run, though, so you may not want to do it. This would necessitate talking to a lawyer.

Overall, you may want to do some Googling on "What to do if you win the lottery". Financially, this is roughly the situation you're in. Good luck!
Grt2bOutdoors
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Re: $2 million at a young age

Post by Grt2bOutdoors »

It’s been said before but I’ll say it again: Tell NO ONE!!! People (friends, old and new or relatives or both) will come to you for a small loan, don’t give it to them, that is what a bank is for! If the bank won’t lend them the money that is because the risk of non payment is also high.
Don’t be taking them to lunch, happy hour or dinner. You may lose some people along the way but it will become quickly evident who is your true friend and who is not!!! The same goes for family, not all family is looking out for your best interests. That family friend or relative who is “personal finance person”? - trust but verify. You can ask generic questions but don’t tell them how much money you have or where you are keeping it. If you take your money to the bank, the bank will introduce you to their “guy”. Their “guy” is also looking to grab a piece of the pie from you in the disguise of “helping you” when all they are doing is helping themselves. Be careful!

Associate yourself with the people who you can learn positive attributes from, stay away from unsavory characters.

If you have any inclination to getting married at some point down the road - this is where a pre-nup agreement drawn up by an independent attorney becomes crucial. Many bees or flies think you are a quick source of money - don’t let it happen. You may want to inquire with an attorney if a trust that you control is a better vehicle to hold the money in to protect against creditors and other unsavory characters.

You drive a car? Now that you are of high net worth it’s time to raise your liability insurance and to purchase a separate policy called an umbrella. The car liability should be raised to either $300k/$300k - that’s $300k of coverage per incident, $300k total per claim. On top of that will be the umbrella policy of $1 or $2 million. If any accidents happen, the plaintiffs lawyer will sue you for all your money even if the liability is only $25k, they try to get the most for their client. For a small premium it’s worth it to let the insurance company handle those sorts of lawsuits.

You’re working? Take $6,000 and open a ROTH IRA (if you have not already) for the 2019 tax year. You have until April of this year to fund for 2019. Then open a ROTH IRA for the 2020 tax year if you continue working this year. Invest the ROTH in a Target Retirement Fund for the year you are turning age 65. I know it’s a long way off, but those investments will grow tax free over your lifetime.

Upgrade your car but don’t buy a sports car. Buy a good 2 or 3 year old low mileage car, something functional but not flashy. Nothing will attract the flies to your honey faster than a shiny sports car and gold chains around your neck with the top down and loud music blaring.

Education-the best way to improve your income is to invest in you learning a skill that people will pay for in good times and bad. Are you going to college or trade school?

Finally, your health - don’t drink in excess or daily, don’t smoke, eat healthy - make the right choices now so you reduce the chances of a poor outcome later on.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Wricha
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Re: $2 million at a young age

Post by Wricha »

Sorry for your loss.

I am going to says things that I would have never ever would of done if I had $2 M at 21 years old. You are dealing with a situation that is nothing short of a loaded gun. The question is are you going to shoot yourself or put it in the safe and use it responsibly. That’s exactly where you are. The good news, it is 100% in your control. The bad news most people in your situation will fail
First, the only good money you can spend immediately is on self improvement (see sand trap).
Second, don’t tell anyone else. And those that know tell them the money has been put in a trust (which may not be a bad idea) and you can’t access till you 35. By then your “friends” who will encourage you to buy stuff will be long gone.
Three, with improving skill set from education go and participate in the world and make your mark. This does not require you to spend your money.
Four, and don’t take this as challenge to prove me wrong (Remember I don’t care what you do). It is unlikely that you and the current girlfriend will make it, even without the windfall. With windfall a near 0% chance. The only way you two can make it is get on he same page of self improvement and participate in life for 20 years (without the money). After 20 then take a look at the money.
In short, improve your self make your own money and at some point in the distance future then decide what you are going to do with $6M in your 30’s at which time you can make your second post on Bogleheads.
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Re: $2 million at a young age

Post by sjt »

Charlie307 wrote: Wed Jan 22, 2020 10:40 pm
Part of me does want to withdraw 1% of the money to put down for a new car, go on a week-long vacation, and for some breathing room. On the other hand I realize it's going to be tempting to use a lot the money without concern and that's a slippery slope to losing it all.
This is a big red flag to me. 1% of the money is more than your annual income - easy come easy go.

I think the best thing you can use the money for is to invest in yourself. Can you use some of the funds to improve your job prospects / income in the future? Can you use some of the money to attend college for a degree which will help you land a high paying job? If college is not for you, can you use some money to attend a good trade school and become an electrician / plumber, etc? What are your interests?
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale
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Sandtrap
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Re: $2 million at a young age

Post by Sandtrap »

Randome Points:
1
The odds are high that money windfalls do not last for very long for most people (including you).
Suggest you be afraid of this, with good reason.
Strive to beat those odds.
2
Two-million sounds like a lot of money and it will last for a very long time.
It is not a lot.. . . it will not last (for most folks).
3
The tendency is to think that we have a lot of time to do things, to think, to wait and cruise, especially at younger ages. Especially youth mixed with wealth. This is a myth.
So. Strive for wisdom. Strive for a "different path" than your peers (friends and everyone you know perhaps).
4
Two million sounds like it will last until you are 40, or 60 years of age. It will not in itself.
But, it can provide a means to be financially secure through higher education (professional degrees, education, etc), and give you time to do that and pursue a career path that is lucrative and fulfilling.
Pretend you don't have 2 million bucks.
Fore example: go to trade school, graduate, work as an electrician, get your certifications, buy a large used van, go in business for yourself, keep renting where you live and save money, grow your business.

Money buys you time and options. (choose wisely)
5
Money also buys you a change in lifestyle and life path.
Not more "things". Not more "fun" that can be bought. Not more "friends".

Actionably: stay on this forum, update your progress. There are many here that have been where you are and survived, and many that have not.

Example: Do you know how a $20 bill seems to disappear once it's broken? Do you know how a $100 bill seems to disappear once it's broken, even if it's just a dollar spent out of it?
That is what happens when you do that with larger amounts as well. We think, "it's just a $50,000 car and I have 2 million", "it's just a $20,000 vacation and I have 2 million", "it's just a $30,000 down payment on a $300,000 dollar townhouse and I have 2 million". Nope. Now you blew $100k and are in debt $300k. All in less than a year.

I've seen this happen with close friends, business friends, and relatives, from $1-20 million. All gone.
Bee careful.
j :D

j :happy
Last edited by Sandtrap on Thu Jan 23, 2020 9:43 am, edited 1 time in total.
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vm81
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Re: $2 million at a young age

Post by vm81 »

I would not touch the money. At your age that money has a very long time to grow.

Only thing I would withdraw is for some classes as you said and help set you up for improving your earning potential. You are very young and should be working hard and making whatever you can and not rely on this $2mn for the future. Dont take out 1% for your car or be more comfortable because then you will always have it in back of your mind that you can fall back on this money. Today its the car, tomorrow it will be your TV, then it will be cell phones and vacations, dinner out. Just consider that money not yours for now.

Just my 2 cents
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djpeteski
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Re: $2 million at a young age

Post by djpeteski »

While the common wisdom is not to touch the money for a decent amount of time, I would spend $20,000:

Pay off the CC. At your current income level, I would not use credit cards. Only debit or cash. My advice is to cut up the credit card, or at least freeze it in a block of water.

Buy a car. I would pay cash for a car in the 10K to 15K range. No car loans, pay cash. No need to drive a beater.

Take Financial Peace University which will cost you about $100. Here you will learn the basics of personal finance including insurance, budgeting, and investing. While most of us on this forum would not agree with the specific investing advice, 90% of the course's content is invaluable.

Create an emergency fund of 5K or so. Put it in a high yield savings account, and only use it in case of an actual emergency. Christmas or vacations are not emergencies. Nor is most car repairs once you have a sinking fund built up. What is a sinking fund? You will learn about that in Financial Peace University.
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marti038
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Re: $2 million at a young age

Post by marti038 »

Lots of good advice above. The ones that stand out to me:

- Pay off the credit card
- Learn about money until you're comfortable with a plan that fits your needs
- Use some of it to invest in yourself. You're not going to want to work part time forever. Pick a career and get an education to support that. At 22, you might get by on $2m, but is "getting by" the life you want?
- Come back here when you have questions. $2m is a lot of money to me, but there are scores of people on this forum who are not impressed by this amount. They have nothing to gain by you and only want to help. This site is more valuable than a financial adviser IMHO because the people here only want to empower you to make wise decisions with your money.

Above all else, you need to soak up information and educate yourself so you know what your options are. I'm afraid its a bit of a responsibility that comes with the money you're receiving.

Best of luck to you. I pray that decades from now you'll look back on this as an opportunity you managed wisely and can be satisfied in the results.
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StormShadow
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Re: $2 million at a young age

Post by StormShadow »

Charlie307 wrote: Wed Jan 22, 2020 10:40 pm My family received a huge settlement after a loss in the family and a month from now I will be getting $2,100,000.
Firstly, I'm sorry for your loss.

For now, I recommend putting the money into a savings account and not doing anything else except perhaps pay off your credit card debt.

Take some time to clear your head and learn about investing. Bogleheads is a great place to start. You are among friends here. There is no rush. Do not let yourself get into a rush.

Most Bogleheads (myself included) are do-it-yourself folks. I don't pay for financial advice because I can essentially get all of it right here.
1. Eventually, I recommend a diversified investment approach. You will learn how to that easily by reading various posts in this site. The 3 fund approach is a popular one.
2. I recommend living below your means. This windfall could lead to financial independence, but only if you let it grow. Think about how would you behave/live if you didn't have this windfall? Honestly, that is how I would continue to live for now.

Good luck.
EddyB
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Re: $2 million at a young age

Post by EddyB »

JoeRetire wrote: Thu Jan 23, 2020 8:24 am
Charlie307 wrote: Wed Jan 22, 2020 10:40 pmI make about $18,000 a year working a part-time minimum-wage job.

My plan is to just live my life like normal and keep working my job and living in my apartment until my lease is up.
You plan to work a minimum wage part-time job for the rest of your life?
Didn’t we just see a thread in which several people longed for the carefree jobs of their youth?
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Re: $2 million at a young age

Post by fredflinstone »

You were wise to post to this Forum, and you have received excellent advice.

In short: don't rush into anything, don't talk to your friends about your windfall, pay off your credit card debt, buy a reliable lightly used car that costs less than $15000, be wary of financial advisors, live below your means, improve your career prospects, and learn as much as possible about Boglehead principles for investing.
Stocks 28 / Gold 23 / Long-term US treasuries 19 / Cash (mainly CDs) 22 / TIPS 8
Bobby206
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Re: $2 million at a young age

Post by Bobby206 »

This will be counter to most of the experts here I am sure but I would hire a financial planner (fee only or whatever) to actually monitor your money. I say this because young people and people not used to wealth are more apt to invest aggressively and spend recklessly. The best thing you can do is pretend you don't have the money. Literally just keep on living your life and don't touch the money. In 10 years you'll have a lot of money. You have potentially life changing money if you don't mess it up. If you think in terms of "only taking 1% for..." you'll spend it all because there will always be a new reason to spend another 1%. Most 22 year olds can use some hand holding with their money and that's ok. It would be a far bigger crime to wake up at 30 and have the money be gone due to bad investments or bad spending. There is a place and time for being a DIYer but I don't think you are at that place. I am sorry for your loss and good luck to you!
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Re: $2 million at a young age

Post by lgs88 »

Everything that's been said in this thread about managing a windfall is correct. HOWEVER -- there's an additional piece of the puzzle here.

You are 22 years old and working a minimum-wage job. Knock it off!!! Invest in yourself. What are your interests? Figure out the credential that'll allow you to capitalize on them. Keep the job for a while -- I think it's good to work and get an education at the same time -- but for God's sake, have a career plan.
merely an interested amateur
vm81
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Re: $2 million at a young age

Post by vm81 »

lgs88 wrote: Thu Jan 23, 2020 11:06 am Everything that's been said in this thread about managing a windfall is correct. HOWEVER -- there's an additional piece of the puzzle here.

You are 22 years old and working a minimum-wage job. Knock it off!!! Invest in yourself. What are your interests? Figure out the credential that'll allow you to capitalize on them. Keep the job for a while -- I think it's good to work and get an education at the same time -- but for God's sake, have a career plan.
This is a great advice
Freetime76
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Re: $2 million at a young age

Post by Freetime76 »

Sandtrap wrote: Thu Jan 23, 2020 9:40 am ...
3
The tendency is to think that we have a lot of time to do things, to think, to wait and cruise, especially at younger ages. Especially youth mixed with wealth. This is a myth.
So. Strive for wisdom. Strive for a "different path" than your peers (friends and everyone you know perhaps).
4
Two million sounds like it will last until you are 40, or 60 years of age. It will not in itself.
But, it can provide a means to be financially secure through higher education (professional degrees, education, etc), and give you time to do that and pursue a career path that is lucrative and fulfilling.
Pretend you don't have 2 million bucks.
Fore example: go to trade school, graduate, work as an electrician, get your certifications, buy a large used van, go in business for yourself, keep renting where you live and save money, grow your business.

Money buys you time and options. (choose wisely)
5
Money also buys you a change in lifestyle and life path.
Not more "things". Not more "fun" that can be bought. Not more "friends".

Actionably: stay on this forum, update your progress. There are many here that have been where you are and survived, and many that have not.

Example: Do you know how a $20 bill seems to disappear once it's broken? Do you know how a $100 bill seems to disappear once it's broken, even if it's just a dollar spent out of it?
...
Sandtrap is one of the many top tier folks to listen to on this forum.

Another good book is The Millionaire Next Door, by Dr. Thomas Stanley (or The Millionaire Mind). This work will show you that many people who look wealthy are not, and that the typical millionaire is not what you think.

I want to add: $2,000,000 is how much you would earn in 30 years if you made about 65K per year, after taxes... Not unheard of for a decent salary job or dual income household. Do most people who made that income have 2M sitting in the bank? No, they have credit cards, house payments, car payments or leases....my point is, you have to assume that *everybody* around you is an idiot (I say this tongue in cheek, with love for all :wink: ). You’re at a great age, as a young man, to dedicate some of your time to finding those very few, diamond-in-the-rough life mentors. You’ll make mistakes - we all need to, because experience is a great teacher - and good mentors can help you keep your learning experiences in the manageable, rather than catastrophic, zone.

ALSO... Please don’t assume that credentials or job titles equate to good advice. Investing/brokerage/banking people can be soooo helpful. Even with the best of intentions, the advice (likely?) won’t necessarily serve you best. Stay away from Edward Jones, and no “investments” at the local bank other than CDs. People mean well, BUT....I once had a Schwab guy learn we were selling a house, and we’d get “a lot” back (never mind the amount, just more than we make in many years of work). In cash. We needed places to park the money. I could hear the change in his tone and energy level over the phone. Before I could think, I was transferred to some other investment guy in their brokerage. He told me all the wonderful ways he could help, and how much experience he had and all his credentials. He could :D really help me, he says :D . It was all marketing schtick. So he took classes, whoopty-do. Do you know how long he had worked as an investment guy? A whopping 4 years. I should’ve asked what his net worth was.

Again, best wishes to you.
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Re: $2 million at a young age

Post by forgeblast »

If I had that it would have been a nightmare. I was not aware of bogleheads and it would have been a bad situation.
Look at how many people win the lottery and loose it all and more.
I would three fund it, and get the temptation locked away. That way when someone asks for a loan you can say you can't.

I will say this, Imagine waking up everyday at your age knowing your a millionaire. Any job you go to knowing you don't have to be there but you want to be there.

Work what ever job makes you happy, your retirement is covered. You want a low stress job take it. Because your future is provided for.
That would put a pep in my step, that would put a smile on my face every day I walked into work and when my investments hit what ever number you want them to, walk away and enjoy.

Just remember though if its burnt through, how hard every day going to work is going to feel knowing you had it made and spent it on "things".
I wish you all the best and hope you choose wisely :D
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Raymond
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Re: $2 million at a young age

Post by Raymond »

Only advice I would add is to keep your lips sealed. Obviously your family members know about the money - how about your girlfriend? Your friends?

If word gets around, you will suddenly become very popular, and may be asked for loans, gifts, or asked to pay for everything, because you're rich...

About the apartment building - what is your experience in real estate? I'd suggest you work in that area first before potentially dumping your money down a rathole - Sandtrap and others with real estate experience can help you here.
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Dottie57
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Re: $2 million at a young age

Post by Dottie57 »

Op,

If I were you, I would park the money in Vanguard VUSXX Treasury money market. Leave it there while you take the time and effort to learn about investing.

Do not talk about the money with anyone. If you do, people will look at you as a money tree ready to be picked. Don’t lend money. Don’t play the big shot. You want to be liked for yourself not your money.


Learn, learn, learn. Use this forum and the associated wiki.
Stormbringer
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Re: $2 million at a young age

Post by Stormbringer »

Personally, at age 22 I would just put it all in an S&P 500 index fund, and take just the dividends (which would be about 2% a year) as income. That would give you about $40K a year for life to supplement your employment income. Never touch the principal, and never look at the statement balance. Just enjoy the dividends.
"Compound interest is the most powerful force in the universe." - Albert Einstein
JHU ALmuni
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Re: $2 million at a young age

Post by JHU ALmuni »

OP,

Don't let anyone know about the money including your GF and closest friends. Just my .02
bugleheadd
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Re: $2 million at a young age

Post by bugleheadd »

Why not just put it all in vtsax since you're young and still have a few decades to let it grow?
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Re: $2 million at a young age

Post by Dottie57 »

djpeteski wrote: Thu Jan 23, 2020 9:58 am While the common wisdom is not to touch the money for a decent amount of time, I would spend $20,000:

Pay off the CC. At your current income level, I would not use credit cards. Only debit or cash. My advice is to cut up the credit card, or at least freeze it in a block of water.

Buy a car. I would pay cash for a car in the 10K to 15K range. No car loans, pay cash. No need to drive a beater.

Take Financial Peace University which will cost you about $100. Here you will learn the basics of personal finance including insurance, budgeting, and investing. While most of us on this forum would not agree with the specific investing advice, 90% of the course's content is invaluable.

Create an emergency fund of 5K or so. Put it in a high yield savings account, and only use it in case of an actual emergency. Christmas or vacations are not emergencies. Nor is most car repairs once you have a sinking fund built up. What is a sinking fund? You will learn about that in Financial Peace University.
I think this is reasonable. Make sure you have healthcare insurance.
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Ben Mathew
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Re: $2 million at a young age

Post by Ben Mathew »

- Don't invest in personal business projects--either your own ideas or those of your friends or family. This includes rental properties.

- Invest only in diversified low cost index funds. A three fund portfolio has everything you need.

- Consult a fee only advisor (not fee based) if you feel you need professional help.

- You probably can't live on $2.1 million for the rest of your life. Plan on a career.
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Re: $2 million at a young age

Post by fyre4ce »

Others have posted really good advice here, and it largely overlaps. I'll only add this:

The key to getting the most value out of this money is long-term thinking. Resisting the temptation to spend it, especially on things that don't have lasting value, is a big part of it. I would not spend "1%" on vacations or any other frivolities until you've taken a year and written a long-term plan. Paying off your credit card debt and getting a reliable sub-$10k car if your current car is unreliable are OK within a year, but little to nothing else. $2M is really not a lot of money. Most Bogleheads wouldn't retire at 65 with a net worth that size. At your age, you can only withdraw about 2.5-3% per year and expect it to last your lifetime - if you do everything right. That's $50-60k/year, or about a truck driver's salary - far from what most would consider luxurious. If you spend more than that, you'll be left right back where you are, filled with regret over the life you could have had.

You should take the next year to think about questions like - what kind of job would I like to have, and what kind of education do I need for that job? Where would I like to live? What would I like my life to be like outside of work? You're young - if you need more than a year to find good answers to these questions, so be it. Then, plan on spending at least 5-10 years putting that plan into action. Your job/income is the most glaring item that can be improved. Think carefully about what kind of job you'd enjoy doing 5 days a week for the next 40 years, hopefully one with a higher income than you have now. It doesn't necessarily have to be some high-income field like medicine or law, but something that will maximize your long-term qualify of life. Also make sure to invest in your health along the way.

Getting ongoing support is a key to having a good outcome for yourself. I like the idea of getting help from a fee-only fiduciary financial advisor. Please some back to the BH boards and keep us updated, and ask any questions that come up. The statistics are not in your favor, but you're already ahead of the curve by asking for help from the right resources.
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Re: $2 million at a young age

Post by BolderBoy »

Dottie57 wrote: Thu Jan 23, 2020 12:18 pmIf I were you, I would park the money in Vanguard VUSXX Treasury money market. Leave it there while you take the time and effort to learn about investing.

Do not talk about the money with anyone. If you do, people will look at you as a money tree ready to be picked. Don’t lend money. Don’t play the big shot. You want to be liked for yourself not your money.


Learn, learn, learn. Use this forum and the associated wiki.
+1000. Of everything I've read above, I like this advice the most. You can set up the VUSXX to transfer the monthly interest payments directly to your local bank checking account. Don't forget that you'll need to pay taxes on the interest, so set some aside for that.

Go slow. Ask us for assistance.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
howtohowto
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Re: $2 million at a young age

Post by howtohowto »

At your age, investing in yourself is the best investment you will ever make in your life.
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FelixTheCat
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Re: $2 million at a young age

Post by FelixTheCat »

Investing in the three fund portfolio is a very easy task. I know a lot of people have commented on it.

Here's an alternative: Vanguard's Personal Advisor Services. https://investor.vanguard.com/advice/personal-advisor
Felix is a wonderful, wonderful cat.
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JoeRetire
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Re: $2 million at a young age

Post by JoeRetire »

EddyB wrote: Thu Jan 23, 2020 10:45 am
JoeRetire wrote: Thu Jan 23, 2020 8:24 am
Charlie307 wrote: Wed Jan 22, 2020 10:40 pmI make about $18,000 a year working a part-time minimum-wage job.

My plan is to just live my life like normal and keep working my job and living in my apartment until my lease is up.
You plan to work a minimum wage part-time job for the rest of your life?
Didn’t we just see a thread in which several people longed for the carefree jobs of their youth?
I didn't see it.

I can imagine that some folks who have worked a long, stressful career might wish to do something less stressful after becoming financially independent rather than simply retiring outright.

I'm not sure that applies here.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
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Charlie307
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Re: $2 million at a young age

Post by Charlie307 »

Wow! I did not expect to see so many responses! Thank you all so much for your friendly advice and information.

Some additional information about me: I do have 3 semesters of college education. I dropped out because I felt depressed there. I'm currently working a job as a budtender at a marijuana dispensary and I really do love working there. I don't mind working at minimum wage at the moment because it's a very carefree job and in a low-stress environment. My plans for the future were to go to save up for a trade school and to learn how to become a welder or an electrician. I could still see myself pursuing that route. At the end of the day though all I really want is to live in a decent house, insure my future kids don't grow up broke, and travel occasionally.

As for my girlfriend, she moved in with me when I was still sleeping on an air mattress on the floor, we've learned to be frugal (no eating out, home cooked meals only). She is far from materialistic and is such a good-hearted person. She helped me out when I needed rent money, made me countless drawings and gift, and has always offered to do stuff for me (make me food, wash dishes, bring lunch to me at work, etc.). I did tell her about the money recently and she has been very level-headed about it, even suggesting we sign a prenup if we decide to get married. I genuinely feel like we're soul-mates. I don't see us getting married for at least a year. I read a suggestion that we shouldn't marry for at least 10 years but that seems a bit excessive to me, especially because I'd like to have kids before I'm 30.

I could be extremely naive about her and about relationships in general, but I don't think she is the type of person who would try to sabotage me. No one else knows about this money besides her.

I realize how easily I can lose all $2 million. After reading the replies I understand that investing into real estate is a bad idea for me right now as I have no reality experience. I like the idea of investing in stocks/bonds, my only worry is that the market crashes and I lose a significant amount of money in a short span of time. While the advice about personal advisors has been mostly to stay away from them, I think consulting a few fee-only personal financers would be a good idea for me in the beginning.

Based on all of your replies I think I will take out $20,000, pay off the credit card/close that account, buy a reliable car for under $15,000, and set up a $5,000 emergency fund in a savings account. The rest I will dump in both CDs and vanguard index funds. I'll leave it there for a year while I learn more and talk to more people with this kind of experience. After the year is up I will decide to either keep the money where it is or invest elsewhere.

If this idea has any major holes I am more than willing to change it.

I feel nervous about all of this, and knowing how the money got here makes me feel uncomfortable about using it for 'fun'. I'm still dealing with the loss and I don't think I'll ever get over it.

I really appreciate all of yall's help and I'll keep reading the forum and ask for future advice. Thank you all so much!
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StormShadow
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Re: $2 million at a young age

Post by StormShadow »

Charlie307 wrote: Thu Jan 23, 2020 1:45 pm Based on all of your replies I think I will take out $20,000, pay off the credit card/close that account, buy a reliable car for under $15,000, and set up a $5,000 emergency fund in a savings account. The rest I will dump in both CDs and vanguard index funds. I'll leave it there for a year while I learn more and talk to more people with this kind of experience. After the year is up I will decide to either keep the money where it is or invest elsewhere.

If this idea has any major holes I am more than willing to change it.
I wouldn't dump into the Vanguard index funds until you have a good grasp of what your risk tolerance is and desired asset allocation. Only then would I set up your portfolio with mutual funds (including index funds) and bond funds. I think CD's is a fine alternative to savings account for now.
Charlie307 wrote: Thu Jan 23, 2020 1:45 pmI'm still dealing with the loss and I don't think I'll ever get over it.
Please do not ignore this. I suggest following up with your primary care provider.
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