
Ask HN: What would you do with $1M cash? - teamleadnew
Here is a quick background. I live in the Bay Area, I&#x27;m a software engineer so I have a 9-5 job. I hate that life&#x2F;setup and I always wanted to work for myself with no boss. I will have about $1 - 1.1 million cash coming in from a family trust. I&#x27;m all about working hard and building things by myself, so I&#x27;m not proud about that trust money... I&#x27;m seing it as a huge opportunity for me to transition to my ideal life, no debts, no boss. I do have a wife and a baby to take care of and ideally we would want our own house.<p>So, my idea is to move out of the Bay in a cheaper place, where we would buy a descent house for about $500k cash. No mortgage, we would pay-off our car loans (about $40k) in order to completely get out of debts. Now, with about $500k left I was thinking I should keep about $100k in a savings account as a buffer. Then I&#x27;d like to invest the rest ($400k) for my future retirement. The missing part is generating an income by myself to pay the remaining bills, etc. But with such a setup, I feel super lucky to give it a shot.<p>What would you guys do in my case? Is this the right approach to get out of my 9-5 job while taking care of the rest?
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DoreenMichele
Spending half on a house is not a great way to establish your independence.

There is a rule of thumb in finance: "Easy come, easy go."

You should pay off your car loans and then sit on the rest of the money for
six months while trying to make these plans _with your spouse_ rather than
with a bunch of internet strangers. It is psychologically much harder to spend
the money if you hold it a few months.

If you don't know how to be your own boss without a million in assets, it
won't magically come to you just because you inherited money. With a well
established expensive lifestyle like you clearly have and immediately spending
half on a house, plus $40k on your car loans, you won't have as much
maneuvering room as you think.

You should be asking questions about whatever business ideas you have and how
to make those work. You should be researching where you can live comfortably
without needing to spend a half mill on a house.

~~~
teamleadnew
Then why would spending $500k impact my 9-5 independence? I'm not linking the
two. It's more about satisfying short terms needs like getting a house for my
family then getting out of debts quickly. I think it's 2 different things. A
lot of people here say you should become independent without any extra money.
I agree, how about using that extra money to do what I would do by making a
lot of money on my own? If I create a business and generate $1 million, I'd
certainly buy a house. Again, I want to use this money to make myself focused
100%. Think of it as luxury money in the sense that I wouldn't have to worry
about anything but my own project.

~~~
DoreenMichele
There are two ways to increase your runway:

1\. Lower expenses.

2\. Increase income.

You haven't talked about your business aspirations. Maybe you will be
profitable from the word of go and this is a nit. I only know what info you
have posted here.

Based on what info you have posted here, I assume you will need to figure out
how to make money. Being successful at a 9 to 5 job doesn't guarantee
entrepreneurial success.

An expensive house will come with higher property taxes, higher insurance
costs and higher maintenance costs. A larger house will tend to soak up money
for more furnishings etc.

Paying cash for a house doesn't have you living Scot free in terms of housing
costs. It does substantially reduce carrying costs, but doesn't eliminate
them.

You are talking about immediately spending $500k on a house, $40k on car loans
and incurring moving costs. This leaves you with well under $500k to live on.

You don't sound like the type who can live on a shoestring budget. A half
million for a single family home is an unimaginable figure for me. If I had
that kind of money right now, I would likely buy two or three buildings,
renovate them, live in one and become a landlord and still have money
leftover.

I've read a lot of financial articles over the years. Two thirds of lottery
winners are bankrupt within 5 years. I think one reason for that is that most
people are either in earning more or in consuming mode and quitting gives you
vastly more time to spend money while not earning. Keeping yourself
entertained on the cheap is not what they envisioned.

You can do whatever you want. It's your money and your life. I merely made a
good faith effort to answer the question. If my answer is not your cup of tea,
well, you didn't pay for this advice. So it's fine if it is worth to you
exactly as much as you paid for it.

Best of luck in your endeavors.

~~~
teamleadnew
1\. that's exactly what I said I would do by paying off all my debts. This is
a life with no debts. zero loan, no mortgages. Plus, like I said, I would
still have enough cash on the side (about half a million) so I wouldn't have
to worry about saving a dollar anymore. That 9-5 steady income would become
like a plus rather than a necessity like 99% of the world.

2\. That's not a short term goal. I don't care about increasing my income
right away. I'm already making enough money as a software engineer working in
the Bay Area. I don't need more money technically speaking. Problem is, I
can't work at a 9-5 job anymore. Why would someone work at a 9-5 job? To pay
bills? To buy a car? To buy a house? To have a steady income, etc. Like I
said, I'd use that money to make my 9-5 job as obsolete as possible for a
smooth transition to generating money on my own.

Where I live (Bay Area), $500k gets you a one car garage. I don't necessarily
want to live in a place where schools aren't that great and where there's no
opportunities. I'm not talking about living a luxurious life in San Francisco,
but looking at places in Texas, Washington state and any other tech hubs,
$500k gets you a house. Not a mansion. Not willing to move to Nebraska yet or
Wisconsin... nothing against these 2 beautiful states but again, it's about
opportunities for us and our kids. I said $500k which is my original budget,
it depends on where my wife and I decides to move. Again, today, I make about
$200k/year and I don't own a house. If I spend $500k in a house tomorrow, it
ain't gonna change anything but the fact that I own a house outright. You see
where I'm going? It's not about not being smart or not knowing how to manage
money... nothing to do with a lottery winner like you said. This is pure extra
money to me. Should I put it in a bank account and not touch it for the next
10 years? Worst investment ever... real estate will bring way more money than
waiting for the FED to print out more papers. $500k US paper dollars will be
worth $250k in 10 years. I already have various investments, crypto, bonds,
index funds.

Also, as a home owner you have what it's called tax itemization. $24k/year if
you don't itemize. A house that is paid off would cost me less than a rental.
Keep that in mind. People are used to think that buying a house puts you in
debts for life. It won't be the case since I would buy the house cash and
still be making enough money per year. It's all about that transition from my
9-5 job to a fully autonomous business. If I fail with my project, I won't go
bankrupt thanks to being out of debts with half a milli on the side. working
at mcdonald's would be enough for me to end up positive at the end of the
month.

~~~
DoreenMichele
If you are going to keep your 9 to 5 job, coolios. Enjoy house hunting.

But I am responding to your assertion that you plan to quit:

 _I 'm seing it as a huge opportunity for me to transition to my ideal life,
no debts, no boss.

The missing part is generating an income by myself to pay the remaining bills,
etc._

It sounds to me like you are getting incredibly worked up about what I've said
and offended and I don't understand that at all. So, I regret replying at all
and enjoy your inheritance.

~~~
teamleadnew
Not offended at all. I just found your answer to be a little to
"standard/cliché" and not targeted enough. Like putting someone in a bucket
right away. It's not the case trust me... I'm better than that ;) Thanks again
for taking time to post an answer. Really appreciated.

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dman
I would refrain from buying the house until 2-3 years into the transition and
after you reach a point where you are cash flow positive in your new life.
Ditto about the car loans if they are low interest rate ( < 3%). In short put
the 1M aside and try to do the switch as if you did not have the money. You
should be able to make the switch without the $1M subsidizing the switch
(except for subsidizing your monthly cashflow for the first year or so).

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AnimalMuppet
In _my_ circumstances, I'd pay off my house, replace one of the cars, and pay
off my kids' student loans. I'd put the rest into a retirement fund, and see
if I had enough to retire now.

In _your_ circumstances, I wouldn't pay $500K for a house. Out here, $500K
doesn't get you a "decent house", it gets you a mansion. You, your wife, and
your baby probably don't need 5000 square feet of house. (Seriously, $500K can
get you that. And seriously, don't do it - it's a huge waste.)

The other part that bugs me about what you propose is that "I want to work for
myself", "no boss", "I feel super lucky to give it a shot" is not a plan. You
can waste a lot of time and money trying to figure this out - certainly you
can burn through $100K. It's far better to have a realistic plan before you
start, even if you don't have all the details figured out yet.

~~~
teamleadnew
I have a couple of side projects I'd like to explore more. The problem I have
is that my 9-5 job that utilizes most of my brain everyday. I come back home
mentally exhausted then here is the baby.

I agree with you on the $500k. That is just the idea, it doesn't have to be
that much and will depends on where we decide to move. Definitely not looking
for a mansion :)

So setting myself up to where I could free-up most of my time would help a lot
in this transition to no boss-life. Plus, most of my projects do not require
any crazy investments, we're talking hundreds of dollars. It's just about
paying the bills for the house, gas, food, etc. while getting up and running
with a business/income.

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metabagel
Invest the money somewhat conservatively and keep working. You're almost
guaranteed to be able to retire early, which is something that few people can
say.

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kp1
Are you taxed on that money? Get a cheaper house .Why 500k? Talk to a
Financial adviser.

~~~
teamleadnew
This is after tax money. Financial advisers are like car salesmen unless
you're extremely rich. I'm already taking care of my investment portfolio
(bonds, index funds, etc.). What they're gonna say is "double down", "increase
your position". 500k because I'm aiming for places like Seattle, Austin,
Denver, etc. Still looking to stay around a tech hub that is still cheaper
than the Bay Area.

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anoncoward111
Put it in something that will reliably pay you a certain amount of money for
the rest of your life

~~~
resource0x
Reliably? What kind of investment pays anything reliably? You can't get 3%
from gov-t bonds, but if inflation picks up, you are in trouble. That's the
whole point: there's nothing reliable, except death and taxes :)

~~~
anoncoward111
I would suggest an annuity if OP is planning on living for a very long time
and the money was completely unexpected. An extra $1000 a month guaranteed is
pretty compelling. Sure you could maybe make $2000 a month from mutual funds
or something, but it wouldn't be a stress free, steady rate of payments. It
would boom and bust with market cycles

