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Ask HN: What did you do when you suddenly got rich?
248 points by ThrowHitJackpot 29 days ago | hide | past | web | favorite | 183 comments
My company just went through a transaction that increased my net worth by >$5M.

When this happened to you - what did you do? How did you handle it? What did you buy and what kind of financial planning/investments did you make?




- Maxed out insurance (home, car)

- Set aside a large amount for taxes, invested it in US Treasury Bond (get an estimate of your taxes from an accountant)

- Got an accountant

- Read up on QSBS (this can save you a lot of money if you got stock when the company was small enough)

- Got a last will and testament drafted and signed. Also asked our probate lawyer about stupid things people do with money, so as to avoid those mistakes.

- Got a financial planner. Also asked about stupid things people do. (At your scale, probably ok to just do standard ETFs and bonds. Note that don't buy in all at once, diversify not just the investments but also by time, so you're not buying all into the stock market at once. This also gives you time to think and reflect about how you want to use your money and what legacy you want, while also getting some returns on investments)

- Set up a donor advised fund (you can donate stock directly to one and get a big tax break)

- Made a donation and got something cool named after two of my long time mentors

- Read book Silver Spoon Kids on how to talk to one's children about money (our financial advisor gave this to us)

- Read a lot about wealth and power in the United States, in particular sociologist and psychologist William Domhoff's "Who Rules America?" https://whorulesamerica.ucsc.edu/power/wealth.html (I stumbled on this by accident, but found it a fascinating read)

Time is on your side here, so don't rush into anything. I was really lucky to have a brother who already had high net worth, so he was able to give a lot of guidance and discussion of tradeoffs.


> Maxed out insurance (home, car)

This isn't a problem I'm ever likely to deal with, but what was the thinking behind this one? I'd have thought >$1 mil in net worth is the time to cancel any insurance you have (maybe not health) on the basis that you can self insure now.


Definitely not. You want to insure against catastrophes as they can wipe out all your assets. This includes regular insurance (home, auto, health) and personal liability insurance AKA umbrella up to the value of your assets. If you hurt someone, the victim could seek large damages if they realize you are wealthy. Liability insurance can protect you against that.


But you can afford to replace your assets if a catastrophe strikes. Insurance won't help you if you die in a car accident, so you are taking out a negative-net-expected-value deal that protects you against a very slim selection of catastrophes. In my experience, probably protecting from risks that are less likely than dropping dead at random one day.

And taking the risk that the insurance company won't pay out for some reason. And creating more paperwork and recurring expenses to keep track of. $5 mil is a lot but it isn't enough to take eyes off expenses.


If you drive without insurance, hit someone, and kill or severely injure them, you will almost certainly lose most if not all of your assets in the subsequent lawsuit.

If you have a house and it burns down in a fire, you will spend hundreds of thousands of dollars or more replacing it.

If you get rid of health insurance, there is enormous potential downside risk.

If someone is on your property and injures themselves or you accidentally harm someone, they can sue you for millions.

Insuring against all of this and more is almost certainly under 1000 per year. That is a trivial expense for someone with that much money. Even shit ROI on a portfolio is yielding at least a hundred thousand per year in growth assuming this person no longer works. The more money you have, the more insurance you want because you have far more to lose.


> Insuring against all of this is almost certainly under 1000 per year.

Um, no.

Average auto insurance premium is $1,470/yr. [0]

Average homeowners insurance is $1,130/yr. [1]

Average health insurance (in 2018, probably more now), was $440/mo., Or $5,280/yr. [2] (And average health insurance will leave a lot of exposure to costs, so you still have a lot of downside risk at that price.)

The idea that you could almost certainly insure against all of that for under $1,000/yr is...wildly inaccurate.

[0] https://www.thezebra.com/auto-insurance/average-auto-insuran...

[1] https://www.creditdonkey.com/average-cost-homeowners-insuran...

[2] https://www.ehealthinsurance.com/resources/affordable-care-a...


I concur with your statements. My guess is the poster accidentally omitted a zero, and likely meant $10k.


At 5M+ it doesn't really matter if you pay $1000 or $10000 for insurance.


Being indifferent to a recurring unnecessary 9k annual expense is roughly being indifferent to 9000 / +4% * 5m) = 4.5% loss of income from investments. If you're indifferent to too many decisions of this form, it's a good way to solve the problem of figuring out how to manage your assets


Unless you're in the US in which case just your health insurance could cost you $1000+ per MONTH.


...and that's if you never use it. If you actually need health care, prepare to shell out about another $5-$10k until you hit your annual out of pocket maximum.


>If someone is on your property and injures themselves or you accidentally harm someone, they can sue you for millions.

That was a bit of stretch, no? I agree with the other points.


It really isn’t. I’m an advisor and work almost exclusively with clients who have $10mm or more. At that point if you get in an accident or hurt someone and someone finds out that you’re wealthy, there is a reasonable chance they will come after you. I’ve seen it happen and heard it anecdotally.

A $5mm umbrella policy with one of the best insurance companies in the US is like $500/year. I just went out and got a quote on it last week. The best part is if that were to happen, the person suing will have to go up against the insurance company’s lawyers, who are most likely very good.

Even if the probability of that happening was in the low single digits, would you really want to run the risk over $500/yr?


> That was a bit of stretch, no?

No, healthcare costs plus lost wages and other damages for injuries can get into the millions quite easily, and slip and fall injuries are a real legal liability of property owners.


Do not underestimate the value of umbrella coverage. Cheap to get. Expensive to ignore.


$1M liability with car/home insurance is less than $500. Anyone with a 401k should have it.

If you end up in a bad situation, getting liquid enough to pay out a big judgement will kill you with taxes.


> But you can afford to replace your assets if a catastrophe strikes

No, you can't, unless your income is large compared to your assets and not dependent on them.


The point of insurance is to protect your wealth in an accident. You actually buy more insurance as your wealth increases, at least I do.


In my opinion the point of insurance is protect your assets you can't afford to lose. Most people cant afford to risk losing their house so they have insurance. However, if you are wealthy enough and can afford losing it then it's statistically cheaper to not insure it since you are not giving a cut to the insurer.


People with wealth are targeted by scammers who file fraudulent claims against them. These fall under the liability portion of your insurance.

It's not about the house or car, it's about that $10MM in your bank people want to go after by claiming that you tripped them and they broke their back.


It's absolutely not about the replacement cost of stuff. It's about protecting your assets from lawsuits.


Insurance makes lawsuits against property it covers -- more likely, because insurance increases chances of plaintiff to get paid.


Indeed, for example, mandatory auto insurance in my state is primarily to cover liability.


Deep pockets make you an attractive target for lawsuits.


Because you're a larger, more profitable, target if you're found at fault.


So your theory is that slightly wealthy people do not have insurance policies?


Agreed, insurance is a tax on the poor.


The part about not buying into the market all at once as wrong and has been known to be wrong for decades.

Several studies to that effect are linked from the Wikipedia page on dollar cost averaging.


You misread. The advice was to invest over time to get used to the idea, so by the time it’s all invested, they are comfortable with and calm about that size of investment.


No. That was the secondary reason given in the next sentence, not the main reason.


You’ve misread.

“Note that don't buy in all at once, diversify not just the investments but also by time, so you're not buying all into the stock market at once.”

This is the recommendation.

This also gives you time to think and reflect about how you want to use your money and what legacy you want,”

This is the main reason, comfort/acclimation.

“while also getting some returns on investments”

This is saying you’ll get better returns than cash, so the price of structuring your investment for comfort will be somewhat mitigated. It’s not advising DCA or suggesting outperformance of or parity with investing everything up front.


Diversifying by time is DCA.

If it was the main reason it wouldn't be "also".


I disagree with you: You're talking about what happens under a rational behavior.

If you get a lot of money suddenly, that's not the case. If you invest it all at once in the market, and get by chance high returns quickly, you could start gambing (investing) very quickly.


that sounds like its own problem to address, not a reason to avoid investing your money.


what's the point in diversifying in time if one believes one cant time the market. the only point i see is "piece of mind" in case the market tanks you wont feel so bad.

If one believes

a) one can't time the market b) the market (as a whole) trends up over time

doesn't this means that on average the best time to invest money is as soon as you can (of course there are other reasons to take you time, but I don't see how "diversifying by time" is a good reason as it would seem to imply market timing)


It is because if you can't time the market you don't know whether you are in a slump or in a rally. If you stretch your investment in time you partially avoid a possible crash after a rally when you got in just before the crash.


On the order of 25+ years I don't see why this would make much of a difference. See Bob, the world's worst market timer: https://awealthofcommonsense.com/2014/02/worlds-worst-market...


I really enjoy your point :-) but I see things differently. I think stretching your investment means you learn about how markets and investment really works because you will make a lot of mistakes during a period of time.

Rushing into market means you will make less mistakes, but bigger ones.


I like this observation that you can take time to ease into it. A lot of the risks of investing passively are really on the individual and the right mental approach is extremely important too.


> "piece of mind"

Small typo, I guess you meant "peace of mind".


yes, need to stop trying to write after midnight


Umbrella Policy if you live in California.


Thank you! This is quite good detail. I especially appreciate that you told me what you did - versus what I should do :-)

Insurance is maxed out. Agree that putting tax money in super safe savings method is good.

Got an accountant, not sure it's the right one but not a bad one.

Working on trust and all associated works.

Interviewing various RIAs. Not sure about DAF - I get it but may wait to donate money.

Great book recommendations!

The only question I have for you and others is - what about diversifying? Details on my 'wealth increase' is that company illiquid stock turned into liquid stock; so did you focus on diversifying or patience?


So weird I disagree with everything listed there. Just invest in the SP500 and don’t spent money on BS.


that is what everyone is basically saying...


Standard advice:

- Set aside money to pay taxes FIRST.

- Invest in mostly conservative instruments, as if you were a retiree.

- Keep a small position in risky stuff to capture some growth and get it out of your system.

- Diversify

- Keep quiet about it, don't get talked into crazy investment schemes. Think "old money" rather than "new money."

- Treat yourself a bit, recognize when you've hit "enough." i.e. more doesn't bring happiness. The number is lower than most realize.

- Remember mom, and others instrumental in your success. Everyone else can apply to your scholarship foundation, haha.

If your expenses are "reasonable" you could live off interest/dividends for the rest of your life. Donating time and charity to whatever causes you see fit.


Agree re: put money away for taxes - I've made the mistake of not doing that in the past and it leads to more problems.

As for conservative - general plan is to put enough money into 3-fund portfolio to be 'set for life' - then be a bit more aggressive with the rest. Agree with diversify. Keeping quiet is good - agree re: think like old money.

I do need to figure out how to treat a bit. Today we decided to splurge on $120/visit weekly housekeeping - too extravagant?

I plan to work for the next 30 years because I like it. I'm around 40 - but we'll see how it all goes.


> too extravagant?

Doesn't sound too bad if you've got millions. Those little things add up though in the long term. Just ask MC Hammer. ;-)


Most people who get a lot of money all at once blow through it in 7 years. There are many broke lottery winners and NFL players.

$5M is not rich today. $5m is a lifetime of moderate income if you're really careful.

The classic advice was that you could spend 4% of your net worth per year. Today, it's probably only 3%. Yields are lower.

You don't have to do anything immediately. You can park it in T-bills, brokered CDs up to the FDIC limit, and big index funds.

Any investment where they call you is lousy. If it was any good, it wouldn't have paid marketers.

Avoid financial advisers who want you to trade a lot. Trading for individual investors is, overall, a lose.

Don't buy a restaurant.


A 3% yield on $5MM is $150k/year forever. Most people would consider that more than a "modest" income. Especially when you don't have to work and can live in a low COL area.


The 4% rule also only applies to people at retirement age => death (i.e. 30-40 years). If OP is only 20-30, that's not going to be guaranteed to work, you probably want to think 2.5-3%, though also keep in mind that your taxes when living off of capital gains / dividends (at least in the US) are going to be way lower - if you do it Right you probably will pay less than 5% federal taxes (CA state is a different story, though you can always move)


It also assumes that you're not going to bring in any more income for the rest of your life too. While the OP could retire and live on a beach somewhere for the rest of his life... By the nature of being someone who posts on HN, I'm betting that that's not the case.


> Don't buy a restaurant.

This is actually the BEST advice I have ever seen, and it works exactly like the (as well very good) advice before it, just like "where they call you is lousy", running a restaurant is a profession (that few people are able to do successfully) do you really believe that you can actually find these people (outside their own successful restaurant)?


This:

"Any investment where they call you is lousy. If it was any good, it wouldn't have paid marketers. Avoid financial advisers who want you to trade a lot."


> Don't buy a restaurant.

This is probably great advice, and falls into the important category of: avoid the worst mistakes that most suddenly-rich people make.


Agree re restaurant = bad.

Agree $5M isn't rich. But I make fairly good money and live in a moderate LCOL, so with good continual salary plus this (which is quite a bit more than $5M actually) it should be good.

Agree trading a lot is stupid - and more so on the restaurant.


I'm guessing the restaurant thing refers to a personal mistake?

In general investing significant money in a business you do not understand is a pure gamble at best.


No, just classic advice. I was once asked to invest in a restaurant, though. I said no.


> Don't buy a restaurant.

I'm curious about this. Could you please explain more?


I almost bought a restaurant. Even the good ones like McDonald's aren't great. They're a lot of hard work to keep alive, very low profit margins, easily influenced by little things like 6% tax.

It's the kind of thing you put half a million dollars into and earns about $10k/month on average, loses $10k/month on a bad month, and teases you with the possibility of making $100k/month on paper.

It also requires a lot of accounting and dealing with minimum wage workers who have to be trained in basic etiquette, like not sleeping during rush hour and not throwing drinks at rude customers. Which is not really the niche for many of us.


I would respectfully disagree on the categorizing of McDonald's as "restaurant" (let alone "good").


I suspect muzani was referring to it as an investment vehicle, not a rating on the food.

How often do you see a McDonalds closing for good?


>I suspect muzani was referring to it as an investment vehicle, not a rating on the food.

>How often do you see a McDonalds closing for good?

Ow, come on, he posted:

>I almost bought a restaurant. Even the good ones like McDonald's aren't great.

It can be read both ways, one of which sounds (to me at least) funny.

However if we are going to be picky, a McDonalds (or better a McDonalds you can actually buy) is a franchise:

https://en.wikipedia.org/wiki/Franchising

and whilst McDonalds (the parent company) isn't going to close for good, I know people that managed to lose money attempting to run similar franchises.

In such a setup, all the technology, the supplies and the marketing (besides quality standards and training of personnel) come from the franchisor, so the "added value" by the franchisee is relatively low, and compensated accordingly.

Some data (maybe accurate, maybe not):

https://work.chron.com/average-income-fast-food-franchise-ow...


I meant "restaurant" as a system that converts raw food into money.

McDonald's, franchise or not, counts. Though to my understanding, they're not doing the franchise model as much anymore and are managing it themselves instead.

The linked article supports my view and is actually a little more profitable than expected. It quotes 20% net profit, which is amazing when most of the restaurants I see make close to 0% net profit.

Franchises add quite a lot of value. The hardest things in running a restaurant are marketing, product development & training, and supply chain. They supply all of these. If you want 'passive' income, franchises are the the closest thing to it.


>Franchises add quite a lot of value. The hardest things in running a restaurant are marketing, product development & training, and supply chain. They supply all of these. If you want 'passive' income, franchises are the the closest thing to it.

Yep, the whole point is that "they" decide (and can calculate at the third decimal point, remember it is "their" business and "they" have decades of experience in it) how much is what you bring home.

A "franchise" is also the closest thing to being between a rock and a hard place, you have more or less fixed prices (sale prices) and fixed (by them) costs, the only variables you can somehow manage is volume of sales (and it depends mostly or more than anything else on location) and personnel costs (which is anyway in most countries regulated by Law).


Restaurants are notorious for failing. Even ones that are always full of customers can still lose money.


Three classic disaster stories: https://news.ycombinator.com/item?id=15658437 https://news.ycombinator.com/item?id=15439346 and https://news.ycombinator.com/item?id=12521045

From the last:

>And while I am not dumb enough to have imagined I’d make much money as a passive, partial investor in a New York City restaurant, I was dumb enough to think that I could probably earn my money back-ish, while at the same time helping some decent young men fulfill their dream. (Also, it seemed more fun than investing in a municipal-bond mutual fund, which cannot, thanks to the killjoys at the S.E.C., give investors free beers.) But of the many failures of logic and foresight of that investment, which I made in 2010, the one that stings the most is not realizing that so few restaurants in New York make money precisely because too many restaurants in New York have investors like me.

>That business, more or less, stinks. New York restaurants are at the intersection of the low-margin world of food businesses like grocery stores (low margin because so many compete in the all-out war to sell food) and taste-predicting nobody-knows-anything businesses like Hollywood. I spoke to one of the two owners of the restaurant, who wished to remain anonymous in case he decided to keep his hand in the restaurant business. He provided me with the Manhattan math, from the seven-year profit-and-loss statement. If you as a customer generated a hundred-dollar tab, about thirty-seven dollars went to the staff (plus the twenty or so dollars you tipped); twenty-nine dollars went to buying the food and beverages that became your meal; fifteen dollars went to the landlord; six dollars went for supplies (such as new forks) and maintenance (hello, plumber); five dollars went to bank fees, insurance, and workers’ comp; five dollars went to other costs (utilities, permits); and just under three dollars (two dollars and eighty cents, to be exact) was left over for operating income. For the record, that is less than was paid in credit-card fees.

[...]

>Yet I’ve come to conclude that the restaurants New York needs are doomed, financially, to fail. That’s because amateur capital backed by magical thinking and a desire for fun distorts the economics for everyone. New restaurants, with too-easy access to financing from people like me, invest too much in design, tableware, food, and service, driving up every customer’s expectations of every restaurant in a cyclone of unprofitability. Landlords, with enough dreamers to fill their spaces, can command nightmare rents. If restaurants had to be good business ideas, and attract sophisticated investors who mercilessly demanded a profit, there would be fewer restaurants. They would be less cool. The food would be less good.


does a taco truck apply to the dont buy a restaurant rule?


I'm not rich, but I'd think that if that's just your keeping-busy hobby it seems like a relatively cheap one. You could save for not that long from just the 3%/yr, buy something used, fix it up yourself maybe paying a little here and there for things you can't do, come out cheap enough that you can make most of your money back and without ever touching your savings/investments.

I think it's more about avoiding investing in probably-doomed but romantic businesses that'll cut into your principal.


i did mean it in a "its ok if it operates at no profit or a slight loss because its a hobby to entertain me" sort of way.


I'd think anything cheap enough to fit in what you're treating as your annual % income budget's basically fine. You won't ruin yourself or significantly harm even a modest fortune with it. More like "don't invest any part of your principal in a restaurant, it will very probably fail, but only after you've thrown even more good money after bad and suddenly you're 20-30% less rich for no good reason".

An ice cream stand or a taco truck or whatever, those are cheap enough you can get them off the ground without touching your savings given even a "modest" (call it) $100-120K after-tax income, provided you have some patience (to save a while for the big expenses rather than pulling it straight out of investment principal) and are doing a lot of the work yourself (which is the point, if it's a hobby, I'd think). Any money it makes is strictly a bonus.


A majority of American millionaires do not think they are wealthy. In fact...


- Paid off the mortgage - Bought another section, built an ideal house on that over a couple of years - Went to Disney World, took the nieces and nephews to Disneyland (yeah, I'm still cheap) - Sent mum to the UK for a holiday

10/10 would slave away at a startup again (actually that's a lie, once was enough). We didn't owe any money other than the original mortgage, so there wasn't really anything else pressing to spend it on. Already owned a number of guns, motorcycles, and a basic sports car. No real plans to spend the rest, it's in the bank/bonds.

Basically I'm still living the life I always have, I just have a giant workshop now in which to play with my toys and pursue my hobbies. I think if this had happened 15 to 20 years earlier in my life, I'd be looking at things differently, but at this point I just plan to retire a bit earlier than I would have and not change much else. My father was also very savvy financially, I suspect he would have some pertinent ideas.

I now work for a small company as an integral cog in a relatively low pressure environment. I get to build things every day, come and go as I please, and my contributions are respected and valued. It's lovely :-)


Paying the mortgage is usually a bad idea. Assuming we are taking about the US, mortgage interests are tax deductible up to 750k (there are also deductions in most other countries), you already paid the mortgage origination fee, and usually you pay an interest rate that is not too high (if it is, you should consider renegotiating your mortgage, rather than paying it off).


From a pure math perspective, sure. But clearing the mental weight of a mortgage off your list of liabilities has value in itself to a lot of people.


I probably won't pay off the mortgage as the interest rate is 3% and I think I can probably get better return in the market.

Startup is a neat idea. Agree re: banks/bonds.

I like your approach - keep on doing what it means to be happy, and work in a good environment with people you like and who like you. Good for you!


A couple years ago I came into about $200M (seriously), and let slip more than I should.

Really it just turns every conversation into a roundabout request for money. People are definitely nice to you and ask you onto all kinds of boards, funds, etc.. but it’s a hassle. You start to worry a little bit at least about personal security, especially if you have kids. You also worry about ruining them forever. (Also, watch out for temptation that could ruin your happy family life... suddenly you’re extra “attractive” it seems.)

On the bright side, you can try and get really big projects done, Elon musk-style. Just knowing you have the money helps a lot in getting meetings, raising more money, etc.

I’d just put it all in an s+p 500 index fund. Though of course I haven’t followed my own advice. I wouldn’t worry too much about dripping it in either, maybe put half in over a month and the rest over six months. Long term you’re pretty likely to wish you’d invested sooner rather than later.

Set up some estate planning stuff and buy a model 3!


Hey congrats and that's great! Appreciate your perspective and your perspective on how everyone wants to take your money. It's not the same thing, but there's an old essay from the 1920s or so - I can't find it - perhaps someone else can. It talks as advice to a young man about how everyone wants to separate you from your money.

S&P500 fund is not a bad idea, maybe a 3-fund portfolio for me.

Agree on invest early. I moved everything to cash 3 years ago, sadly.


I’d just put it all in an s+p 500 index fund

That's a lot of money to invest in the health of one country's stock market -- a successful terrorist attack (think a dirty bomb in NYC or even multiple cities) could wipe out a significant portion of that overnight - it will likely recover eventually (as it did after 9/11), but that's a time when you'll want access to your money

I'd diversify across countries, and maybe precious metals.


Many of the companies on the S&P500 are global businesses whose value is based only partially on the US market.

Also, if something big happens in the US (9/11), stock markets tend to take a hit globally.

That said, I’d still diversify into a few international indexes.


Actually it looks like I have it about 10% in real estate, 20% public equities, 10% private equities, 20% cash, and still 40%... crypto!


Personally I prefer total market funds to the S&P 500. VT is a good Vanguard fund that provides market cap weighted exposure to global markets.


Yep, foreign real estate is a good way to do this, and also gives you a passive'ish revenue stream


That's really interesting to know. I suppose if I ever came into that much money, it would be a good idea to keep real quiet about it. Thanks for sharing.


I'd love to hear more about your big projects! I'd love take on Facebook, or plant a billion trees, or fix news!


Mostly some public transit-type stuff and fixing American democracy! And (embarrassingly) maybe a movie?


I love that you admitted to the movie part! I think there is a lot of personal satisfaction to be gained from using financial freedom to create art, even if it's not quite as easy to articulate to other people compared to the benefits of the other projects you mention. Certainly, it's my primary motivator. No need to be embarrassed!


How did you make that amount? Was it also as an early employee at a startup, or as a founder?


Saying he came into it makes it sound like inheritance but that's an unusually large amount. Maybe a lottery winner. Or just ambiguous wording and I'm making too many assumptions. Either way, cool for him :)


Bitcoin?


Yep


Are you willing to share the story? I would hazard a guess that you played around with mining on your old laptop in 2010, accidentally left it running for a while, mined 10k bitcoin, and sold around the top at 19k each.


Have you declared to IRS.


Please invest in my ethereum startup: FinneyFor.com. Patent pending.


to quote parent: "Really it just turns every conversation into a roundabout request for money."


I mean, you gotta give it to him, that was not roundabout


Wow what a dream! You make it sound like you (or almost) spent it all, is that true?


Congrats! I'm in similar situation couple of years ahead of you. There are good recommendations about the practical side of things in this thread. I like the bogleheads approach of simple index investing.

The actual transition was thrilling for me especially because I never anticipated that my life would still change once more at this age. The joke is of course as I had heard before, but never truly believed, that actually nothing changes. I wish the possibility of finding out that money really does not make you happy to as many people as possible.

I refrained from doing anything for almost two years. First big thing I did after that was to stop paying rent and got a decent apartment. Most sensible things to do with money are incredibly boring. And the fun things lose some of their charm if they become really affordable and common. The whole thing hinges on desire to have something you can't reach.

So the choices are to either up your game or decide that maybe this is enough. For me the jump was so big that my hedonic treadmill maybe got damaged.

I never was so materialistic, but I used to maybe value experiences and dream about ability to set my own schedules. Now I'm afraid that those as well are a mirage. Just a trendy pastime for people like me who have had always quite easy life.

I think the less known secret about money is that nothing needs to be done about it.

Sorry to everyone reading who are in a tough spot. I am aware that this is super tonedeaf.


> Sorry to everyone reading who are in a tough spot. I am aware that this is super tonedeaf.

This shows empathy, and it's not a given in your situation. I feel you might be a cool nice person :)


Quoting Dalai Lama's reply to a question by a journalist about if Dalai Lama would counsel a rich or a poor person - "Rich person, of course. They know wealth does not change anything."

Warren Buffett Quote: “Money is not everything. Make sure you earn a lot before speaking such nonsense.”


Great comment. I anticipate I'll agree that nothing really changes and it doesn't make you happier. The literature says after you make $70-$120k/year it doesn't get much better. Joe Rogan says once you can buy a nice dinner without checking your bank account you're rich, or something like that.


1) https://www.bogleheads.org/wiki/Managing_a_windfall (the Bogleheads community is great)

2) Read this book: https://www.amazon.com/Investors-Manifesto-Prosperity-Armage... (or anything else by Bernstein, for that matter)

3) Try to steer clear of people/firms who want to manage your money for a hefty percentage fee. They're one step above crooks, sometimes not even. In the wise words of John Bogle, "you get what you don't pay for."

Good luck, and congratulations!


Very familiar w/ Bogleheads and agree that it's a great resource. Will check out the book.

The advisor I'm looking at is 0.35%-0.7% depending on lots of things. Is that 'hefty?' The Bogleheads mentality is certainly that one can do it themselves. I'd like to believe that this particular RIA is plugged in to certain investment opportunities, but not sure it's worth the risk. If I did do that, I might allocate 10% of post-tax money to speculative things like private investments etc.


From what I understand, private funds, especially hedge funds traditionally charge 2% of assets under management and 20% of profit.

As far as financial advisors go, that doesn’t sound insane, but remember if the advisor is investing your money into mutual funds, etfs, private equity, or hedge funds, those will each charge a nice fee on top of that seemingly small .35%.


Good point. However, as I understand it Vanguard's funds have < 0.2% management fee, so hopefully smaller than .35, e.g. https://investor.vanguard.com/etf/fees

But you're right. If manager charges 0.5% and fund charges 0.2% I'm still losing 0.5% of principal and 0.2% of my gains per year.

I don't see a reason for hedge funds. In my mind those are folks who have a proprietary edge on the market due to location, information, or experience.

To me, private equity ("PE") are folks who know how to reshape companies.

I spent a fair bit of time working w/ and for and sort of as a VC - that is a fun lifestyle but their risk adjusted and fee adjusted return is not impressive:

http://www.industryventures.com/2017/02/07/the-venture-capit...

The weighted average of table "Early Stage Venture Returns" shows about 2.5X on money with an assumed period of 10 years.

That's about 10%. When I invested $400k in venture capital in 2000 [timing...] it was worth $250k total return by 2018 - so not as great.


This is true about vanguard fees being low. Ideally your advisor would only use Vanguard, but if they try to get you diversified into more exotic etfs or mutual funds, expect to pay a fee closer to 1% to be invested in that fund.

> But you're right. If manager charges 0.5% and fund charges 0.2% I'm still losing 0.5% of principal and 0.2% of my gains per year.

Be careful with your math here. It sounds to me like you think .2% fee is only on gains, however it also it on your principal.

Here is a concrete example.

You hire an advisor at .35% per year. In one scenario, they invest you in Vanguard S&P 500 for .04% a year. You will pay .39% a year of your principal in fees. In another scenario they invest you in a hedge fund fully, where the hedge fund charges 2% on principal and 20% on gains.

Here you will end up paying 2.35% per year, EVEN if you are losing money. And if you gain money. The hedge fund will take 20% from that. So best case you are paying 2.35% in principal fees, and pocketing 80% of the profit. Worst case, you pay 2.35% to lose money.

Two extremes of the fee spectrum, so likely you will end up somewhere between the two.

Be wary if you advisor tries to push you away from Vanguard and into a different brand (they can have incentives that don’t perfectly align with you). For instance A Charles Schwab advisor might push you to use a Charles Schwab branded s and p Mutual fund with .25% fee on top of his .35% fee. When the actual fund is exactly the same as the Vanguard one that is only .04% fee.


You raise a good point, I am wrong you are right. Of course the costs are on the entire principal, thank you for correcting me.

Investing in PE/Hedge/VC again is not likely for me. So I agree, with an advisor at .35% and vanguard at 0.04% - it's .39% per year. With 10M invested in VSTAX under these numbers, maybe it gains 4% but i pay out .39 or almost 10% of the gains. Far better than the 2% - but we are on the same page.

Agree that the advisors can have misaligned incentives - I trust the two I'm working with though based on relationships who trust them, so I'm fairly certain they are altruistic, a bit.

By the way, really good podcast on Hidden Forces with Ben Hunt for Demetri Kofinas about the "awesome renumeration" for money advisors, as long as you're right :)


Much financial good advice here. Let me give you some life advice.

Cut the sugar. I presume you are American and your entire culture pretty much made you a sugar addict so this will be hard but do it. Your health depends on it. Yes, all diet advice is suspect but this is not: stop eating anything with refined sugar and high fructose corn syrup in it. With much less money than that you can already afford to hire a chef if you don't like cooking/baking.

Slow down. Destress. Learn to enjoy for real a fresh, local strawberry. Enjoy every bite. Grab a book, read on the beach at sunset. These things won't take a lot of time but now you can afford that little time and you don't need to stress on your next mortage payment, job etc so you can really enjoy these moments.


agree. now that the pressure isn't there to get cash/retirement taken care of, it is a great idea to invest more time and energy into diet, exercise and health!


add regular (3x a week 1/2 hour each time) strenuous (and sustainable AND fun) exercise and enjoy a comfortable and enjoyable aging process


I got some hot cash several years ago unintentionally. After that, I set up 3 goals:

1. Maintain high quality life

2. Improve skills for my career

3. Meet more interesting friends

With these three goals, I did these:

1. Maintain high quality life

  1.1. I bought myself a lot of insurance, both financial and life
  1.2. One nice apartment
  1.3. Put about 20% to some low risk fund
2. Improve skills for my career

  2.1. Best keyboard, chairs and ... as a developer
  2.2. Books
  2.3. Donate some open source projects and make friends with contributors
3. Meet more interesting friends

  3.1. Host regular meetups of great developers in China
  3.2. Go to a nice gym as I find people who work out hard and keep self-discipline are normally class-a players
  3.3. Get much more opportunities when focusing on what's next than what you're paid


These are all things you can (and should) do on a regular software engineer's salary, don't need to wait for a $5m windfall.


Depends on what regular software engineers in that area make. I had to basically sell a startup to afford a nice computer desk and chair, lol.


Maybe hot cash means something different, but it means stolen where I come from :)



The parent did not market this link enough but OP please read it! Especially if you are not already on your path to financial independence or not really bothered with investments.

This is a writing about people suddenly got money and how they got destroyed by it and how can you avoid it. What can happen in your family because of it. How and why to be quiet about your wealth.

Entertaining and great read and always the first thing I remember when somebody wishes for a jackpot.


You're right, I could have done a better job explaining what this is about. Thanks for doing that part for me!


I've read this before. And it's good, but it's more about what to do if you make >$100M. It strikes me as something somebody writes from hypothetical, not from experience.


It depends on your goals and lifestyle.

$5mm+ is tremendous. Could last you a lifetime. You could try an annuity. Pop this formula into Excel or Google Sheets: =pmt(3%/12,50*12,5000000). A very conservative 3% annual growth rate can afford you $16k in monthly withdrawals for 50 years. The downside is, of course, you'll be drawing down on your wealth til zero.

Purchasing real estate for the rental income can yield more attractive returns. First off, you can leverage yourself up. Then cash-on-cash returns - in well selected locations - could be in excess of 10% (easily). Your principle in real estate is afforded some level of protection and may even grow as the economy and country grows ..standard investing caveats apply.


Some good tips about managing a windfall from the Bogleheads froum.

https://www.bogleheads.org/wiki/Managing_a_windfall

With that amount of money, you're set for fatFIRE as well.

https://www.reddit.com/r/fatFIRE/


> https://www.reddit.com/r/fatFIRE/

Thanks - fatFIRE is a great reading recommendation. FatFIRE stories are insightful and help to re-evaluate my goals.


First off, unless you were really early, you are going to need about 1.5-2M of that for taxes, so plan for that.

That said, I put the remainder of a similar outcome in 60% stocks (VTI 75% + VEA 25%) and 40% short term bonds (VCSH). The stocks give you growth and the bonds give you stability. Rebalance this once a year and you are done. You are financial secure. Don’t get sucked into crazy complicated schemes - simpler and more diverse is better


* bought an Alienware, work chair, and 4K monitor (for work purposes I swear)

* spent about 20k renovating a home office

* subscribed to Joox/Spotify and purchased all the games I once pirated

* donated 10% to charity

* gave a fat envelope full of cash to my wife (she was so shocked that she suspected me of having an affair)

* gave money to my mom

* bought bitcoin and other crypto

* got a will done because bitcoin isn't covered by inheritance laws (also for religious reasons)

* considered investing into a restaurant, but it was too much work

* invested most of the rest into startups which all failed

* paid for funeral fees for dead companies when partners passed the ball

* looked for a job after burning through it all


Would you do it this way again?


Background story: did a startup as a CEO+CTO. 100 hours a week, mostly because I had to play two roles. It seemed easier to find a CEO than CTO.

So we were burnt out. Sold the startup. Made 750% ROI in a year, which is a good investment. Planned to reinvest that money into startups for maybe even a 300% ROI.

The plan was to go CTO route and rely on someone else to play CEO.

It didn't work out - most people were decent at business skills, but terrible with product. Some could build a million dollar traditional business, but couldn't make it in the startup space - they were too cautious, too scared of committing, or wanted passive income. There people with sales experience, who are great at forming strategic partnerships with big corporations, but don't dare talk to the customer.

So that was a mess. I regret expecting others to do well when given the trust and opportunity, even if they had done well in the past. I regret following logic over instinct, and following people who were not "animals" like Paul Graham suggested.

I'm working on a startup now, but it's the unsexy idea I had 3 years ago. At least I get full control over product and customer development.


Betting on the come with all the winnings is dangerous. Sorry you lost things. Good to put some away for sure.

Glad you are working on something you enjoy and have the level of control you're looking for!


great summary, thank you! That you ended up burning through it all is somewhat disheartening. Glad you had fun though!


The standard advice that is recommended for windfall recipients is to stash it in a savings account and sit on it for 3 months. The goal is to avoid making any rash decisions based on euphoria.

You can use that time to read some books on wealth management. Two classics are The Four Pillars of Investing and The Bogleheads' Guide to Investing:

https://www.amazon.com/Four-Pillars-Investing-Building-Portf...

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lar...

It is also a good idea to not tell anyone, unless you want to be bombarded by requests from family and friends for loans, invitations to invest in weird ideas/schemes, and so forth.


First of all congratulations. The great thing about being rich is that you only need to get rich once, then you need to preserve it.

I’ll focus my comment about things often overlooked:

Insurance. Medical, home, car, and umbrella insurance. KEEP GOOD MEDICAL INSURANCE.

Work hard on your privacy. People with deep pockets are juicy targets for lawsuits. Start an LLC (with a name not associated with you) and transfer things like real estate to it.

Investments: there are tax-free investments such as muni bonds. Invest in rental properties (under your llc). There’s no shame in sticking a bunch of money into an S&P 500 index fund. Capital gains are wonderful.

When you speak with an accountant, tell them specifically you’re interested in tax deferment and protection strategies.

For your children’s education: look into front-loading their 529 plans.

If your accountant doesn’t mention this type of stuff then find another.


agreed re keeping it is harder than making it. Made a fair bit in the past and didn't keep it.

Agree re: insurance - raised umbrella to +$3M and car to $1M. Perhaps raise home though umbrella helps that?

Agree re: tax optimizing.

For 529 front loading, there's apparently a way to do a 5 year- averaging that allows you to put 6 year's worth of 529 in. In my state a certain amount is tax deductible, so I'll factor this in.

Accountants seem good at calculating - not so good at ideas. I'm expecting my RIA/Advisor will help here, but I'm on a track consistent with what you've said - thanks!


I went through it all in less than 2 years and ended up hoarding the things I enjoy very much to this date. I have no regrets (never), coming into millions in thirties is an incredible life experience and the vacations, scotches, watches, cars, homes and other toys are all things I have enjoyed very very much. I also learned to buy forever things which has changed how I see consumption completely. It also led to some amazing opportunities to meet very interesting people in strange places. Overall, I cannot emphasize how much fun it is to spend a few million dollars in 12-18 months without being fixated with savings.


> Overall, I cannot emphasize how much fun it is to spend a few million dollars in 12-18 months without being fixated with savings.

Not sure if I understand you right, so I'll just ask.

Did you just spend your millions? And you still presumably have to work?


I'm not the poster, but in my case, I don't plan to spend the Millions, I absolutely plan to work. You might have some folks working you worth >$20M if you work in Silicon Valley.


I did that too 15 years ago. I still have some of the 25 and 30 year MacAllan left :-) Agree with buying quality - sometimes spending 2-3 times as much lasts 5-10 times longer.

Agree it's a lot of fun, but I've sowed those oats and out for keeping more of it. And I already have a lot of those things!


What were the "most worth it" items for you?


I have not gotten quite that lucky, but still lucky to catch a unicorn early enough to have gotten to ~1m at a youngish age.

Have you actually liquidated the funds? Or is that the value of your stock? I think a more interesting question for this audience is what to do when you have pre-IPO "unicorn" shares. On one hand, if you wait til IPO there may be a big "pop". OTOH, it could drop below what it's trading at in private markets. I think about diversification a lot too.

I haven't felt the need to hire a professional at this point, just put most of my liquid NW into a robo advisor (I use the Schwab one) and forget about it.


Not exactly the same, but here's the advice for if you win the lottery: https://www.forbes.com/sites/deborahljacobs/2012/02/11/10-th...

Much of it involves don't make big lifestyle changes, invest smartly, get lawyers/financial planners together to protect yourself, and pay off any debt you have.


Welcome to the world of high consequence tax filing! As you may already know, penalty severity for tax mistakes are pegged to the dollar amount. This includes very large fines and possible prison time for "willfully" incorrect taxes, or not disclosing a foreign bank account, for example. I read the tax code, and do my own taxes first. Then send them to an accountant for verification and filing.


I like this finance website. Some of the advice surrounds improving your financial standing, but much of it is just about how to live well, and how money does and doesn't play into that.

https://www.mrmoneymustache.com/blog/


Almost a decade ago I made a similar amount in an IPO event being an early employee.

Company of said IPO dropped fairly hard in less than a year (you may be able to guess which one). I'm still not poor by any means but seeing $5~6M turn into $1~1.5M doesn't feel great. Especially since, $5M is retirement money, and $1M is not, so I was literally looking at myself going from being able to retire to not being able to retire.

My advice would be that if this asset of yours could be volatile at all by any means (e.g. is a stock of your employer or even your own company), liquidate and diversify as much as possible as soon as possible.

Then do everything else that everyone else on this thread said about investing, insurance, etc.

(using throwaway because my main account is somewhat recognizable)


I agree with you. I'm trying to decide how quickly to diversify, and also if I want to buy stock for LTCG (conclusion, I don't).

Agree - 'life' money change to 'car' money is disheartening.

Good perspective, thanks!


It was an order of magnitude or two less but: Stopped chasing external jobs. Started working on aggressively non-commercial personal projects while living simply. My main splurging has been that my laptop upgrade cycle got faster than every five years for a little while.

Also a couple of cross country moves, once to Seattle because I missed the west coast and it was a compromise my SOs would make, then back home to New Orleans because Seattle’s cost of living was skyrocketing and I missed the sun and wanted to live somewhere I could pay the rent with what I make off those personal projects.


I have a friend who received a similar windfall at a young age. He bought multiple super cars for himself, paid off his parents mortgage, bought his sister and girlfriend a high end SUV, bought a house, spent a lot partying for two years, then invested most of it in a new business that is struggling. He’s renting out his supercars now. He told me that it’s not as much as you think and it’s not easy to reproduce that kind of result.


When this happened nothing changed, no Hollywood style lifestyle change happened for me.

I was still the same person, I took the money and invested some in SP500 and Tbills and bought a 20,000 sq ft land in India (my wife is from North India).

Started a business of branding and selling items in India (there is huge money to be made on Amazon India, you can't even find 10% of the inventory that's actually in the US)


Wow that sounds super smart! Good for you!


I don't have personal experience with a windfall of that size, but I've found that Bogleheads usually has decent advice: https://www.bogleheads.org/wiki/Managing_a_windfall


There is some really good basic guidance on dealing with windfalls, available on Reddit's personalfinance board: https://old.reddit.com/r/personalfinance/wiki/windfall

I recommend you read it all and take some time to digest it.

Don't do anything rash -- in fact, don't rush to do anything right away unless it's necessary. Necessary things include:

* Figuring out what your tax obligations are.

- You should get someone to recommend you a competent CPA who has dealt with this situation before. You want someone who will proactively help you sort out your tax situation starting NOW, not wait until tax time. But I would _not_ suggest a "wealth manager", or even a "financial advisor" at least to start with -- find someone who will just help you with the immediate tax consequences, and who will deal with you on a flat-fee basis with price given up front. A competent CPA should probably be able to handle this on a bare-bones basis for less than $1000, but _if_ you can get someone who comes highly-recommended and has significant experience with the specific issues you're facing, and can help you navigate the situation, paying a small multiple of that for more good advice won't kill you.

- Note that you are going to owe estimated taxes, which need to be paid quarter-by-quarter, not at tax time. At the federal level, you will not be subject to penalties, regardless of your income this year, as long as you prepay (in payroll withholding plus estimated tax payments) 110% of _last year's_ tax obligation. However, if you are in the state of California there is no such safe harbor for _state_ taxes if your income exceeds $1 million in a given year (which it will). (See https://www.bdcocpa.com/resources/articles/43 .) So make sure you pay California estimated taxes as promptly as you can manage. (But also, don't panic if you end up being charged penalties. For stuff like this (i.e. not fraud) they are generally quite small relative to the amount of taxes owed, especially if you aren't that late.)

* Figuring out your liquidity situation:

- Are you getting the money in cash, or liquid securities (i.e. that you will be able to sell easily), or illiquid securities (i.e. that you cannot reliably sell?) If your employer has been thoughtful towards you, you won't be in the third situation, which can be very messy come tax time. (If you are in that situation, there are people who can help advise you, but you'll want to start thinking _now_ about how you'll pay the taxes.)

- If you're getting securities (i.e. stock shares) that come to you in some sort of brokerage account, it's fine to _leave them there_ while you decide your next steps. Make sure you're able to sell enough to cover your tax bill, but you don't need to actually sell anything until you discuss it with your tax advisor.

- If you're getting cash, you will probably want to open a brokerage account to put it in (don't stick it in your checking account.) Charles Schwab and Fidelity are fine general-purpose brokers. Vanguard is good if your plan is to invest the money in low-fee index funds and then not touch it, which is generally a wise idea.


Oh, and don't post all over the internet about it. ;-) But I see you're using a throwaway, which is a smart move. As the reddit PF link will also tell you, don't go around telling everybody about it. In fact, for now don't tell anybody but your spouse (if applicable) and your tax advisor. You can always tell people later, but you can never un-tell someone. You'd be surprised (or not) at how people can get when huge sums of money are at stake. Even if people know you are getting an IPO windfall (or what have you), be vague and downplay the amount. Don't promise anybody anything. This goes 10x if they are asking you to.


> for now don't tell anybody but your spouse

Depends. One could not mention it at all, and spend their 9-5 at a some-what serious fictitious company where you work on your dreams, but 50% of the time just hang out with your best friends.

But if your story leaked, it probably wouldn't go over as well if your spouse was going to a difficult job every day.


I’m going to assume you’re not married. That’s a horrible idea.


How much of this did you follow when you made millions suddenly?


Nothing spectacular: Pay off flat mortgage & rent it off, build a house in the neighborhood (parcel prices gone crazy here now), buy a new second car (nothing fancy, like some Renault or other) and keep living as nothing happened (work, but less stressful etc.) Maybe I would also buy 1 or 2 small flats to rent near the university at nearest city etc.


How has the real estate investment turned out?


I am moderately successful, and thankfully I have accumulated some wealth over the years, as opposed to a single big hit like in your case. Despite I can't claim to be rich, I have been fascinated by understanding how to manage my money better, and hopefully I can offer some advice here.

In random order:

1) Take it slowly. You don't need to rush into investing, buying stuff, getting a new house, etc, all in two weeks. Slow, thoughtful decisions will usually be better than rushed ones.

2) If you are not financially literate, try reading some good books on the subject, and IMHO, not necessarily the most popular ones. Picking the right ones is NOT easy. There are several lists of "best financial books" or "best personal finance books", and reality is that you should read 15-20, and stick to the 2-3 that you really liked.

Financial literacy will allow you to take much more informed decisions about everything.

3) Depending on your age, where you live, and if you have kids or not, you might want to consider "estate planning", a broad category that includes, among other things, establishing "trusts" (legal entities) or similar and granting some amount of money to the trust, in order to get some tax advantage, and clarify what's going to happen to that money when you will eventually die of very very old age.

4) If you know a few friends who are also rich, talk to them and ask them to share their experience with you.

5) Don't tell others about your wealth, or don't be too specific about how much you have. A >$5M wealth creates issues, and provides strong incentives for people to try to manipulate you.

6) If you are married, share this burden with your spouse - I think it's a good idea to keep her posted, to tell him/her NOT to share too many details with friends and family, and possibly to get both of you financially literate.

7) There's a lot of BS around. Be very wary of any advice, including mine. (especially mine!) Be really, really skeptical about any claim by anybody. Remember there's no free lunch out there.

If you are considering investing in a 12% guaranteed annual return, well, let me tell you, it doesn't exist on Earth (both guaranteed and 12% together).

As a rule of thumb, take inflation + GDP * (1 - long term capital gain taxation) as the threshold beyond which you should start to be wary of any claim.

For US, currently: 1.6% inflation + 3.10% GDP[0] * ~0.75 = 3.92%, which means: any investment that is both guaranteed and above a 4% annual return, you should start being skeptical.

8) Try to invest in things that you understand well, or otherwise try to invest in things that are tax-optimized and dumb-proof (e.g. investing in an index is relatively simple to understand, can be done in a tax-smart way).

9) understand diversification. Key to this is that diversification should apply to your goal in life, and your risk-aversion. E.g. if you're 25, you might want to take a bit more risk, as riskier bets tend to pay slightly better over the long run, if you can take several of them (because comparatively less people are willing to play in risky territory). If you are 55, you might want to settle with a more conservative approach. Etc.

10) Big mistakes are usually made when investing in real estate. Try to separate the "emotional", irrational purchase of your main home, with the "investment" part. I wrote about the "rent vs buy" dilemma last year, it might be a useful read to get started. [1].

Finally, if you want this money to make you happier, the thing is, it probably won't, unless you're really really disciplined about it. Mae West used to say "Money isn't everything, if you have it". Once your basic needs are met, it's very hard to use money properly to be happier over a long period of time.

I personally try not to obsess too much about money, I try to use it to buy me "time" more than anything else, and I also try to use it to relieve me from issues that would make me anxious. I also try to remember that I won't bring any money with me in my grave. I am not great at doing all of this, but I keep trying.

Hope this helped.

[0]: https://tradingeconomics.com/united-states/gdp

[1]: https://medium.com/fabrica/the-rent-versus-buy-dilemma-12-im...


1) Slowly makes sense but I need to diversify - which I probably will do more quickly than slowly.

2) I'm fairly literate financially but need more depth and breadth.

3) Revocable trust and wills are in the works.

4) Asked friends for recommendations, agreed!

5) Agree. I've told one person (outside of work folks who are in the same situation) and that was a mistake.

6) Spouse is fully informed and has delegated all decisions to me. Oooof.

7) Good advice re: expected safe return!

8) Agree investing in simple things. Investing in America or the World with a diversified portfolio makes sense.

9) agree with diversification and risk tolerance as a function of dynamic market.

10) Real estate seems fun but not really - too many societal changes and troublesome renters.

Good point that you 'can't take it it with you' - interesting to see that as an actual issue to deal with.

Great input - thanks!


Happy to have helped. Good luck. :)


When did you join the company? What percentage did you own? That’s a nice payday, congrats.


Keep in mind that you almost certainly now need to pay taxes 4x/year because your taxable income just jumped by a significant amount this year. Get an accountant to make sure to avoid paying $1000s in IRS penalties for underpayment


Move to Ireland for 2 years to become a resident, there you only pay 10% tax over the capital gain if you meet the "entrepeneur relief" criteria. Not sure if this works as a US citizen, but works for many.


I'm upset by this. Why is it paying taxes so repelling after you acquire wealth?


3 Reasons:

1. The taxes wealthy people pay is both higher in amount and higher in percentage that non-wealthy folks.

2. The way the tax money is spent is inefficient

3. Because it is legal to minimize taxes, and to waste money is bad.

Lots of wealthy people are charitable. It's preferred to spend money through charity versus give it to the government to spend in their preferred way, which can often include buying votes.


Couple of years ago, Big payout:

- Paid / Allocated money for all taxes

- Legal tax evasion planning for future, a lot planning prior to transaction, I don't want to give $1-10M in tax. I would rather move to a country that I can avoid tax completely or lower it significantly. There is no country in the world that's worth paying $5M extra to just to live IMHO.

- Separated wealth into multiple banks and 2 countries (reduce risk of investment)

- Went to an expensive holiday and flew first class for the first time :)

- Bought a lot hardware, treat myself with simple things. Like hobby hardware, cutting edge hardware. I realized buying an expensive car cost $300K buying hundreds of hobby stuff doesn't even cost $50K and brings me more joy. I was a nerd I guess now I'm just a rich nerd.

- Helped relatives a lot, just gave plenty of money

- A lot of Sadakah (charity) & Zakah (mandatory in Islam, 2.5% of wealth goes to poor every year)

- Invested a lot in real estate, all in cash. Safe long term investments (if you know what you are doing, I have family who does this)

- Invested in 4 companies. 2 early stage tech companies and 1 brick and mortar old school business. 2 are very risky and expected to give a return in 5-10 years, if any. Many countries

- I'm going to give a very unpopular advice, spend your money. I mean really spend it. I'm not saying burn it (i.e. parties, private jet and yacht) but spend it on stuff that makes your daily life better with the right economical balance. For example fly in first class but don't get a private jet.

- Put something like $2M cash aside, for whatever the future brings

Most satisfying thing I've done was to help less fortunate. To me $0.5M is couple of percentages in a rich person's increasing wealth but splitting that money to tons of people in 3rd world countries means hundreds of people's live will be so much better. If I were to spend it for myself my life quality might have gotten better by 2% but spending that for other people means hundreds (or even thousands) of people's lives will be 20-100% or infinitely better. (What's the % of life quality improvement when you can start drinking healthy water? or afford food?). Did you know $30 can make someone see again through cataract surgery? [0] When I learned it kind of shocked me and made me question my life and where I spend my money.

AMA about charity :) And if you hit jackpot please go and help someone unfortunate, I don't mean someone who cannot afford a new iPad for uni, I mean someone who cannot afford food, clean water, or life changing operation. Think about numbers and efficiency before doing charity and deciding where that money goes.

P.S. I'm a Muslim therefore I don't use interest. Which means majority of the traditional investment models don't work for me. That's why I invest a lot in real estate and businesses (who doesn't use interest) rather than stock market, funds, bonds etc.

[0] https://www.cbmuk.org.uk/get-involved/donate/


Muslim here. Interesting to hear. I had to avoid a lot of investments, because they weren't so clean. Forex felt like gambling, and many options felt like riba/usury.

Real estate seemed a bit off. Lots of friends would take huge loans and rent it out for a little more than what they were paying in bank loans; also felt like usury. But it should be fine if you've paid it all in cash.

Probably the big thing I regretted was spending about a year and a lot of cash on a startup which partly donated to temples. Made me realize that wealth really comes from Allah.


> Probably the big thing I regretted was spending about a year and a lot of cash on a startup which partly donated to temples. Made me realize that wealth really comes from Allah.

Could you elaborate what your regret was in this case? I'm confused and don't quite understand what you mean by this.


There's a long story behind this.

One of the fundamentals of Islam is to worship Allah alone, and only ask help from Allah alone. The second part is extremely difficult - it's easy to just assume that wealth comes from clever financial planning, hard work, or that knowledge comes from a mentor. But this is egoistic. Especially when you've gone moderately rich off a crazy gamble, you're more likely to dismiss God's role in answering prayers.

The story was that someone proposed a startup with some sinful attributes. Think of it as sort of like working for Playboy - you can justify to yourself that you're just taking a supporting role, more interested in the tech, the culture, the articles, could do some good with the money, etc, etc. But the core purpose is still sinful.

The plan seemed foolproof. There were contingencies. If the plan failed, I'd still make $X. If it failed really hard, I could bring the code I wrote back to another startup I was a director of.

But everything went wrong. The team was horribly incompetent, and couldn't dedicate any time. My backup plans fell apart. People who I trusted backed out. The whole thing was depressing, and I found it hard to get any work done, despite my best efforts and ability.

I went in thinking that I had the resources and experience to no longer need to rely on God (or luck), and was proven wrong.


You seem to have it figured out- I'd love to talk with you privately. I like your point of view.

One of my advisors said one of his clients spend $30k on an A/V room for playing video games. And although that seems excessive it's so much less than other things.

I love your approach on charity and will dwell on it.

Thank you for your comments!


I'm not in this position, I've thought a fair bit about it since it's in the realm of possibility. This is what I'd like to believe I would do:

Buy 30yr Treasury Bonds with enough of the cash to generate ~$200K/year passively for the next 30 years.

Then proceed to continue my normal life. I'd treat the extra income from the bonds like a raise, invest it smartly, buy things as I would normally. Except now I have an immense buffer to stop current work and/or the freedom to pursue other interests.

But I wouldn't change anything in the first year of such a cash influx.


Wait. You'll need closer to $8 million invested at 2.57% (30 yr current yield) to earn $200,000 a year. And consuming that every year means you'll destroy much of the real value of your hoard over 30 years (you're not reinvesting something to cover inflation). Further putting it all into Treasuries is actually riskier than diversifying across multiple assets - foreign stocks, real estate, etc. If we go into an inflationary period and you're locked into a 30 year at 2.6%, you'll watch your fortune collapse and your stipend's buying power crumble.


You might want to consider inflation into this strategy. 100% allocation to 30yr Treasury Bonds at the current rate will continuously lose money until your 200k (plus yield) becomes a buying power of < 40k in 30 years.

US stocks should be part of your allocation.


I was in a somewhat similar circumstance via a very large inheritance. I'll start from the emotional side of things before moving into the financial side.

Emotionally, I was very shocked as I did not see this situation coming. Like you, I was also scared about making stupid choices. You probably had some idea that your shares had upside potential, but the money I received dropped into my lap with no warning and was approximately the same amount as what you received. My immediate advice is...do nothing. Wait for the shock to wear off and for you to acclimate to the situation. Don't tell anyone, don't run out and buy things, don't move assets; just keep on with your day to day life until you are ready to proceed.

Based on the fact that you are here asking these questions at all, my assumption is that the money likely will not change you much as a person. I still have the same friends and relationships that I had before I received my funds; my values are still the same; I'm still the same person. Most people who interact with me have no idea that I am as wealthy as I am. Who you were before you receive your money will largely be who you are now that you have received your money.

Economically, my general spending patterns have remained largely the same. The main thing I've found is that money is less about buying stuff (which I think is how most people without money view money) and more about buying time, cutting through bullshit, buying access, and creating opportunity. I feel much more free to spend money on education, conferences, vacations with my loved ones and friends, once in a lifetime opportunities etc. I'd encourage you to think about your funds this way too depending on your circumstances as I think it brings a lot more happiness than buying tons of shit you don't really need, a big house, cars etc. I'm not saying you need to live a frugal life, but I think excessive consumption gets boring quickly. You have "fuck you" money which gives you enormous power over how you craft your career and your life. Think hard about what you want to do. I still work but I've had the flexibility to explore career arcs that I would not have otherwise been able to with almost no risk.

I would be very careful about telling other people about your situation because it might alter your relationships. I think it's fine to say you are doing well at work, but definitely do not tell people you have 5 million dollars. You don't want people feeling jealous, resentful, etc. It can be helpful to have other wealthy people to talk to about issues and feelings. If other people you trust have money, feel free to talk to them. Alternatively, there are certain places that generally cater to the wealthy (eg social or country clubs, business associations, etc) where you can meet some people who will be in similar circumstances and will be happy to talk.

Moving on to what to do. I don't know how old you are or what your future earning potential is (meaning is there another chance for a payout this size), but in general what you do with five million dollars will not be dramatically different than what you do with a few hundred thousand dollars. I would seek out a wealth management group for a consultation. Make sure this entity is a fiduciary and are legally obligated to act in your best interest.

If you don't think you have more big payouts coming your way, then your strategy will likely focus on wealth preservation. If you think you can make more money you can be more aggressive. Either way, you will probably construct a well balanced portfolio of low cost index funds. Depending on your risk and needs, you could devote a portion of your portfolio to more exotic things like hedge funds or private equity or whatever. See what they say.

You have generational wealth, so if you have kids or are thinking about kids, you need to focus on general tax minimization and avoiding inheritance taxes (within the law of course). There are a variety of strategies that can be employed here, and a good wealth management firm can help you with that. You also need to think about how you will teach your kids about money given your new situation so that they have the right values.


That's very kind of you to suggest it won't change me. I hope you're right and expect you are.

Totally love the idea about buying time. Not entirely clear about what to buy access for, but I'll ponder that.

Agree re: confidentiality. Age is 40, and expect to work for another 5-20 years or more.

Working w/ an RIA so things should be good there, totally agree they must be fiduciary.

Agree long term planning; not exactly sure that giving kids money is a great idea. Perhaps some/all college and help w/ house down payment - but life is a struggle (jihad - I'm not Muslim but that's the analogy I use). Agree learning how to teach them is a good goal! The Silver Spoon book looks good for that!


I wake up


As everyone has said, the first thing to do is nothing. Well, that's not exactly right. You may think "No sweat, I'm in no rush to spend it" but recognize that most people that go broke... from bad investments. There's no dumber way to lose your money than investing in some stock that sounds good or becoming an angel investor or buying a bunch of rental properties or whatever "safer than the bank" idea you have right away.

Ok, that's easy enough... but pretty quickly you will realize that money is ALWAYS invested, whatever you do with it. Keep it in cash? Ok, you are investing in the U.S. dollar. And where should you put your pile of cash? FDIC only insures bank accounts up to $250k, so if someone grabs your login most of your money is just gone.

So it needs to go somewhere - index funds, CDs, mutual funds, etc. There are a lot of boring options with minimal differences and most financial advisers will encourage you to diversify money all over the place. I know some investment bankers and they say most of their high-end clients are more focused on trying not to lose money than make it with investing, so there is a very well-trod path to doing all this. Recognize that diversifying rarely protects you much from a sudden market downturn (check out 2008) as the economic engine is pretty well intertwined, so there is no need to go nuts trying to spread money everywhere.

Another reason to keep your diversification simple: pay close attention to the vig (the cut going to an adviser/investment vehicle). Not all index funds are the same and certainly not all financial advisers all the same. Especially when trying to be safe with money, too much can be scraped off by advisers. Flat fees are best for what you want, or you can do some research and do it yourself with some help from your bank. If you want to keep things basic for a while without any fuss, talk to an investment bank (like Schwab) and ask them to walk you through a simple distribution with cash equivalents and index funds. You can always adjust things later but please don't let your cash just sit in an under-insured deposit/savings account.

If you do feel the need to invest in stocks/business, read Warren Buffett's advice and make slow moves - a good rule of thumb is if you invest in a thing, make sure you would be comfortable if you couldn't touch it for 5 years. Anything less is not an investment but a gamble.

In CA, I also recommend umbrella insurance, not sure how it works elsewhere. The idea is if someone slips on your staircase and breaks their butt they could theoretically sue you for all your money - umbrella insurance covers your from that and most other things. Take small protective measures from unlikely but cataclysmic losses.

Finally, what to actually spend money on? There is one thing I read that has proven true at any price point: spend money on things that improve your everyday life. That might be getting something pricey for what it is, like an Ember mug that keeps your coffee warm, or something bigger like moving closer to work so you have an easier commute and gain more free time.


I love the Ember idea! Agree on the vig! If I'm making 5% and they get 2% well that's just not fair!

Umbrella is looking good.

Great input, thanks!


I woke up, and realized that I was actually still poor.


buy land get farming secure your food & home relax


Bought myself a yacht


Hey congrats man. Congrats.


Woke up


You guys wanne be my friend? I need rich friends...


At Buck's Restaurant in Woodside, CA there's a postcard on the wall (or there used to be) from a lady somewhere "else" who said since everyone there is wealthy - could they send her some money.

Let me ask you, shifto, if I can.. Why would you like to have, or as you say 'need' rich friends?


It was a tongue in cheek remark. I'm pretty well off as I at least have decent job in IT. I try and make life better for friends and family by spending my money. I just wonder how it would be to be on the receiving end of it all.

Also, my very rich friend will bootstrap my company no strings attached. He/she's the best! :)


That's great, but when your great country brings the whole world to its knees, when the financial system collapses, all you have left is your eyes to cry. In the future, it will not be good to be too rich... Don't put your money in, buy a pair of air max to run fast;)




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