[MikeCF]

Most of us would go broke if given a windfall of 500K. Pro athletes go broke. We are no different.

The key is to not think of 500K as what you earned.

Instead of saying, "I have 500K to spend," say, "I have a lifetime job that will pay me 40K. My expenses are $x over 40K. How will I meet my expenses?"

We did a budget thread.

My expenses are 60K a year. (I want for nothing; I just don't get off on a lot of stuff other guys do.)

I'd only need to earn 20K a year to continue living my current lifestyle.

Viewed that way, I'd never squander the 500K as to me that would mean having to work harder to earn more money. Who wants to do that?

[Excelsior]

(10-24-2012 01:26 PM)MikeCF Wrote:  

Really interesting thread because it shows a lot of the bad thinking (my own included) we suffer from. This bad thinking is what makes us go broke.

All this, "Start a business stuff...."

This idea that you just start a business is a dangerous one. Opening your own business means working harder than you ever have.

I've noticed this trend in our society, probably a holdover from more profitable eras (the prosperity the baby boomers grew up in, the moneymaking heydays during the 90's, etc) when the economic/money-making picture was a bit more positive. There is a tremendous aura of romanticism surrounding the "entrepreneur" in our culture.

Everyone wants to go into business, but nobody wants to hear about the difficulties associated with it. Its become almost a default ideal. Every kid thinks they have what it takes to be the next big thing, but nobody wants to hear about the time (much of it spent working for other people and gaining experience) and sacrifice it took those "big things" to get where they did.

Its kind of like sports and rap in the black American/urban culture-everyone wants to be a baller or a rapper, but nobody wants to hear about the odds of getting there. Everyone wants the new Benz and the money to buy it, but nobody wants to go to class.

Idealistic escapism and entitlement are kind of running rampant in our society-we want to have it all, but don't want to give at all.

[Samseau]

(10-24-2012 01:20 PM)MikeCF Wrote:  

(10-24-2012 12:46 PM)Samseau Wrote:  

Anyone who would use this 500K to pay off their student loans doesn't know what they are doing. Student loans are probably one of the safest investments you make right now because of the "income based repayment" plan + inflation.

Here's what I would do with this 500K:

- Rack up as much low-interest debt as possible. Anything under 7% is fair game.
- Start buying rental properties. Throw some of my broke-ass relatives in there to manage them for me while I travel around the world banging babes.
- Spend about 5K on clothes.
- No need to buy state of the art technology, I build my own computers and it costs me less than 1000 bucks every three years to upgrade.

Really, that's all anyone needs to do. I could coast on 500K for an easy 10 years or more.

Your relatives would steal the copper out of your apartments to sell at the scrap yard to pay for meth.

Broke people are broke for a reason.

First thing to do if you come into 500K? Don't tell your family.

My family knows I "do OK" and are left guessing what that means.

My closet friends know my situation. But I choose my friends.

People who say blood is thicker than water should see what happens when a rich family member dies without a will.

Blood might be thinker than water but it's not thicker than money.

Nah man. I got family I can trust with my life

[Veloce]

(10-24-2012 01:17 PM)MikeCF Wrote:  

500K means you never run the rat race again.

You'd have to work some job, or start a small business, or run some hustle. You'd need some cash.

But you'd never have to worry about paying your bills again.

That, to me, is huge.

This.

Contrary to some dudes here, I actually like work, especially if it would be my own business. I've been doing this shit long enough to know exactly what I'm getting myself into. 6 months of travelling and partying is probably more than I could handle, but I go hard like that

The ultimate goal for a man is to never again work for another man. That's freedom right there. You might pay taxes to the gov, you might bow before your customers (exception for el mech), but you'll never ever again give your labor to another human in exchange for some paper. That's a level of freedom that I dream of.

Party like a rockstar? That's cool for a few months, but if you blow a half mil on "partying like a rockstar" you're a moron. If I blew that much on partying and then had to go right back to the ratrace bullshit, I'd probably blow my brains out, but of course, that's part of the "rockstar" thing too.

[WestIndianArchie]

(10-24-2012 01:26 PM)MikeCF Wrote:  

Really interesting thread because it shows a lot of the bad thinking (my own included) we suffer from. This bad thinking is what makes us go broke.

All this, "Start a business stuff...."

Guys, do you know what starting a business entails?

I actually do know quite a bit about it.

If you've got 500K
- you aren't spending all of your waking hours working for someone else, draining your time and mental energy.
- you do have 168 hours a week to work on your business - where you have full say in where the business goes and what you do.

- AND THE KEY, you have enough cash in the bank to pay your rent and get by while you work on it.

- you have a good chunk of capital to start micro-sized businesses and test your market. So you come up with your concept, you do your internet testing. It fails. No problem. You spend another 100-1,000 bucks on the next idea and test it.

If you go through 15 ideas, at max 1,000 bucks a piece, then you realize that being self employed is not the move for you.

So if your dream is a Fast Food Amish restaurant, rather than spend 500K on a location and genuine Rumspringa chicks for your hostess

- you do some supper clubs

if that goes well
- then food festivals,

if that goes well
- then a pop up cart,
- then a pop up restaurant @ an established place
- then a food truck

and then when all of that says your idea is winner, that's when you find like minded investors and put some of your money into a brick and mortar spot.

In 2012, there's no reason for you to not test your idea in a small way before you go big.

E-books, programs, restaurants, services, physical products...

Lots of people could conceivably start businesses after work and on the weekends, but realistically, most people are giving the best part of their time and energy to someone else.

500K makes a significant difference. That's like 8-12 years of not having to worry about expenses (and that's living in the states) 16-20 years in the 3rd world (provided you have good internet connection)

You've got ample time and $ to really make something happen.

WIA

[smashley]

Saving money is like women... Mostly fuckup avoidance game...

[Veloce]

I could start a restaurant for 100K in Los angeles. Or about a quarter of that in SE asia.

I'm not talking white tablecloth, a full floor staff, or fancy kitchen equipment.

Just a few burners, a cold station, dishwashing station, small dining room, like 40 seats. Bring in a friend to run the front, pay an accountant to come in 3 times a week to handle paychecks, invoices, and bullshit from the city. Cook simple food in a dope neighborhood for people who really like food, not some Top Chef wannabe bullshit with 12 components on each plate.

I'd make 45K my first year and grow from there. If I've got major cash saved I'd be closed one or two days a week and take a month off every year.

[smashley]

I know a lot of you guys criticize living off the interest as i've seen by a few comments, and that all you need to do is start a business or by a four-plex, but it's really not that simple.

Lets break down the living off the interest thing. Yes, I know CD's are making only 1% but lets look at CD's over history.

http://3.bp.blogspot.com/-qxi8eUIvnAI/Ti...istory.jpg

You could average Cd's over the last 50 years at roughly 5-6%. Now 5-6% of 500,000 is $20,000 to $30,000 per year, EVERY YEAR.. Guaranteed with no work!! Yes there is inflation, but add 30,000 to your current salary every year and you'll see that it more than helps pay bills/ travel, etc. Good luck taking risky business ventures at the shot to make 30,0000 a year. I've started various businesses and let me tell you the best businesses to start take little to no financial investment... Only lots of time, but with that you can stop at any time without losing money. Also making 30,000 with your own business is not easy.

Once the FED stops keeping rates down as inflation increases, you will CD rates raise again. Quantitative easing is in place now, but with time inflation will creep up and CD rates will increase again and things will be better again for savers.

Don't downplay living off the interest.

Also with real estate, run the numbers.... Investing the entire 500,000 in a house will only make you 3000 a month in rent (roughly..) thats $36,000 a year, just slightly over what you would make in the Cd. Plus you have management costs, maintenance, hoa's, time, everything else, it makes you question whether it's worth it. And by no means is it even guaranteed. It could take 90 days to evict without payment, costs to replace after the tennant trashes your place, etc. It's not all gravy... That 36,000 would probably be down significantly on average. Yes the house appreciates, but it also depreciates in certain scenarios.

[w00t]

(10-24-2012 08:56 AM)Nonpareil Wrote:  

(10-24-2012 05:04 AM)w00t Wrote:  

Put it in the bank and live off interest.

500k is nowhere near enough to stash away and hope to live off the interest, the only way you can live off it is if you make some very smart investments.

At 5% interest thats 25k a year, more than 2k a month. Enough for me.
I dont have any loans and my family makes their own money.

[Katatonic]

(10-24-2012 03:04 PM)smashley Wrote:  

I know a lot of you guys criticize living off the interest as i've seen by a few comments, and that all you need to do is start a business or by a four-plex, but it's really not that simple.

Lets break down the living off the interest thing. Yes, I know CD's are making only 1% but lets look at CD's over history.

http://3.bp.blogspot.com/-qxi8eUIvnAI/Ti...istory.jpg

You could average Cd's over the last 50 years at roughly 5-6%. Now 5-6% of 500,000 is $20,000 to $30,000 per year, EVERY YEAR.. Guaranteed with no work!! Yes there is inflation, but add 30,000 to your current salary every year and you'll see that it more than helps pay bills/ travel, etc. Good luck taking risky business ventures at the shot to make 30,0000 a year. I've started various businesses and let me tell you the best businesses to start take little to no financial investment... Only lots of time, but with that you can stop at any time without losing money. Also making 30,000 with your own business is not easy.

Once the FED stops keeping rates down as inflation increases, you will CD rates raise again. Quantitative easing is in place now, but with time inflation will creep up and CD rates will increase again and things will be better again for savers.

Don't downplay living off the interest.

Also with real estate, run the numbers.... Investing the entire 500,000 in a house will only make you 3000 a month in rent (roughly..) thats $36,000 a year, just slightly over what you would make in the Cd. Plus you have management costs, maintenance, hoa's, time, everything else, it makes you question whether it's worth it. And by no means is it even guaranteed. It could take 90 days to evict without payment, costs to replace after the tennant trashes your place, etc. It's not all gravy... That 36,000 would probably be down significantly on average. Yes the house appreciates, but it also depreciates in certain scenarios.

So you're advocating buying variable rate CD's today in the hopes that the rates will go up sometime soon? You do know that super ultra commander Bernanke has stated that the Fed is going to keep rates artificially low for the next few years right? Anyone who buys a CD today is assured to lose money for the next few years as inflation is greater than the interest rate.

[Drazen]

(10-24-2012 03:00 PM)thedude3737 Wrote:  

I could start a restaurant for 100K in Los angeles. Or about a quarter of that in SE asia.

I'm not talking white tablecloth, a full floor staff, or fancy kitchen equipment.

Just a few burners, a cold station, dishwashing station, small dining room, like 40 seats. Bring in a friend to run the front, pay an accountant to come in 3 times a week to handle paychecks, invoices, and bullshit from the city. Cook simple food in a dope neighborhood for people who really like food, not some Top Chef wannabe bullshit with 12 components on each plate.

I'd make 45K my first year and grow from there. If I've got major cash saved I'd be closed one or two days a week and take a month off every year.

food trucks would be good too. Pretty low startup costs, low overhead, no dependency on a location and you can always move! work any day you want.

[Teddykgb]

(10-24-2012 01:14 PM)Bad Hussar Wrote:  

One idea would be to spend a few years building up a series of relatively low investment franchise businesses in your particular town. Keep an eye out for a trusted friend/relative/employee who would be able to run the business in your absence. Once you have a good income coming in from the franchises and you have installed a trusted manager you should be able to physically leave for long periods of time. Provided you're not a control freak who thinks the world will stop turning without your intervention.

I mention franchises, rather than other types of businesses, because it's easier to leverage that $500,000, when you are running an established franchise rather than a completely new business. i.e. a bank is more likely to olan you money. Say you have 5 franchise locations where your investment is $100,000 into each, while you raise another $400,000 in loans for each location. You do your due dillgence and work your arse off to make sure each franchise is returning more than the interest rate you're paying on the loans and you're leveraging your $500,000 to give you a great return. A lot less dangerous than real estate, which in my opinion is way over-leveraged.

This is what I was thinking. When I was in highschool I worked at a restaurant as a cook for 1 year so I have some experience. Alot of the restaurant franchises that I looked at want you to have around 400k to 700k in liquid assets so it would be in the price range.

A friend of a friend just opened up a Five Guys in my town and they are making a killing. After traveling I have ran into a few other restaurants that would be good in this area.

Plus I heard dunkin donuts is making a comeback to my area. The only thing that scares me about donuts is watching the rise and fall of krispy kreme in my area. But at least dunkin has really good coffee or so I have heard.

[rudebwoy]

Ok just how much interest can you get on $500k??
If it is enough to live on I am not touching a cent of the principal, I would love to check out the rat race. I would travel like a mofo, there are so many places you can rent for cheap around the world.
I want to buy time, having a business and working sucks all my time away.
I would move to Tampa and make a documentary about El Mech, then sell it to some network and make more money. lol

[Blaster]

I would buy a house or condo in the $400,000 range and use the rest to pay for taxes and maintenance.

After taxes, rent is my biggest expense. Paying cash for a home allows you to skip the ass-raping that is a 15+ year mortgage and you get a place to live. If you travel a lot and don't mind someone else in your house there's airbnb to make some extra cash.

[Drazen]

Hmm, maybe I'd buy some decent camera equiptment and make some travel films. Then pay some unemployed film editors 10-20 bucks an hour to cut them together into various web series and try to be an alpha version of rick steves. try to start a whole series, sell on itunes or whatever. something fun. maybe won't make money...but it might. and it'll be pretty fun to do and won't cost a whole lot.

[Blaster]

(10-24-2012 05:43 PM)rudebwoy Wrote:  

Ok just how much interest can you get on $500k??

At current rates, very little. You might be able to clear $5,000 per year on a time deposit account. Most savings accounts will net you somewhere between $750-$1000. After accounting for inflation, that's essentially nothing.

That is because of the ongoing-and-probably-never-going-to-end recession. Rates are low to discourage people from saving money. To compare, when I opened my first savings account in the late 80s, I could have gotten $15,000 per year on $500,000. Time deposit rates were even better.

[Kona]

I got 8 live turkeys for $150.00 this morning. Just in time for Thanksgiving.
   

You can get all kinds of crazy shit on Craigslist.

Aloha!

[Cooze Hound]

With a 6% return, I would have 30K a year. Enough to live comfortable in EE or Central America for some time.

[Teddykgb]

(10-24-2012 06:53 PM)Cooze Hound Wrote:  

With a 6% return, I would have 30K a year. Enough to live comfortable in EE or Central America for some time.

where are you getting 6% so easily?

[Moma]

(10-24-2012 06:27 PM)Kona Wrote:  

I got 8 live turkeys for $150.00 this morning. Just in time for Thanksgiving.


You can get all kinds of crazy shit on Craigslist.

Aloha!

This was so random...LOL!

[cibo]

I'd pay of my student loans and then start a business. I always have like 3-4 ideas in my head any given time.

[pitt]

I am currently living off passive income. If i had 500k right now, i could live the rest of my life without working for anybody (although i dont work fo anybody right now). I may invest 150k in order to make more money, but if i decide not to stress myself, this 500k could be enough for the rest of my life.

By the way, its funny how many guys here in their 30s and 40s advise younger cats to focus in making money and then when we see them in these type of threads, i get the idea that they dont have that much money saved. If i was to spend my 20s solely on making money, i would make sure that i would be WELL off by the time i get to my late 30s.

[rudebwoy]

(10-24-2012 06:56 PM)murrb Wrote:  

(10-24-2012 06:53 PM)Cooze Hound Wrote:  

With a 6% return, I would have 30K a year. Enough to live comfortable in EE or Central America for some time.

where are you getting 6% so easily?

I would imagine it would be easy to get those kind of numbers when you are depositing that amount of money.

[pitt]

(10-24-2012 08:19 PM)rudebwoy Wrote:  

(10-24-2012 06:56 PM)murrb Wrote:  

(10-24-2012 06:53 PM)Cooze Hound Wrote:  

With a 6% return, I would have 30K a year. Enough to live comfortable in EE or Central America for some time.

where are you getting 6% so easily?

I would imagine it would be easy to get those kind of numbers when you are depositing that amount of money.

I swear there are banks that will pay you 6 or 7% interest on your savings.

[rudebwoy]

(10-24-2012 08:11 PM)pitt Wrote:  

I am currently living off passive income. If i had 500k right now, i could live the rest of my life without working for anybody (although i dont work fo anybody right now). I may invest 150k in order to make more money, but if i decide not to stress myself, this 500k could be enough for the rest of my life.

By the way, its funny how many guys here in their 30s and 40s advise younger cats to focus in making money and then when we see them in these type of threads, i get the idea that they dont have that much money saved. If i was to spend my 20s solely on making money, i would make sure that i would be WELL off by the time i get to my late 30s.

Times have changed now, but when I was in my 20's you always thought the money tree would be there. As you get older you go to more funerals than weddings, not like I know too many people getting married.
You just reach a point whereby you realize that you will not live forever and saving for a rainy day is important. I have friends who have lost jobs and had a hard time getting back on there feet.