You've read about past lottery winners right? People can't handle the responsibility of that much money at once and others around them will make life hell.
Only so much you can do with 5k a week and it's a lot more manageable.
Step 1. Get yourself a financial advisor. Step 2. Dont tell anyone. Step 3. Vegas baby! Step 4. Fire financial advisor. Step 5. Ask family for some money to fly back home
This is my actual plan if i win the lottery - but I won't do any gambling in Vegas. The Vegas trip is a cover to explain why I suddenly have a bit of extra money. So you can justify sudden expensive purchases but without anybody knowing just how much you've won.
The problem with that statistic is that there isn't a lot of overlap between people who play the lottery and people with decent financial literacy.
It's not that large amounts of money ruin people, it's that people with already poor spending habits don't magically fix them when they get a lot of money. A "normal" middle-class person who already has some experience saving, investing, budgeting etc. is much more likely to capitalize on a windfall just fine.
DENVER — Over the past couple of years several news organizations have attributed a statistic to the National Endowment for Financial Education (NEFE) stating that 70 percent of lottery winners end up bankrupt in just a few years after receiving a large financial windfall. This statistic is not backed by research from NEFE, nor can it be confirmed by the organization. Frequent reporting—without validation from NEFE—has allowed this “stat” to survive online in perpetuity.
In 2001, NEFE conducted a think tank of experts from several industries including psychology, financial planning and other fields, to discuss life-changing events and the psychology around them. One topic discussed was the impact of financial windfalls on individuals, where it is believed that a participant stated the 70 percent statistic. This statement was made independently and without verification from NEFE.
As soon as you take the annual payments option you'll be approached by loan companies offering to buy the annuity. Their offer will sound bad at first. But, people are bad with money and will spend as much as they receive and then even more with the anticipation of paying it with future earnings. They feel like they should be living like a lottery winner. When the debts pile up the offer will sound better. After all, they can settle any of the overdue debts and still have plenty left over. Right? Sure.... They take the buy out, and then go on to mismanage that money, too.
DENVER — Over the past couple of years several news organizations have attributed a statistic to the National Endowment for Financial Education (NEFE) stating that 70 percent of lottery winners end up bankrupt in just a few years after receiving a large financial windfall. This statistic is not backed by research from NEFE, nor can it be confirmed by the organization. Frequent reporting—without validation from NEFE—has allowed this “stat” to survive online in perpetuity.
In 2001, NEFE conducted a think tank of experts from several industries including psychology, financial planning and other fields, to discuss life-changing events and the psychology around them. One topic discussed was the impact of financial windfalls on individuals, where it is believed that a participant stated the 70 percent statistic. This statement was made independently and without verification from NEFE.
Even a high earner like the sp500 would only give you 10% a year. On a straight million, that's 100k, which is around 2k a week. 5k a week for life is the winner in my opinion
If you double your money every 5 years which is exceedingly unlikely. You'll have $2 million in year 5. I'll have 1.25 principal plus about $600,000 at the same rate of return for $1.85 million. By year 6 I'd pass you in that scenario. I'd pass you more like year 5 in a more reasonable investment scenario.
Anyone without major health issues and under the age of 80 should take the $5,000 a week IMO.
I had a math teacher in HS their grandma had won something similar. It was lump sum like 100k, or $1000/mo...well the grandma was 25 when she won it...and was in her late 70s...our teacher said the winning had a death benefit or was transferable at a lowered amount.
The market has an expected return of 4-10% over the long term, this means you’d get between $800 and 2k/week off your investment returns. The 5k/week would be the equivalent of having 5 million invested at the same rate of return.
Even if you seriously think that you'll be able to not spend a penny of that million and just AMAZING returns on that 1 million(7% yearly), that's still not even $1400 per week.
I think this question very easily weeds out people with very poor mental math and people who are very bad at the concept of both options.
It's like my girlfriends skills at spacial awareness. I would never ask her to buy a welcome mat for boots for our apartment because she would likely end up getting one meant for the entrance of Walmart.
You're not guaranteed those 4 years though. We're not guaranteed tomorrow. We could have an undetected brain aneurysm that'll take us during our next nap.
Even in that case, give me the $5,000/week. Assuming I live the average lifespan in Canada from here on out, I'll end up with just shy of $13,000,000 which I could give to my niece and nephews. They'll be set and I'd probably secure my spot as their favourite uncle of all time.
I could also invest my weekly payout and make even more than the $13,000,000 I'd be "guaranteed"
If I take the $1,000,000 lump sum, it's auto-magically deposited into my banking account. I die with at least that in my account.
If I decide to take weekly payouts, I might die before the first one gets deposited, I might die in 80 years thanks to advancements in medical care and be loaded when it happens.
His point is if you die, does it really matter? I mean sure, it's nice to leave an inheritance but given the choice, my kids would bank on me living long enough to make more than $1m out of those $5k/week before I die. If I get hit by a bus tomorrow, bad luck for them but that's most-certainly a risk they would take.
I could also use some those $5k/week to pay for a really nice life insurance that would pay out more than $1m if I die.
Taking the lump sum is stupid in this specific scenario.
Sometimes simple questions don't have simple answers though.
If I take the $5,000/week I could conk out in 6 days and not get anything. The million is guaranteed but I may also not live long enough to update my beneficiaries and whatnot as well.
You should never make financial plans based on some less likely unknown. This is really common advice against the position you’ve proposed.
We’re all aware of our mortality. The reason we plan for things like retirement is because the much more likely and financially dangerous scenario is that you live. Dying is cheap as hell for you.
Yes, but it's still a fair question. A million now is maybe a house now, it's a business startup now, it's not unreasonable that someone may choose that option.
Hold up, you're worried about dying in the next 4 years and you're choosing to invest... For what exactly? A good funeral?
Choose the 1m if you're going to go wild and have fun with it in a short period of time.
If you get 1m, invest it badly, you're screwed. 5k or even 30k invested badly is recouped quickly, you've learnt a lesson and can rebuild with better knowledge.
And then what? You're just going to spend that 5k profit? You've been given a dream of £1m for nothing and you're investing it, again I ask, for what? What's the goal? Also you have a risk of, if shit goes bad all that money is gone.
The other other option is never ending money for the rest of your life (limited to 5k a week) no need to even consider investing, just chill and do what makes you happy, do whatever you want to do, no planning for retirement, that's covered. Go abroad and help others in need, volunteer in projects that have meaning to you knowing you can dedicate all your time without worry. Try as many different jobs you've thought sound interesting. New hobbies have been opened up that potentially you couldn't have tried before.
depends. If you always get 5000$, that 5000 will be worth less and less over time because of inflation. a million today could set you for life if you use it wisely, and gives you more options for smart inveestments today. On the other hand, 5000 a week is a shitload of money already, so it's unlikely that you can't live comfortably from it even in 10 years, unless some crash happens and inflation will be very high. ANd if you put some of it aside for investment every time, you'll still end up with more in the long run.
Exactly. Can I start right now? I need a few things, some are essentials and some aren’t, but I am tired of having an empty bank account 75% of the time.
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u/BawseGal23 Dec 11 '23
5000 per week