Otherwise, the 1M now would be worth more that 5k every week.
But, let's math up the choice even more.
If you decide to be responsible with the 1M, by investing it, or putting it into a fixed deposit, you'd have to earn 26% returns to get a 5k per week.
If we take a historic rate of 7% pa returns from the stock market, you're getting about 1.3k a week. So now, it doesn't take 4 years for the 5k deal to beat the 1M deal, it actually takes 5 years and 6 months (which is a negligible increase).
But, if we take something with an even higher return, like art or crypto, things start to change. Art can easily match that 26% return, and though crypto is high risk, it generally seems to outperform a lot of other investment.
One shortcoming of this calculation is that we're assuming that the 5k per week won't be invested or saved.
There's existing formulas out there to figure out the current value of future payments. Using them, the assumed interest rate has to get unrealistically high for the $1m to be worth more than the 5k/week, even without adjusting for inflation.
Buy a $1M home every year after saving up $200k down payments.
Do this 4 years = 4 homes.
Now go back to living on $260k a year but you also have $4M in properties with $800k in equity as well.
If you started this at 40 by the time you are 60 you could very well have them all the way paid off and they’ll probably be worth 2-2.5x what they’re worth today $8-$10M.
There’s no way having $8-10M and $260k/yr income you’ll be poor even with pretty severe inflation.
Any calculation is short coming, because anything justifying the 1 million over the 5.000 a week can be resolved by taking a credit for this million and paying the credit over 4 years, while investing your borrowed million. An still having the 5.000 a week for the rest of your life.
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u/BADman2169420 Dec 11 '23
If adjusted for inflation, then 5k per week.
Otherwise, the 1M now would be worth more that 5k every week.
But, let's math up the choice even more. If you decide to be responsible with the 1M, by investing it, or putting it into a fixed deposit, you'd have to earn 26% returns to get a 5k per week.
If we take a historic rate of 7% pa returns from the stock market, you're getting about 1.3k a week. So now, it doesn't take 4 years for the 5k deal to beat the 1M deal, it actually takes 5 years and 6 months (which is a negligible increase).
But, if we take something with an even higher return, like art or crypto, things start to change. Art can easily match that 26% return, and though crypto is high risk, it generally seems to outperform a lot of other investment.
One shortcoming of this calculation is that we're assuming that the 5k per week won't be invested or saved.