How MacArthur Geniuses Handle Their Money Windfalls
nytimes.com
nytimes.com
I had a Shuttleworth Fellowship for 2 years which is very similar to the MacArthur Genius grant. They are both often enough to not worry about having to work a job to pay your bills and feed your family. (The Shuttleworth fellowship includes enough to pay for legal, financial, travel, contractors, etc)
I worked harder during my fellowship than I can recall otherwise. I knew it was a once in a lifetime opportunity and that I only had a finite amount of time to do something great.
I wrote about my experience as a fellow here.
MacArthur winners have two advantages: First, they are probably good at something, and therefore are likely not poor. Secondly, even if they are poor, they are probably very focused on their thing which made them get the prize, and any money goes to their thing, not to themselves, which makes most people a little more rational when deciding things.
I spend quite a bit of time thinking about this but it doesn't appear to be a solveable problem for people with kids/family even if their earnings as an IT/SDEV person are well above average.
The principle of not wasting money is well taken, though.
Yes his stuff works in the same way that Amway works for the people making a lot of money off of it - it's not realistic for the majority of people who want to do it.
He is almost the antithesis of an Amway salesperson. His philosophy is mostly don't buy stuff you don't need and you need way less than our consumerism based world tells you to need. He also is very much "find your own way".
[1]http://www.mrmoneymustache.com/2017/05/19/2016-spending/
PS - When you are trying to live on $25,000 a year so you can choose what you work on, a $200-$500 a month air conditioning bill some people have for half the year is significant.
http://hcsoftware.sourceforge.net/jason-rohrer/simpleLife.ht...
Living on $10k doesn't have to mean only having income of $10k. I personally say "we live on $50k" but our income is more than 3x that.
It might be easier to start with a goal of maybe 80% first before moving to 50%? Seems overly ambitious to start with.
This is the real, real big issue. We are surrounded by our peers spending money and ads that tell us to spend more. It makes us lose touch with what's a need vs a want and what sort of spending would actually improve our lives. It's going to be different for everyone, of course, we aren't the same, we all have different priorities in life. I remember reading a Reddit post where someone thought a stay at home mom selling her (financed) car was totally ridiculous because the kids might have a doctor's appointment one day. This was an upvoted post. This was a second car and the family was in very siginficant debt. Sure, a second car is very nice but not anywhere near a "need" for a stay at home parent.
Like, uh, if she needs the car one day she can jut drive her husband to work and pick him up again.
Personally, my family can certainly afford a second car, but we have one car because a second car would costs thousands of dollars and it's just not worth thousands of dollars to us just to avoid the inconvenience of dropping my husband off at his work on my way to my work and picking him up again. That money is better spent on things that give us more joy then avoiding spending more time in the car together.
Every dollar spent requires trade-offs.
Having a spouse that agrees with you in the realm of personal finance and life goals is incredibly important. I don't think a marriage could last without having the same financial/life goals. Not without a large amount of resentment anyways.
Two working people == two cars in most places where public transportation is unavailable or very inconvenient. There's insurance, taxes and maintenance. Health insurance - I probably don't need to say much but it's insanely expensive for most people.
I guess for a couple without kids and the right jobs at right places some things are simplified. You could rent a 1BR without worrying about the school districts, have decent health insurance for two, use public transportation and keep your entertainment needs limited. That might get you to a semi comfy retirement at not very old age but it feels like anything else is just going to be a constant hustle.
Me, my wife, and our two kids all live in a 720 sq ft, 2 bedroom house in a worse part of town. We have one car (1999 minivan bought in cash). Right now I work remotely, but I take the bus to work when I'm not remote. It's definitely not living large, but I like the freedom and low-stress.
In contrast, I completed my professional degree and a masters in law at the two best universities in my country for a total out of pocket tuition cost of approximately $9,000. That's around 1.3 orders of magnitude apart.
I'm sure there will be replies about the quality of the alumni networks or the level of scholarship (which would be very poorly founded), but that misses the point: the magnitude of debt is shocking.
i'm sure he's doing well, but the play business is a tricky one and never that large, afaik. i'm sure he's well positioned tho!
http://time.com/money/4362742/hamilton-cast-earnings-lin-man...
I would have thought you'd make a lot more money for creating such a huge cultural force, but I suppose the economics of live theater don't scale much no matter how popular you are.
I'm sure he made a pretty penny from the Moana soundtrack though
First off, there are two pictures in the article, so the idea that "looks matter" as pertains to selfishness, whatever that means, is in question.
Secondly, the idea that "looks matter" doesn't make sense. She seems rather regular looking, not picked out specifically because of her looks.
Lastly, spending money on your children to me is far less selfish than paying off your personal debt, which did not get a photo.
However, while this is certainly a windfall and I wouldn't turn it down its not a lifestyle changing windfall. I would say this is enough money to do anything for at least a short amount of time, but it is certainly not enough to do nothing. I think that combined with the fact that the awards are given to people who are pursuing their passion is a large differentiator to those who've won the lottery and aren't rooted in some cause.
It would be a huge kickstart to my independent adult life, and the savings over the decades from not having a mortgage would absolutely be lifestyle changing. I'm not talking about yatchs and lamborghinis, but it would certainly provide the freedom to live on less income in exchange for more free time to pursue hobbies and side projects.
Not that I have any reason to complain, I'm very grateful for who and what I have in my life right now.
A larger issue IMO, is condo's / houses have large upkeep costs and reduce mobility. So, simply renting while investing 90% of the money for a very early retirement is probably the best bet.
Of course, there will be years you spend much less and years your roof needs replacing so you'll spend much more, so that's why you amortize.
The real savings from renting is the flexibility to up size, downsize, relocate etc as needed and with minimal transaction costs. Thinking of starting a family some day? That does not mean you need to pay for more space today, unless your planing to stay put for 15+ years.
People say this but do they know what it means? It's not like the "woooo, free money!" people make it out to be. You are spending a lot of money and saving a little bit of money. It's only a very significant decrease in taxes if you pay a real lot in interest and have high property and income tax.
In my experience buying a house saved me only about a whopping $500 in taxes the first year. And you better fucking believe that $500 went right back into the house in the form of maintenance and upkeep.
Furthermore,
You don't get the mortgage interest deduction if you don't itemize and take the standard deduction instead. Due to new tax laws the standard deduction after 2017 is so high it will be taken by 97% (IIRC) of Americans. So mortgage interest deduction is totally irrelevant from 2018 on.
One of my biggest concerns with putting the vast majority of my wealth in my house is a lack of asset diversion and if it causes you to negligent the tax advantages of contributing to retirement account. ESPECIALLY when your in your 20s, that's when compound interest work most of it's magic.
The first twelve months payments total $36,028.44, of which $24,689.72 is interest. At the top marginal tax rate of 37%, that's $9,135.20. For married couples your HHI has to be above $600k to be in that marginal bracket so your household is pulling in at least $630k+ in this example.
Does a household making $53,000 a month get anything by saving $9,000? Especially if they need to spend $36,000 to get it?
It's _a_ way to do it though. My argument isn't that buying a house with the cash is the optimal way to spend it, simply that having a house fully paid for is a massive financial burden taken off one's shoulders.
In Australia where a typical house can easily sell for $800K-$1M AUD in desirable locations, the repayments on a mortgage (or rent) can be crippling. I would be more than happy for that to be a non-issue for me!
I learned an interesting, though obscure, word today:
palmarès: a list of races a (bicycle) rider has won. (French, meaning list of achievements or list of winners).
Personal art projects, long-term research projects, etc. are often difficult to get funded because they are risky and may not have an immediate path toward revenue. There is surprisingly little money available in the world designated to fund people’s green-field creative work, with project leads allowed to just hire smart people and tell them to work on whatever interests them for 5+ years without worrying about immediate payoff.