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176 Comments
- bobsmithhome, on 10/12/2007, -2/+152Recently a friend called and requested financial advice. He had just come into a large sum of money. I gave him three suggestions:
1. Do NOTHING now. Put the money in a CD or high yielding FDIC insured account and leave it there for 6-12 months.
2. Spend the next 6-12 months learning about personal finance. Become your own financial planner (and I gave him a couple of book titles to get him started).
3. Do NOT use financial planners, advisers, or brokers. Use an accountant for tax related questions, but avoid the rest like the plague.
He seemed quite enamored with his bank's investment salesman who had wined and dined him. I warned him away. But I'm pretty sure he marched right down to his bank and plunked his money down. If he ever takes the time to learn about investing, he'll regret it someday. But he'll probably never educate himself, and so he'll go blissfully go on his way, a much poorer man than he could have been, like 99.99% of the population. - futureb, on 10/12/2007, -2/+41i wouldn't blame this guy. i blame smith barney. The guy invested 2 million with them, and instead of doing something responsible (bonds, index funds, etc.) they dumped it all into individual tech stocks IN THE YEAR 2000. Poor bastard.
- torched, on 10/12/2007, -4/+40We need to start teaching money management in high school, the first lesson should be to always get a prenup. The next would be not to lease a $50,000 bmw if you only make $35,000 a year.
- neuropsychguy, on 10/12/2007, -3/+38"why use double negatives? WHY?"
Because there are not some times when double negatives don't work better than not using them. :) - orlyfactor, on 10/12/2007, -4/+37armchair investors always know the right thing to do...
- pictureDIGGER, on 10/12/2007, -2/+33This is so common with lottery winners. They always end up poor after their dreams come true/
- queuetue, on 10/12/2007, -1/+30Way too late in life, I'm discovering that wealth has nothing to do with how much you make - it's about how much you spend.
- torched, on 10/12/2007, -7/+35Marriage is a great thing, 2 people standing in front of thier friends and family promising to stick together no matter what happens through good times and bad times. Growing, sharing, and loving, but as far as the state is concerned its nothing but another contract that is thrown into the legal system and the laws, judges, and courts are strongly in the woman's favor. Lets say your a young guy straight out of college and you just got your first job, naturally you need to work your way up the corperate ladder and you start off at a decent $40,000 per year. You meet a girl and you two really hit it off and you both later decide to get married at the age of 25 thinking that it will last forever. You get a house a 4 bdr 3 bth house for $300,000 with a 30 year mortgage for payments of $833 a month, then you decide to finance a 4 door car like a camry that costs $16,000 for 48 months at $333 per month. You get her pregnant, she has the kid and being the good and loving husband that you are you tell her she should maybe take a year off of work to stay at home with the kid and rest and that you'll pickup the slack by getting another job or doing some side projects on the weekend. Well now your always busy and she feels neglected and starts looking for attention from other guys, at first its just innocent flirting but then it progresses into something more. Some new guy is giving her all the attention in the world while your "ignoring" her because your always to busy so she decides she wants to leave you for him. She goes to the court and her lawyer says you told her to quit her job so she has no income, the mortgage and the car is in both of your names and you two have a joint savings account. What happens most of the time is that she will get the kid, the car, the house, the cash, and all you will get is the right to remain silent. Now you've gone from making a decent $40,000 a year and having about $1500-2500 in spare cash every month to having to pay for her mortgage, her car, she took your savings, you now pay child support for the next 18 years because little timmy needs new shoes every week and started taking karate classes, swimming classes, and needed a new soccer uniform. Now you only have an extra $300 a month so you have to move back in with your parents at the age of 26 and live off of ramen noodles again.
Yea that is an extreme example but its not too far from the truth. Its not just men either it can happen to women too so a prenup is a good idea for both parties, lets just call it marriage insurance. - inactive, on 10/12/2007, -4/+30I'm not so sure he was irresponsible with the money, he is 72 years old - he wins all of this 'money' only to be told he is only going to get $90k in the first year and the more in each subsequent year for 25 years.....I can imagine it would have been attractive to do the deal he did to get it up front so he could at least enjoy it before he got to his 80s and starts to decline.
I think he might have a case against his advisors if he was lead by them to invest in the tech stocks - if they gave him advice which resulted in him losing his money then they need to share responsibility - he could certainally argue that as a 72 year old working class person he wouldn't have been expected to understand the ins and outs of corporate finance.
Sad story though. - quomen, on 10/12/2007, -5/+27meh.. look at mike tyson.
Just because you make a shartload of money doesn't mean that you don't need to know how to manage it. - TheGentleman, on 10/12/2007, -12/+33allegedly the winning numbers were: 4, 8, 15, 16, 23, 42...
- EBFoxbat, on 10/12/2007, -4/+24The best financial move in that story was by the wife: asking for a divorce.
- inactive, on 10/12/2007, -1/+20Shame on the rest of us for not inheriting 64000 Shares of International Business Machines stock.
- norbiu, on 10/12/2007, -2/+20easy come, easy go
- Caruthers, on 10/12/2007, -5/+23That guy is an idiot. Who turns over all the money they have without doing any research first?
- diggerhater, on 10/12/2007, -3/+21That's not really true. A majority of them turn out fine. New money doesn't change you. It just magnifies who you are. If your a spender, you'll probably spend it all. If your a giver, you'll probably give a lot. If your a saver, you'll probably save it all.
These people just make better stories for the media than the ones who don't lose it all. - ivantalboys, on 10/12/2007, -0/+18He didn't have the full amount as a lump sum, state law says he would get he winnings in instalments over 25 years, this isn't a nice prospect for a man in his 70's.
- inactive, on 10/12/2007, -0/+17@bobsmithhome:
4. Two chicks at the same time.. - brianbennett, on 10/12/2007, -1/+184. DON'T TELL ANYBODY!
- TheGilmanator, on 10/12/2007, -2/+18Little high, little low.
- DangerMouse9, on 10/12/2007, -0/+14apparently this guy.
- gjscds, on 10/12/2007, -2/+16@dpdesign:
"And someone making $60,000 every year isn't really being irresponsible by leasing an $80,000 Mercedes..." "Credit can vastly increase a person's buying power and standard of living with very few negative side effects, if it is used responsibly."
Keep telling yourself that to yourself. Follow by your own rules. Wait a decade. Then come talk to us... Report your findings. - inactive, on 10/12/2007, -1/+15Mainly because they trust people!!
- inactive, on 10/12/2007, -2/+15"And someone making $60,000 every year isn't really being irresponsible by leasing an $80,000 Mercedes as long as they're being intelligent about what *else* they're spending money on."
Well those people are being irresponsible. You might as well flush your paycheck down the toilet... And I'm sure that almost anyone who leases a car isn't being intelligent about what *else* they're spending money on. - unloud, on 10/12/2007, -2/+15My high school required two years of Economics to graduate. Some of this is getting taught.
- Arkz, on 10/12/2007, -1/+14I see a little silhouetto of a man,
Scaramouche,scaramouche will you do the fandango-
Thunderbolt and lightning-very very frightening me-
Galileo,galileo! - evilregis, on 10/12/2007, -0/+12Absolutely. It doesn't matter how much money you make if you're regularly spending more than that. On the other hand, the guy who makes a modest salary, pinches his pennies, maybe snags a lucky investment or two, can retire a wealthy man.
- unloud, on 10/12/2007, -1/+12Magnifico-o-o-o-o!. . .
- cawpin, on 10/12/2007, -1/+12I don't know who Dave Ramsey is but I'll give you a quick lesson. Donald Trump (his various corporations actually) has filed bankruptcy multiple times and he is still raking in the cash. Filing bankruptcy and going bankrupt are two very different things. Filing is often a business decision that ends up saving you money in the end.
- stanleyford, on 10/12/2007, -1/+11@dpdesign - "The hell? While a $50,000 BMW may be a bit irresponsible for someone making $35,000, you seem to be implying that one should never buy or lease items that cost more than one makes in a year, which, among other things, would make it awfully difficult for most people to own a home."
I don't think torched is implying anything of the kind. There's a difference between buying a luxury car, which cannot be considered a necessity, and purchasing a home, which is a necessity. - synapticcleft, on 10/12/2007, -0/+10You have a catch 22 situation here. Smart people would do a much better job of investing the winnings but smart people don't play the lottery...
- douggmc, on 10/12/2007, -2/+11Did you even RTFA? Also, you MUST have a degree in finance with those VERY accurate calculations (maybe you are the same ass-clown broker at Smith Barney that lost all his money)?
- logicalnoise, on 10/12/2007, -1/+10wrong, smart people don't play the lottery religously relying on the dream that they might win. Most will play when the jackpot is high or if they can do it as a pool.
- OrangeCrush, on 10/12/2007, -0/+9While the lotter is effectively a "tax on people bad at math." Smart people still play the lottery, gamble, smoosh pennies in those machines at gift shops etc. if they enjoy such things. The odds of winning are negligible, but it's still amusing enough to spend a dollar every once in a while.
- santiago1, on 10/12/2007, -1/+10
Oh Mamma Mia... - inactive, on 10/12/2007, -1/+10Don't you know that cashiers at 7-11s have PhDs in Computer Science?
- byrons, on 10/12/2007, -2/+115.25 APR dude. Not 5.25% per month. I'd be loaded if it were 5.25% a month.
- brufleth, on 10/12/2007, -0/+8@ torched
That is an excellent "what if..." story for why to get a prenup. People often do look at them as insulting. They also think that the person they love right now would never screw them. Well ***** happens and it happens a lot. I love my fiancee very much. We've been with each other for five and half years already and getting married is just something we figured we'd finally do and not so much a segway into a new stage of our lives. I still think a prenup would be a good idea just in case. ::shrug:: Call me pesimistic but there are plenty of possibilities ending in one of us being severly screwed by the other. We don't want kids so that makes things slightly less complicated but a prenup is a good idea and I'm especially surprised that more of these people who get married after only knowing a person a year don't get them. - powerhouse, on 10/12/2007, -2/+10yeah, must be rough driving a beater G35 after that inheritance. Maybe bragging on the internet would make you feel better?
- tHePeOPle, on 10/12/2007, -2/+10(Let him go!) Bismillah! We will not let you go
(Let him go!) Bismillah! We will not let you go
(Let me go) Will not let you go
(Let me go) Will not let you go (Let me go) Ah
No, no, no, no, no, no, no - schnuck, on 10/12/2007, -2/+10...and your plan is? ah, thought so....
- aviazn, on 10/12/2007, -0/+7raynar's got it right.
There was a story on This American Life a few weeks ago about a guy who become a salesman in the lump sum industry. Back before the states offered lump sum options, you could go to a company that specialized in lottery winnings and they'd give you a lump sum in return for the rights to your cash flow from the state. It was a fascinating story--the vast majority of lottery winners he went on sales calls to had blown it all very quickly, suffered emotionally, and had their lives changed for the worse.
Edit: 5xstuN beat me to it. - tical2756, on 10/12/2007, -1/+8His first mistake was not checking off the lump sum option. You're always better off with the lump sum especially if you're in your 70's
- ChumpChief, on 10/12/2007, -3/+10"Easy they come when you got the dough
Easy they go when you got no mo'" - Urusai, on 10/12/2007, -2/+8People who play the lottery are idiots. Therefore, when one of these idiots wins, the ultimate disposition of the money in the hands of grifters, con men, bank executives, investment brokers, etc., is assured.
- raynar, on 10/12/2007, -4/+10"I'm not so sure he was irresponsible with the money, he is 72 years old - he wins all of this 'money' only to be told he is only going to get $90k in the first year and the more in each subsequent year for 25 years.....I can imagine it would have been attractive to do the deal he did to get it up front so he could at least enjoy it before he got to his 80s and starts to decline."
He's a ***** then. You always take the lump sum, even if you only get about 65%. If you're getting your winnings over 30 years, and after the 1st year you die, the money doesnt go to anyone else, it goes back to the sytem.
Hell, just stick it some bank accounts and collect some interest checks. - unloud, on 10/12/2007, -2/+7mama mia let me go -
Beelzebub, has a devil put aside for me,
for me?,
for ME!!?
("Digg users in concert. This Friday only!") - laelfrog, on 10/12/2007, -0/+5So basically you inherited ~ 6.5m of IBM stock (102 today), and you invested most of it in an insured fund getting 2.1%
Dude, thats just keeping up with inflation.
Yea AAPL is a still good pick at this point, but don't waste your time getting 2.1%. There are FDIC insured savings accounts that will get you ~ 5% give or take a little, it may not seems like a lot, but over time it makes all the difference in the world. Think about your kids, or your grandkids. The best gift, keeps on giving...
There is a comment at the top of this post. Please re-read it!!! Please do your homework!!! - turnlikeawheel, on 10/12/2007, -0/+5Totally! We could use some new guitars and *****. Hook us up!
- jhnewt, on 10/12/2007, -0/+5My plan when I win the lottery is to reinvest all my winnings.... in the lottery! If it worked once, it's bound to work again!
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