"Powerball Jackpot Increases to $1.5 Billion"
This message just popped up on my iPhone. It prompted me to write this post.
In our business of financial planning, money and the lives of the people who own it are constantly front and center. We concentrate on how we can help them save more, invest better and manage the other aspects of their financial lives as efficiently and productively as possible. It's considered a success if we have helped them to withstand market volatility, pay less in taxes, hit their goals for college and retirement spending, and have a sounding board and good guidance over the course of their lives. That's how we earn our keep.
However, it's a valuable learning experience if we each (all of us, advisors and clients) take stock of our lives periodically, and the role that money plays in our overall experience of existing on this planet. When I saw the above message, I thought to myself, "$1.5 Billion is a lot of money...what would it mean to actually win a prize like this?" It's an interesting thought experiment, and by thinking through this, you may come to some realizations about your own life.
Just imagine for a moment that you are the lucky winner of $1.5 Billion. You can choose the cash option of $930 million in cash, or an annual payout of around $50 million before tax. Consider the following questions and considerations.
- If you take the cash prize, you'll receive about $422 million after tax, and if you take the 30-payment option, you'll recive somewhere around $33-37 million after tax, depending on where you live.
- Let's imagine that you select the immediate cash prize, and your net after tax sum is approximately $422 million. So you've just received $422,000,000.
- You now have more money than almost anyone else in the world. How will your life change?
- You may have to consider how you maintain your privacy, as you have just become a major target for investment schemes, long-forgotten friends and relatives, and anyone else with whom you are friends or acquaintances.
- Where will you put the money? You'll need an investment strategy, AND you'll need to figure out where to store your money. All in one bank? Several banks? You may just have to consider starting a "family office" to help you watch your newfound wealth, make good tax and investment decisions, act as a gateway, etc.
- Now that you've got your money safely invested and your family office established, we can think about what to do next.
- Pay off existing debts.
- Maybe take $1 million to do some fun things. What are they? Write them down.
- Would you buy a new home? Maybe a couple of homes in places you'd like to spend time? Don't go overboard here as every thing that we own can end up owning us in the end.
- Maybe a couple of toys...a boat? Private jet? Maybe a membership in NetJets?
- What charities are you passionate about? Would you contribute to a few that you're passionate about?
- How about your kids? What would you do for them without turning a large gift into a curse?
- What aspects of your life today will you end up changing? Is your job or career so distasteful that you would quit and start your "dream" business?
- Travel? Where would you go that you haven't been yet?
- How about your marriage or significant relationship? Can it withstand this sudden windfall? Should it? I know that's an indelicate question, but massive wealth has a tendency to disrupt relationships and expose differences in values, etc.
How'd that feel?
Our chances of winning the Powerball are slim to none. But that doesn't mean that we can't take SOME action toward our dreams, desires and goals.
The first step is identifying what's important to us. Determine what your life's "mission statement" should be and get to work on what's missing.
If you would like to begin reviewing your current situation with us, just click the button below to access our confidential 10 minute questionnaire: