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A question for the financial gurus

Topic closed. 19 replies. Last post 3 years ago by Teddi.

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Teddi's avatar - Lottery-008.jpg

United States
Member #142499
May 13, 2013
1182 Posts
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Posted: May 30, 2014, 9:31 pm - IP Logged

I'll admit the credit angle never once crossed my mind. Probably because I'd think if one won a boat load of money, one wouldn't need to buy anything on credit ever again. But a higher credit rating is definitely something to consider.

At least until AMEX sends their black card. LOL. After that I doubt I'd give my credit score another thought.Dance

    CDanaT's avatar - tiger avatar_04_hd_pictures_169016.jpg
    TX
    United States
    Member #121193
    January 4, 2012
    1637 Posts
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    Posted: May 31, 2014, 8:42 am - IP Logged

    I'll admit the credit angle never once crossed my mind. Probably because I'd think if one won a boat load of money, one wouldn't need to buy anything on credit ever again. But a higher credit rating is definitely something to consider.

    At least until AMEX sends their black card. LOL. After that I doubt I'd give my credit score another thought.Dance

    Teddi,

    Going back to your original posting. The house purchase is depending on how much you win might and depending on your budget in the future. Lets say you take home a 50 million dollar cash option win of which Uncle Sugar taxes his 40%(yeah yeah I know it's 39.6% right now) plus any state taxes(if applicable)...so for sh*ts n giggles you walk away with ohhhhhhhhhh 26-28 million after all the taxes and lawyers fees,etc etc............The main thing is the nest egg for future financial gain

    Now let's address 2 main issues. (1) where do you want the main bulk of that cash for your financial nest egg to live off the rest of your lives ? Something that gives you 3 ? 4? 5% divendends I trust ?..okay, now(2) how much do you want to want to have out of the $26-28 Million to have as the nest egg ?? Let's saaaay you want to also want to help out  family n friends and a few choice charities, maybe set up an alumnist scholarship...don't forget the house......
    You decide on the million dollar home and a few toys....So after all your fun and sharing that you are planning on doing, STILL ...that nest egg is your baby that has to be addressed before any major purchase or assistance to others. 
    This is just my humble opinion...I would suggest you set aside $20 Million to get that 3-5% interest/dividends....3% of 20 million is 600K..not too shabby, 4% is 800K..NICE..but 5%, now that's some MOOLAH,,, sweeeeeet !!! I will take it....buuuuut, here comes Uncle Sugar & Auntie State for there hands in the newly acquired cookie jar...You know that you are still in the very top bracket of 39.6% as far as taxes are concerned(unless you give it away to charities,etc etc). Move to a state with no state income tax or dividend tax 
    Well shoot taxes on 600K arent too terrible right ? Lets look and see shall we ? $600K-40%- Auntie State's(lets say 6%) tax rate.net profit around $324K+/-..OOPS, gotta pay my accountant and investors fees,drop another 20-30K on them,now I am down to about $295-300K.....on $800K ?..take home after taxes,financial gurus and accountant, etc etc is about $400K or a few thousand over that....on 1 Million ? after taxes and fees you get $510K......
    Would you need to worry about spending ???....not too much, but you can't go hog wild and start buying properties and investing in friends businesses, vacations,cause you still have property taxes and maintenance on that $1 Million + dollar mansion, family gifts, health insurance.a new car every 4 or 5 years.who knows, maybe you also bought a lakeside cabin or Condo some place ?? more property taxes and upkeep and costs taken out of you profit.....Do you want to worry about your credit rating ??? I wouldn't, but then again I can control my spending habits. The question is, can you if you won this amount ?
    So when it's all said and done, even a $20 million dollar nest egg producing 5% still requires a budget.
    Just my 2 pennies worth

      Teddi's avatar - Lottery-008.jpg

      United States
      Member #142499
      May 13, 2013
      1182 Posts
      Offline
      Posted: May 31, 2014, 7:27 pm - IP Logged

      Teddi,

      Going back to your original posting. The house purchase is depending on how much you win might and depending on your budget in the future. Lets say you take home a 50 million dollar cash option win of which Uncle Sugar taxes his 40%(yeah yeah I know it's 39.6% right now) plus any state taxes(if applicable)...so for sh*ts n giggles you walk away with ohhhhhhhhhh 26-28 million after all the taxes and lawyers fees,etc etc............The main thing is the nest egg for future financial gain

      Now let's address 2 main issues. (1) where do you want the main bulk of that cash for your financial nest egg to live off the rest of your lives ? Something that gives you 3 ? 4? 5% divendends I trust ?..okay, now(2) how much do you want to want to have out of the $26-28 Million to have as the nest egg ?? Let's saaaay you want to also want to help out  family n friends and a few choice charities, maybe set up an alumnist scholarship...don't forget the house......
      You decide on the million dollar home and a few toys....So after all your fun and sharing that you are planning on doing, STILL ...that nest egg is your baby that has to be addressed before any major purchase or assistance to others. 
      This is just my humble opinion...I would suggest you set aside $20 Million to get that 3-5% interest/dividends....3% of 20 million is 600K..not too shabby, 4% is 800K..NICE..but 5%, now that's some MOOLAH,,, sweeeeeet !!! I will take it....buuuuut, here comes Uncle Sugar & Auntie State for there hands in the newly acquired cookie jar...You know that you are still in the very top bracket of 39.6% as far as taxes are concerned(unless you give it away to charities,etc etc). Move to a state with no state income tax or dividend tax 
      Well shoot taxes on 600K arent too terrible right ? Lets look and see shall we ? $600K-40%- Auntie State's(lets say 6%) tax rate.net profit around $324K+/-..OOPS, gotta pay my accountant and investors fees,drop another 20-30K on them,now I am down to about $295-300K.....on $800K ?..take home after taxes,financial gurus and accountant, etc etc is about $400K or a few thousand over that....on 1 Million ? after taxes and fees you get $510K......
      Would you need to worry about spending ???....not too much, but you can't go hog wild and start buying properties and investing in friends businesses, vacations,cause you still have property taxes and maintenance on that $1 Million + dollar mansion, family gifts, health insurance.a new car every 4 or 5 years.who knows, maybe you also bought a lakeside cabin or Condo some place ?? more property taxes and upkeep and costs taken out of you profit.....Do you want to worry about your credit rating ??? I wouldn't, but then again I can control my spending habits. The question is, can you if you won this amount ?
      So when it's all said and done, even a $20 million dollar nest egg producing 5% still requires a budget.
      Just my 2 pennies worth

      Hi CD, thanks for your insight. And trust me I'm taking it all in simply because I hadn't really gotten the mindset of staying in debt to anyone unless I had to. If you don't have to, why do it? But these guys had perspectives I hadn't thought of; not having the money tied up in property when it could be invested hadn't occurred to me because I was looking at being beholden to a bank AND the added interest paid on that mortgage that could be avoided. Regardless of the amount won there still has to be a budget. No one has yet  won a jackpot that was large enough to not need a budget. The ones who don't budget are the ones we shake our heads at wondering how they could blow through a 9 figure cash payout. 

      The way I saw things was this, if the worst happens, and you become one of those people who lose a large chunk of their winnings, at least you have a roof over your head. My brain cannot really fathom a multimillionaire ever putting himself in a situation that he can be homeless. Even if they bought a mansion and can no longer afford the upkeep/taxes/HOA fees etc, the house can be sold (at a loss if need be) and they can downsize but still have a place to call home.

      Based on what I've heard here and how I personally feel about debt, I think I'd still not have a mortgage on any primary residence, but would have a mortgage on any vacation/secondary property.

        mjwinsmith's avatar - moon

        United States
        Member #391
        June 8, 2002
        16061 Posts
        Online
        Posted: May 31, 2014, 7:47 pm - IP Logged

        To the financially savvy lottery post members, I have a quick question for you. Is there any circumstance where it's better to have a mortgage than buy a house outright?

        There have been so many lottery winners who lose their homes due to foreclosure because they missed mortgage payments, I had to ask. So many of us would love to win the lottery just so we can pay off our mortgages. I'm not getting why anyone would give away thousands of dollars in interest to the banks instead of just paying for the house in full. Why would a person who just got $50 million deposited into their accounts, take out a mortgage on a $2 million house? Isn't the key to get out of debt and stay out of debt??

        Logic would dictate in this situation. If someone hit the Lottery for $50,000.00 and took a lump sum then they would have more that enough to purchase a house for $2,000,000.00 outright. So yeah, why would they take out a mortgage on a new home purchase.

        Forget the Lottery winnings for a moment, if you had $2 million cash money sitting somewhere and wanted to buy a house, why would you not want to purchase it outright and not go into debt??

        Yeah, take into account insurance and monthly expenses for the home and if you can afford it then it would be a good move. If not then maybe a $1,000,000.00 home would be best or a home for lesser amount.

        Just like with gambling, never bet over your head, or in this case don't go into debt if you can't afford the monthly payments if you don't have the income monthly to pay for it. You are just setting yourself up for failure.

         ~Michael

        "Don't be a Dummy, Make 'Dat Money"

        Mjwinsmith's Blog Page:   http://blogs.lotterypost.com/mjwinsmith/

        "How to Play My Pick-4 System": https://www.lotterypost.com/thread/306450

          Teddi's avatar - Lottery-008.jpg

          United States
          Member #142499
          May 13, 2013
          1182 Posts
          Offline
          Posted: May 31, 2014, 8:55 pm - IP Logged

          Logic would dictate in this situation. If someone hit the Lottery for $50,000.00 and took a lump sum then they would have more that enough to purchase a house for $2,000,000.00 outright. So yeah, why would they take out a mortgage on a new home purchase.

          Forget the Lottery winnings for a moment, if you had $2 million cash money sitting somewhere and wanted to buy a house, why would you not want to purchase it outright and not go into debt??

          Yeah, take into account insurance and monthly expenses for the home and if you can afford it then it would be a good move. If not then maybe a $1,000,000.00 home would be best or a home for lesser amount.

          Just like with gambling, never bet over your head, or in this case don't go into debt if you can't afford the monthly payments if you don't have the income monthly to pay for it. You are just setting yourself up for failure.

           ~Michael

          Hi Michael, I don't think the question is they got mortgages they couldn't afford. They could all afford it initially. And even discounting those that went hogwild or spent their money on drugs and prostitutes, you can be relatively careful and still lose large chunks: banks go under, accountants embezzle, businesses go bankrupt, stocks tank, investments don't pan out, divorces happen...there are a whole lot of non-high spending scenarios where you can end up behind. But in the event of any of those situations happening, a lottery winner should be situated in such a way that they are never homeless. Downsize if need be, but still be able to have a debt free home. I guess for me the peace of mind is worth more than the interest I could make investing that money.

          But I acknowledge that it isn't the smarter course to have a lot of money tied up when it could be out there being invested and making me money. So while I had thought to never have a mortgage, I would probably have a mortgage on any vacation and investment properties assuming the rates were favorable. If a bank gave me a Zuckerberg 1% deal the probably would turn to a definitely.

          Do millionaires qualify for 1% or do you have to be a billionaire, I wonder.