Recently rich, unsure what to do with the bucks
June 17, 2013 7:47 AM   Subscribe

I never had any money. Now I have $600,000. Help me not squander it (and maybe even beat inflation).

Five years ago, in my 30s, I had about $10. Since then I've worked my hirsute and increasingly pallid ass off and have put together about $600,000. $300,000 is tied up, and I need about another $100,000 for a specific purpose next January. My annual take-home should be about $300,000 this year and will probably grow for a couple more years (culminating, I expect, around $500,000), so I'm still saving a lot.

I've never invested, really, and have no idea what to do. I also have very little time (see above re: pallid ass). I'm also bad with money (which is why now that I have some it's sitting in a bank yielding basically no interest). Possibly relevant: I'm an American expat but don't want to buy real estate in the US because it would complicate my taxes.

Someone please help me--any combination of pragmatic nuts-and-bolts and conceptual broad strokes will be appreciated. I can't work this hard forever (maybe another 10 years, max?). The last wrinkle I can think of is that there's a bit of a shelf life to the lucrative thing I do for a living (no, sadly, it's not porn), after which I can probably safely make $100,000 a year for much longer with less suffering and gnashing of teeth.
posted by anonymous to Work & Money (25 answers total) 16 users marked this as a favorite
You don't mention where you are currently living - do you have access to a financial advisor? They should be able to suggest advantageous ways to place your money so you get the most out of your hard work!
To find a good advisor you may have to meet with a few, or perhaps you have a trusted friend that might make a recommendation.
You are in an enviable position-good luck!
posted by PlantGoddess at 7:56 AM on June 17, 2013 [1 favorite]

Index funds.
posted by ewiar at 7:56 AM on June 17, 2013 [11 favorites]

You need to find a professional financial adviser. They're going to be able to help you make sense of what you want to accomplish with your money better than people on metafilter. At best you'll get a lot of conflicting answers here that will probably only confuse you further.
posted by something something at 7:56 AM on June 17, 2013 [3 favorites]

Hire an independent financial adviser. Pay them a flat fee. Ask them what you should do.

You can usefully prepare for your appointment with the financial adviser, by thinking through roughly what your aims are: do you want to retire, if so when, where and how much money will you want; are you planning to buy a house, or do you have a mortgage; and any other relevant financial plans you have. They will also be interested in your attitude to risk.

If you have no spare time you certainly don't want to go buying real estate.
posted by emilyw at 7:56 AM on June 17, 2013

To be clear - some financial advisers are NOT independent and some take commission rather than a flat fee. These ones are to be avoided.

Another question to mull over is how much of your time you ARE willing to invest in keeping on top of your financial situation.
posted by emilyw at 7:58 AM on June 17, 2013 [7 favorites]

If you don't want to do anything at all, you might just sign up for a betterment account, and let them do simple, long term focused investing for you. Low transaction fees, nice website, low stress and time investment.
posted by rockindata at 8:00 AM on June 17, 2013 [1 favorite]

Congratulations! That's quite an achievement. I would see if you can find a CPA who is an independent financial advisor. You will probably want to shield as much of that wealth from the IRS as is leagally possible.

Here are some things to consider.

1. How much risk can you deal with?

2. What do you want to accomplish with your welath?

3. How do you see yourself living, now and into the future?

The idea is, not just 'how do I make more money', but also, 'how do I live with the money I have?'

You're going to want to do some retirement planning, some investing and some protection of assets.
posted by Ruthless Bunny at 8:02 AM on June 17, 2013

Flat fee financial adviser. I also suggest you pay an accountant for tax prep each year instead of filing on your own. This should cost around $200, depending on where you live.
posted by elizardbits at 8:05 AM on June 17, 2013 [4 favorites]

If you do not already have an IRA set up, get on that right away and pay in the maximum allowable annual amount. You can discuss pros and cons of regular vs Roth with that financial adviser you're gonna hire.
posted by elizardbits at 8:07 AM on June 17, 2013 [1 favorite]

Possibly relevant: I'm an American expat but don't want to buy real estate in the US because it would complicate my taxes.

If you're making six figures, you have enough to hire someone else to worry about this for you (on preview, what elizardbits said). That's what wealthy* people do with some of their money -- hire other people to give them more time.

* - Stealing from Chris Rock: Shaq is rich, the white dude who signs his checks is wealthy. There's a difference.
posted by Etrigan at 8:07 AM on June 17, 2013

ALSO I just now saw the part where you say you are an American expat. If you are living outside the US and earning at this level you absolutely and without question need to hire an experienced accountant who can help you correctly navigate the various tax requirements of someone in your position. My $200 cost prediction is lowballed with this additional information.
posted by elizardbits at 8:10 AM on June 17, 2013

You have lots of options. Here are two very basic ones.

One is to invest the money yourself in index mutual funds. Those are accounts that essentially mimic the Dow Jones industrial average, the Standard and Poor's 500, the Russell 2000 or other stock indices. Your investment will track the index, so you always know how you are doing. Be aware that there is still some cost to this, called an expense ratio. All mutual funds have them, but they are kind of invisible because it's deducted before the returns are posted to your account. Index funds generally have low expense ratios, like a fraction of a percent per year. That's because even though it's almost running on autopilot, somebody still has to do all the regulatory reporting and paperwork, and nobody works for free. Actively managed mutual funds -- where somebody is trading stocks in an attempt to beat the market -- can have fat expense ratios that really put a drag on your account.

If you don't have time to deal with this, you may want to pay a pro to manage it. Avoid the people who earn their living based on where you invest. They are getting a commission, even if they don't call themselves salesmen. Find a flat-fee wealth manager as mentioned above. The flat fee typically is 1 percent a year of assets under management. Often the percentage goes down as the amount under management goes up, but expect to start at 1 percent. The idea here is that the manager will do whatever seems best to make the total grow, because that will increase the manager's income too.

Also, yes, have an accountant guide you through the tax jungle. That's in addition to a wealth manager.
posted by Longtime Listener at 8:25 AM on June 17, 2013 [1 favorite]

Index funds are a horrible idea if you don't know what you're doing. Get a financial adviser who will monitor your accounts, I'd get one paid by the size of the account since they have an incentive to grow your account size and look for those who only deal with accounts >$1M since of course you want your $$ to grow. Interview many people and talk to their clients as references.
posted by St. Peepsburg at 8:25 AM on June 17, 2013

You need to think about how you want to spend your money. Since you've been poor, maybe you are ok living in a regular house and eating regular meals and doing regular activities; if so, then the money can be a big stockpile for your later years. You can do some calculations as to how much you really need to spend each year, and given that number you can figure out how many years your stockpile will last you if you decide to just quit your lucrative job.

If you are getting a taste of the good life and want it to continue, you have to make different calculations. $600,000 is not infinite money; you can't go out to $1000 dinners every night and buy mansions that you take a private jet to all year round. But you can buy SOME $1000 dinners, and then a lot of $200 dinners; you can buy 1 medium-ish mansion and you can fly commercial almost any time you want to go there. But if you do that, then you won't have as big a nest egg to rely on later.

So spend some time to think about what parts of your new life do you really like and want to continue to spend money on, and which parts can you continue to live the old way, and how you predict the future will look earning-wise, and how big of a nest egg to accumulate to meet your goals.

Then take all the advice above about a financial advisor and work with him/her to make your goals a reality.
posted by CathyG at 8:29 AM on June 17, 2013

What will you be doing once you are no longer doing what you are doing? Set yourself up for that life. Will you need to go back to school? Will you want to open a small business? Do you want to live on your own farm?

Where will you be in 10-15 years? Start paying for that dream.
posted by myselfasme at 8:37 AM on June 17, 2013

Not a substitute for any of the above, but read Dave Ramsey (with a grain of salt) for some generally sound advice about living on less than you make. I read his stuff when I got a windfall, and it was extremely helpful in setting up budgets, etc.

Ironically, when you live hand to mouth you don't develop certain budgeting skills because the paycheck somewhat enforces a budget. When you have a lot of money laying around, it's all too easy to squander it - not by lighting $20 cigars with $100 bills, but by a series of bad decisions that all make sense at the time.

Congratulations and good luck to you!
posted by randomkeystrike at 8:41 AM on June 17, 2013

Index funds are a horrible idea if you don't know what you're doing.

Please elaborate.
posted by ewiar at 8:42 AM on June 17, 2013 [5 favorites]

Fee-only financial advisors.

Or if you prefer to do it online.

In general, reasonably smart people can do their own financial planning after a few hours of reading. But given the amounts you're dealing with and the unusual pattern of income, I agree that you would benefit from speaking with an advisor.
posted by Mr.Know-it-some at 8:44 AM on June 17, 2013 [2 favorites]

I agree that you would benefit from a competent CPA and financial advisor, and that you need to be thinking about where you want to be in 10-15 years and tring to achieve that goal. I think you want to diversify - some percentage of cash, investment funds, maybe property, etc.

I don't think anyone has mentioned disability insurance, though. I think you should probably get on that pronto, if you haven't already. It won't be cheap, but in the event that you are no longer able to do this very lucrative job because you are injured or seriously ill, you will be much better positioned if you have solid disability coverage.
posted by semacd at 9:48 AM on June 17, 2013

Before you hire a financial advisor, you need a qualified accountant (CPA, chartered accountant, or similarly licensed accountant in your jurisdiction) who has experience with the tax laws of the USA, your residence country, and any other countries you may be doing business in. Much of the above-advice is pretty good, for your typical American resident with a salaried job. However, your question leaves me with the impression that you are self-employed to some extent or another, and legally shielding your income from taxes will likely provide a greater return on your money than some stock brokerage account. Additionally, an accountant can advise you on how to optimally structure your business and investments going forward. Even if you're not self-employed, the tax situation for ex-pats is complicated. Do that first. A good accountant can also talk you through different future scenarios and help you prepare accordingly.

Also, I'd like to make the argument for keeping it simple. There seems to be a perception that rich people do a lot of moving money around and trickery to increase their wealth. While that is true for the super-rich titans of Wall Street, I believe that is less true for the more modestly wealthy people. No one will care as much about your money as you do. Don't invest in anything you don't understand. Don't trust an advisor implicitly just because you pay them by an hour. Basically, don't completely hand over your finances to someone else to manage. Keep your eyes on the prize!

And congratulations for the major financial achievements. Money isn't everything, but you should take some pride in what you've built. Maybe spend a little on some waxing and tanning for that ass. ;)
posted by stowaway at 12:52 PM on June 17, 2013 [1 favorite]

If you're an American expat, you are very probably subject to both the IRS and the tax laws of the country you live in. I'm going to join the chorus of "get an accountant" - in fact, when we lived in Australia, we had two sets of accountants, one in each country. That was expensive, but worth it for the (relative) peace of mind.

MoonOrb has a good list, and I really liked stowaway's comment above - don't invest in something you don't understand. The entire financial industry exists to parasitize off of other people's wealth with commissions, fees, and can't-lose investments. Contrary to the throwaway statement above, index funds are an excellent use of your money as long as the expense ratios are truly low enough! (Vanguard gets down to 0.04--0.10% - that's the best I've found so far.)
posted by RedOrGreen at 2:39 PM on June 17, 2013

Put it away for your retirement by consulting with a financial planner. Don't underestimate the budget for the increasing medical expenses in the last 10-20 years of your life. In terms of planning, I would work backwards from the end of your life. In other words, don't put this money towards a house, a vacation, children or their college until you have secured your retirement finances.
posted by conrad53 at 2:47 PM on June 17, 2013

That's enough money that you could qualify for USAA's wealth management. I can't find a link directly to their page, but poking around here is a good place to start. They're accustomed to Americans living overseas.
posted by The corpse in the library at 3:51 PM on June 17, 2013

If you have that much save as an American expat and you don't already have an accountant squaring things away for you, you almost definitely will want to read the anonymous comment in this thread: Delinquent expat tax situation, will I need an enrolled agent?
posted by alidarbac at 12:25 AM on June 18, 2013

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