Life advice when money isn't an issue
May 19, 2023 5:30 AM   Subscribe

I discovered recently that I'm heir to a reasonably large fortune, in addition to already having a lot of liquid net worth.

My father, in his seventies, built a fortune north of £10m. I have two siblings; we're each set to inherit a third of this, plus his house in the suburbs (£1.2m). Much of this is held in trusts which we have access to. This is in addition to the money we've already inherited from him.

This brings my liquid net worth to around £600,000, plus something like £3m held in trusts. Money appears faster than he can spend it: he receives a pension of £150,000 annually, plus payouts from various S/EIS investments, while living pretty frugally (me and my sibs are pretty frugal too).

Most advice is geared towards the median individual - save money each month, put something away for a pension, don't have big gaps in your CV, don't spend too much on travel etc. But this advice doesn't make much sense for someone in my position. I don't talk about this with friends, so similarly their financial/life advice likely doesn't fit me too well.

I'm in my early thirties, single, renting, no kids and not planning to have any. I started a startup in the hopes that it makes a lot of money and I can give it away to highly-effective charities. We pay ourselves a reasonable salary, so I don't draw on my savings regularly.

What life/financial/general advice do you have for someone in my position?
posted by anonymous to Work & Money (51 answers total) 18 users marked this as a favorite
See a financial advisor.
posted by penguin pie at 5:33 AM on May 19 [25 favorites]

Just get a wealth manager/financial advisor.
posted by superfluousm at 5:35 AM on May 19 [8 favorites]

Jacob Kaplan-Moss (MeFi's Own jacobian) just wrote up his household's philanthropic plan for giving away all their wealth during their lifetimes. Probably very relevant to your current situation.
posted by brainwane at 5:44 AM on May 19 [19 favorites]

Get thee to FIREUK (Financial Independence Retire Early UK) on Reddit.
posted by moiraine at 5:44 AM on May 19 [2 favorites]

In your case, the most effective 'charities' are the ones that work against the extreme and rapid concentration of wealth upon the rich, i.e. those that oppose the systematic transfer of wealth from poor people to your father.

So this probably means donating and organizing for politicians who will actually tax the rich, so that you don't have this problem and more people have their needs met. Remember, Charity is cold grey loveless thing and all that.
posted by SaltySalticid at 5:47 AM on May 19 [9 favorites]

First - congratulations on your good fortune.

Early 30s is still very young. I think this coming half-decade will give you more clarity on the places and people you want to support. Give yourself some time to figure this all out.

Last: volunteer. Boots on the ground, stuffing envelopes, picking up a shovel, collecting trash from waterways, tutoring adults or children — whatever your passions and schedule allow, choose one organization and stick with it for at least one year. The ability to GIVE but not PARTICIPATE skews many people’s views of their communities, and the people or systems that are struggling. Too many “solutions” get imposed upon people, and are not built by the people who are affected. Live in that space a bit. I bet it will be an education worth your time.
posted by Silvery Fish at 5:48 AM on May 19 [15 favorites]

Congradulations, but also condolences that apparently things are moving towards an inheritance.

Reddit's r/personalfinance has a set of links on the right hand side that include the "prime directive" with a flowchart of handling money (with separate links for England-specific advice), and a page on handling windfalls. I think these are also linked to the side of the FIRE subreddit linked just above.

Interviewing some wealth management people would be smart, whether or not you choose to get professional help or just manage it yourself. You at least want to know what they are offering and what it would cost.

I've never personally been in this (very fortunate) situation but I know a couple of people who are, and from watching them, I'd say that first and foremost, especially while you figure it all out, it's something that you shouldn't talk about with most people, because of how people have such strong feelings around money. Talking to some people is healthy and good, but pick with great care and still expect to be surprised a few times.

Overall, my advice would be to spend some time really getting your head around it, getting it parked in appropriate places, and if necessary, interviewing and hiring relevant professionals to handle taxes, management, or other functions. Let most of it sit for a bit before you make big decisions, but also look for things that you have been suffering with (like an old car that keeps breaking down, or not having gone on a good vacation since 2011) that you can now easily take care of.
posted by Dip Flash at 5:58 AM on May 19 [5 favorites]

Think really hard about what you want to do in life. Do you want to be able to retire (ie not work for money) at some point in the future, even if that's a long way into the future? Do you think you will ever want to own property? Are your goals partly dependent on what a future partner might want to do? What kind of philanthropy do you have in mind? What kind of financial cushion do you need in case your start up doesn't work out?

An independent financial advisor can help you understand how much of your current capital and trust fund money you need to set aside for future retirement, and help you be a good custodian of your wealth until you want to spend it. But they can't really help you decide on your goals or when you want to spend. You need to do that thinking yourself.
posted by plonkee at 5:59 AM on May 19 [3 favorites]

Personally, in shoes not all that dissimilar to yours, I'm considering the inheritance to be imaginary money right now. Even my very rich parents and yours could have the kind of old age where medical issues or dementia-related bad choices or susceptibility to scammers could mean I never see a dime of that, depending on how the trusts etc. are set up. (Fingers crossed the medical piece is at least less likely for you since it sounds like you're not in the US, though!)

So I live and save as if the money I'm making now, plus the proceeds from a smaller inheritance I already have from my grandmother, is the money I will have to retire on. That means I live more comfortably and give away more money to causes I support than most of my peers, but I still save aggressively, assume I will work most of my life and so try not to have CV gaps, spend sensibly, etc. The biggest outlier between how I live and how most of my peers live right now is that a) my house is paid off, thanks to the grandmother inheritance and buying in 2006 and b) I support a dear friend and their child to the tune of about $25k a year that I would not be able to afford if I weren't essentially just taking my parents' "here's part of your inheritance we want to give you early" money and turning right around and passing it on to my friend who needs it more than I do.

My financial planning is more future-focused - I do think now about how I want to unload that imaginary money if it ever does come my way, so that it will benefit people who need it a lot more than I do while still ensuring I will still always be able to support the three people who depend on me and likely always will for disability reasons. I want to have at least a rough plan before I need it so that when the time comes I don't make a bunch of terrible choices running on grief and the sudden number of zeroes in my bank account. But when that time comes I imagine I will, yes, make a financial advisor one of my first calls. (Maybe a few calls. I imagine it may take a while to find myself one who is receptive to "help me figure out how to make sure I will retain enough money to support three disabled people with high medical needs forever, and then how to set the rest of this aside somewhere else while I get rid of it responsibly.")

It is weird to be in such an unrelatable financial position that you can't really talk about it with any of your friends. If I were younger I might have fallen in with the Resource Generation crowd in the US, which I've heard some very mixed things about but it seems like there might at least be some useful ways to think about things to be gained from poking at their Resources page.
posted by Stacey at 6:10 AM on May 19 [19 favorites]

If you can, find out from people in the trenches how the financial end of end-of-life care is handled in your country. It might be socialized and you have to worry less about it than I do, but if you end up needing round the clock care one day, you will likely need a substantial chunk of that 3 million to fund those services.
posted by corey flood at 6:13 AM on May 19 [2 favorites]

If any of your family wealth was obtained through questionable, or immoral means in a current historical context (even if these come from investments that your family hasn’t “directly” participated in) consider reparations of some sort.

Even if you didn’t do the bad, you can help fix some of that bad.

This really isn’t meant to cast you or your father in a bad light, but give the nature of capitalism in our current day and age, it is relatively safe to say there is some form of wrong (maybe perfectly legal wrong) that has had to occur to garner that much wealth somewhere down the line, and some effort should probably be made to correct that, and likely you remain comfortable in your finances.
posted by furnace.heart at 6:22 AM on May 19 [7 favorites]

Read the book The Soul of Money by Lynne Twist. It'll help you use money as a tool for expressing your values.
posted by spindrifter at 6:34 AM on May 19 [3 favorites]

Nthing a financial advisor.

But also - I wouldn't necessary assume that you are guaranteed that much unless your parents actually pass away tomorrow. You've not mentioned your parents' health; I'm assuming that that's because they're still relatively hale and hearty. So - you have to allow for the possibility that they could live into their 90s, and may have to sell off a lot of the property and use up a lot of the savings in health care and elder care expenses.

The best advice I can offer is to see a financial advisor, and work on a plan that imagines that you're getting nothing. Then if you do get something, you'll be ahead of the game (and you'll also have an existing relationship with a financial advisor who can help you sort out what you'll ACTUALLY have gotten).
posted by EmpressCallipygos at 6:47 AM on May 19 [4 favorites]

Unless you've witnessed your dad's will, don't assume you'll inherit a dime. I have a friend whose grandmother passed away, and her until-now-comfortable family is angrily confronting each other over the inheritance. In your shoes, I would just carry on and deal with the money once it is your hands.
posted by SPrintF at 7:24 AM on May 19 [7 favorites]

I'm considering the inheritance to be imaginary money right now.

1000x this, I think it’s really much better not to focus on something that “should” come to you until it actually does. To the extent this situation applies to me I actively try to think about it as little as possible and definitely not make plans that are contingent, who knows what could happen between now and then…
posted by advil at 7:30 AM on May 19 [8 favorites]

What are your goals? What are the charities you want to support? You have the opportunity to effect some change. You have real wealth, but bad decisions or a wild economy can take a lot of it. You sound like you have common sense; use it. Be cautious, don't tell people, you'll attract people who want to use you; it's emotionally toxic.

Financial advisors vary so much. Get references, find one that is a fiduciary, who is obligated to put your needs 1st. Many take a %age, but make sure they generate enough to pay for that; fee-paid is almost always a better idea. Too many will sell you mediocre at best investments that have a high profit for them.

Are you willing to profit from military suppliers, fossil fuels, companies that behave in ways you think are foul? Socially Responsible Investing is a thing. It seeks to minimize the harm done by irresponsible capitalism. The Gates Foundation has classes and information for people with wealth who want to do good. There are non-profits that help people be good philanthropists, this is one in Maine.

I'm in the US; if I had significant assets, I'd:
build affordable, sustainable, owner-occupied housing and sell it at a fair price, then build more.
fund research into housing materials and processes that are sensible and sustainable, maybe fund companies to make them. The construction business is driven by the materials available to make building fast and easier.
support non-profits addressing Climate.

It's okay to buy a home, a car, art, some nice things. Support your local economy, if you can. It won't corrupt you if you keep your head. Good luck.
posted by theora55 at 7:30 AM on May 19 [4 favorites]

Much good advice above.

I am sorry that you are having to think about life after family loss: these are hard topics.

But in a philosophical vein, if you're asking how to live when you know you have a lot of money, you can always continue to live simply:
  • Don't spend on things you don't need (like a larger house you can fill as a single person, or gas-guzzling sports car you don't drive often, or frequent air travel).
  • Let your money work within your community, even if local purchases cost more than you could spend at Amazon or by hiring out-of-towners.
  • Sponsor (publicly or anonymously) art and social organizations instead of re-investing the money just to grow more.
  • Get involved in a hobby where your extra resources can be used by a number of other people: for example, bee-keepers want to borrow a honey extractor to use once day per year, instead of everyone owning one. Similar things hold true at community farms, homebrew clubs, or community boating groups.
One advantage you have is that you may not have to work as many hours as people on a low income -- so you should make this extra time serve your values. Volunteer, as mentioned above, or else study local issues that are neglected. Offer your expertise for free to people: you mention having a startup, so devote your overtime to mentoring others instead of grinding more at work.

And thank you for pausing to consider the notion of Enough.
posted by wenestvedt at 7:37 AM on May 19 [7 favorites]

Leave the money where it is for now, divest yourself of everything — all property large and small — that won’t fit in a backpack, and go out for a walk.

You don’t need to go ultra-cheap, but avoid staying in places that isolate you from the local people living their lives. Go watch people live and meet them and expose yourself to the many different ways people experience the world. To keep things interesting plan your itinerary out of Atlas Obscura.

Having few belongings and being removed from your regular environment will let you discover what truly is important to you and seeing other perspectives will be grist for the mill.

After you’ve done that for a year or so you’ll be in a much better position to exercise the freedom you’ve been given. At that point you should get a financial advisor, or blow it all betting on horse races as you see fit.
posted by Tell Me No Lies at 7:44 AM on May 19 [1 favorite]

“Windfall” is the word you want in looking for resources. Yes, get a financial advisor.

A friend of mine was in this situation a few years ago. He and his sibling both tried to manage it all on their own, and I think it’s been stressful for both of them.
posted by bluedaisy at 7:53 AM on May 19 [1 favorite]

I agree with not assuming the money is yours until it actually is. Plan now for what you know for sure, then you can skylark a bit about what first steps should be when the day comes, and deal with the actual fact of the money once it's an actual fact.

However: I have had many thoughts about this philosophically, writing a character in a book who has an income that is basically unstoppable as a result of creative success as a young man. He continued to do creative work because it tends to routinely call you up on the phone once you're a known entity, but with some guilt about the specific work that could have gone to someone newer to the industry who could actually use the paycheck.

Ultimately he decided to train himself for a job that can be done by someone who doesn't need a paycheck to get generated by the work. So he did the financial stuff to set himself and his children up well enough even if the rest of the money disappears, invested that rest fairly conservatively so it was pretty safe, went to law school, and opened an organization that did tenant's rights and on-the-ground immigration work, paying a fair salary to younger/poorer lawyers out of his reserves and challenging other Fuck You Rich people to join him in either working for free or sponsoring more attorneys. Zero financial ROI for anyone putting in money, intended to drain the coffers over time, and he has a minor obsession with setting up the business so if he dies with anything left it'll continue to run in the same manner without scope-creeping into for-profit work.

At the point we meet him, he's trying to figure out to do exactly this, as theora55 said: build affordable, sustainable, owner-occupied housing and sell it at a fair price, then build more

I have seen what startups do to the (alleged) souls of the people who found them, and that is not the way. Startups are suction systems for VC money, meant largely to go into your pockets to the detriment of most of your employees. There is exploitation baked directly into the system, and as far as I'm concerned taking investment from venture capital (or private equity! where you get to make a lot of money and watch them destroy your business for the tax writeoff) means you go to hell forever when you die, and I don't even believe in hell. Only do this if you hate yourself and others. If you want to start a company, make it a nonprofit at least.

Consider your passions and your largest pools of already-existing knowledge and maybe training or experience, and consider what job you would invent for yourself if you were Batman with less trauma. Hopefully you have lots of time still to go for some long walks and do some research and let your bones tell you what you could be with very few limitations. If you are already somewhat at leisure thanks to income, maybe even go do some version of that job for free or cheap. Go talk to people who run those organizations, figure out if your personal Batman goals fall apart in the harsh light of day or if - even if it's hard as hell - the people who've been doing it for a long time say there are paths to some kind of success at least for the beneficiaries of the work.
posted by Lyn Never at 7:54 AM on May 19 [2 favorites]

£3m at a 4% withdrawal rate is worth an annual salary of £120,000, so for the UK (I'm assuming that's where you are) that's pretty high, considering any actual income you earn would be on top of that. I'd also recommend a financial advisor.
posted by The_Vegetables at 7:59 AM on May 19

Just a re-direct note to other commenters - please note that the OP is not saying that their parents are about to die; they only say that their 70-year-old father has X amount of personal wealth right now.

Again, OP - Your father has 10 million pounds today. But that's today, and your father is still using that 10 million pounds. He may continue to live until 2043 - and there may be a whole lot less than 10 million pounds left after that. You don't know.

That's why I am again saying that you should consider that money to be pretend right now, and plan based on what you know you have - which is your own income.
posted by EmpressCallipygos at 8:08 AM on May 19 [14 favorites]

That's why I am again saying that you should consider that money to be pretend right now, and plan based on what you know you have - which is your own income.

100% this. Also, even if you inherit every penny you're expecting to, that money likely isn't going to last nearly as long as you might imagine.
posted by Artifice_Eternity at 8:25 AM on May 19 [1 favorite]

The UK actually has an inheritance tax of 40% on estates above L325,000. I'm sure there are some ways to game some of that, if one is inclined to do such a thing (I don't know if trusts serve this purpose in the UK tax system as they do in the US), but putting aside EC's entirely valid point about future spending by the dad (even in a system that is less designed than the U.S. one to suck out every dime in the last year of your life), any math has to take the significant estate taxes into account.

Regardless, that amount of money is respectable and I'd certainly be happy to have it, but I don't think it's "permanent beneficence for 50 years" money. You'll need to talk to a financial advisor once you have actual numbers in hand, but be careful. There is a whole subset of the industry devoted to liberating the cash of unsophisticated HNW individuals and using it to line bankers' pockets.
posted by praemunire at 8:26 AM on May 19 [6 favorites]

It is probably in trusts in order to reduce inheritance tax. If you give money away and survive for 7 years then that money is exempt from inheritance tax. You can structure trusts so that they count as “giving money away”.
posted by plonkee at 8:30 AM on May 19 [3 favorites]

Sounds plausible to me, but also the kind of thing you'd want good advice on.
posted by praemunire at 8:43 AM on May 19

I think as you get older and possibly have kids, nieces/nephews, and maybe a partner, the value of creating long-term security for them may seem more important. As well, as you get older, you may find that making a real difference in some aspect of your community (parks? local schools?) seems more important. So I think I’d advise that you don’t make any permanent decisions about your wealth now but let it evolve over time. It may be that right now “effective altruism” seems like your highest goal, but as you are closer to the end of your life, making contributions to your loved ones and community may seem more important.
posted by haptic_avenger at 9:03 AM on May 19 [1 favorite]

My first interview with a financial adviser ended up being a chat about life circumstances. Kind of a therapy session, in a way. One topic which was very big with me, that I haven't seen mentioned above, is relationships. I see that you're single and not planning for kids. But I think it would be wonderful if you could go into any permanent relationship with a solid idea of your priorities which you would be able to share with your partner. And also, some sense of how flexible you are able to be. You could be thrown all kinds of curve balls with regard to your eventual partner's (or partners') circumstances and values. The financial adviser mentioned to me that a lot of her function is mediating between spouses and also between clients and their children who need financial help. Not that she sits down with them all, family therapy style, but a financial adviser type figure can help you sort things out as an individual and/or a couple.

Relationships can be affected when just one person has a lot of money-- especially if there is a sense of unequal privilege. Again, I know you are not in a relationship now but having a strong sense of your own priorities will be good when you are. My personal feeling is that power differentials in relationships are to be avoided as much as possible, up to and including giving the partner who brings less money to the relationship more control over the budget. But other people have different priorities.

And, yes, inheritance is imaginary money. There's illness, remarriage, the markets, all kinds of stuff. If there is any room for dispute, that can be agonizing. Every time there's been inheritance in my family there has been some contention, including once when someone was determined to get their hands on a whole estate that had been left to between four and six people. You think that getting a good trusts and estates lawyer will protect you but it won't always. But that brings me to trusts and estates. If you inherit multiple millions, you might want to start work on that as soon as it happens. The person you go to for that may also help you with your priorities.
posted by BibiRose at 9:21 AM on May 19 [2 favorites]

Spend some time day dreaming about your legacy - plant a tree in whose shade you’ll never sit. What is that tree?
posted by St. Peepsburg at 9:23 AM on May 19 [1 favorite]

Choose a community and make it a place that you will be happy. Often money helps with this.

Some evidence shows that social connections are the greatest factor in whether we are happy, especially as we get older. It could be wonderful to be surrounded by people who don't have to worry about whether their kids can actually get a good enough education to understand how good they have it, and to take care of themselves, their families, and their neighbors (i.e. you) in ways that are human and loving.
posted by amtho at 10:09 AM on May 19 [1 favorite]

My friend’s dad was worth almost ten times as much as yours, and he unexpectedly left everything to his wife, cutting out all three of his kids completely. Try to just put this out of your mind until it becomes reality.
posted by HotToddy at 10:38 AM on May 19 [2 favorites]

My mother worked for the US Federal government for many years and then retired early due to health reasons. However, she was still able to live in an "Assisted Living" facility virtually indefinitely because her monthly stipend was greater than the facility charged per month. I told her that she had no financial worries and to just make friends and enjoy herself. But unfortunately she developed severe depression and had to move to a full care facility and her funds were drained much more quickly.

My point is only that none of us knows what the future may bring, and all you can do is set yourself up so that by continuing to have a heart beat you are able to fulfill your needs and responsibilities. A licensed/recommended/professional financial advisor is one aspect of that. We meet with ours semi-annually by Zoom after sending him our financial, living expense and investment statuses. We also have a separate CPA for our tax planning and filing.

If I were to win the lottery (despite a math background, I still play) I don't think much would change, I would still work within a budget as I do now. However, I would carve out a segment of income solely for helping others. We currently give to charities, but that's kind of spitting in the wind. I think (?) I would like to work with reputable organizations to meet urgent or exceptional needs.
posted by forthright at 12:17 PM on May 19

As many, many people here have already mentioned, that £3m may not be worth £3m when all is said and done, unless you have explicit assurances otherwise in the language of the trust. As they've (rightly) said, many inheritance decisions can be quickly reversed by unexpected health needs or ideosyncratic decisions by the grantor. Don't bank on getting that money until it's in your own personal account.

So let's talk about that £600k, which probably sounds like a staggering amount of money.

When I was in my early 30s, as a frugal bachelor renting my apartment, it would indeed have seemed like a staggering amount of money. I would never have been able to articulate exactly what I would have done with that kind of windfall.

Yet when I was in my late 30s, having married, with a kid, bought a house, just a few years later after a series of not entirely anticipated events... it would have been very, very, VERY clear where £600k would have helped. Across the mortgage, child care, education, transportation... there were clear and obvious places that money would have gone to improve our lives very substantially. That's a lot of money, but that's not an endless, do-whatever-you-want amount of money.

You might not be planning on getting married, or having a kid, or even buying a place, but I can assure you that £600k as a bachelor today might seem enormous and luxurious but that just years in the future, but when you have to buy a place, or decide to get married and have a kid, it will suddenly seem like a mere step up to something more comfortable than you'd be able to afford otherwise.

Keep it as a gift to yourself, in accounts bearing adequate interest, reasonably insured against a bank run or economic catastrophe. Let it sit there, until future you needs to buy a house or start a family or it's quite clear that's not actually going to happen.
posted by I EAT TAPAS at 1:03 PM on May 19 [4 favorites]

Hmmm, yes, since you don't actually have this yet, and since it was compiled by your Dad -- how about talking to him about his thoughts and dreams?
posted by amtho at 1:57 PM on May 19 [1 favorite]

The burden of feeding yourself has informed your upbringing and your adulthood so far. Between the actual work, commuting, scheduling your vacations around it, and just having it percolating in your brain it probably eats up close to half of your time. That leaves you time to sleep and 4 hours to squeeze in some hobbies.

Without work you can spend 16 hours on hobbies.

That is a huge amount of time. Can you really kill 16 hours a day, every day? There's only so much YouTube one can watch at a time (trust me).

You'll be free, but free in a way that the people around you may not understand and certainly won't appreciate. It's disorienting and isolating. And of course on top of that your enhanced level of freedom will likely bring an enhanced level of existential angst.

The first time I had enough to cut loose I made the trip I mentioned above, fiddled around a bit, and then purposefully blew enough money that I would feel motivated to work again. I needed the containment and the structure. I was only about 35 at the time and it was much too soon to retire.

Age 47 was a different story. I'm retired now and I usually have no problem filling up 16 hours a day. There are programs to be written, 3D objects to be designed, books to read, and YouTube to watch. Toss in some volunteer work and I am comfortable with how I'm using all that freedom. The fact that the other volunteers are largely retirees who understand the "How To Use Your Time" problem is icing on the cake.

In any case, while money management is nice it will kind of miss the point if you decide it's not healthy for you to have the money in the first place. Freedom is a burden that you will have to take seriously.
posted by Tell Me No Lies at 4:24 PM on May 19

Mod note: From the OP:
Many thanks all for the thoughtful answers so far! To clarify things a bit:

- the family has a financial planner, although I'm considering retaining my own.
- much of the money is in trusts that are in mine and my siblings' names and structured to reduce inheritance tax as much as possible. The house is the only thing that we actually have yet to "inherit".
- my father isn't drawing down on any of this money (as I mentioned, and people seem to have missed, he receives a six-figure pension so has no need to). End-of-life/senior care is not expensive here. Though with any luck he has a lot of years left in him!
- comments about how accumulating wealth is wrong aren't really what I'm looking for; I'm not after value judgements about my situation.

In terms of requesting financial advice, I meant more in the sense of Dip Flash's and @BibiRose's (about how to spend the money wisely, enjoy it, avoid it becoming a problem in relationships).
posted by travelingthyme (staff) at 4:40 PM on May 19 [3 favorites]

In terms of requesting financial advice, I meant more in the sense of Dip Flash's and @BibiRose's (about how to spend the money wisely, enjoy it, avoid it becoming a problem in relationships).

I said earlier that my friend got a windfall. At the time he heard a podcast and read some advice that suggested putting aside a certain amount -- not a specific amount or percentage, but there may be best practices around this -- as some immediate sort of mad money. The idea is to give yourself a kitty to play with to spend indulgently, on travel or a fancy new thing, stuff or experiences well beyond what you do now, and then also follow the best practices with the rest, of giving some to charity, investing, etc.

Notably, my friend did not do this. We even talked about it at the time, and he dismissed this idea. He was worried that letting himself spend frivolously would get him hooked to spending. Then, more recently, he ended up on a bit of a frivolous spending spree anyway and realized, in retrospect, it would have been a lot better if he had allocated that original mad money. Because he had never really allocated the money to his spree, he had a lot of guilt and complicated emotions, and he felt out of control.

He recently advised another person who had a windfall to allocate the mad money from the start. His take was that it needs to be an amount of money that feels like a lot to you.

I'd refer you to the podcast episode if I could find it but alas I cannot.
posted by bluedaisy at 5:19 PM on May 19 [1 favorite]

Read this starting on page 17. Ignore most of the ‘helpers’ who will offer their advice for a princely sum. Talk to other people who are rich. Be grateful. Work out how best you want to give it back to society while still providing a comfortable life for yourself.

P.S. I’ve been lurking on metafilter for 15+ years and this is my first post. Yikes!
posted by ehartkc at 6:54 PM on May 19 [6 favorites]

So, your post mentions that you are frugal, but not where you live or what the cost of living is around there, but I'll assume somewhere in the UK.

Let's assume this money gets from your father's estate to you, and not much of it is lost to taxes, unexpected end-of-life care, sibling disputes, fraud, investment reversals, or any of the myriad things that could easily take a chunk out of it.

If I'm reading this right, that's about 3.6m pounds to you. You're in your early thirties. Assuming a 'safe' withdrawal rate of 4% annually (making some not-super-conservative estimates about continued growth in your investments, inflation, drawdown periods, etc), that's like 144k/year. Now, obviously 144k/year is well more money than most people, even in rich countries, even most entire families, live on. However, I think, with an expected ~40-50 year remaining lifespan for you, in the UK, 144k/year is well short of "when money isn't an issue" and that's a highly optimistic case! Never mind plans changing (it's not uncommon for people in their early 30s who don't want kids to meet someone who changes their mind, for instance) or major financial setbacks occurring.

So my actual advice would to try to reframe your thinking from "I'm rich" to "I'm less poor than everyone else". For most of us in economies like the UK and US, living what we were raised to think of as a middle-class lifestyle is out of reach on normal incomes, and things like housing and healthcare and something to live on when we can no longer work a paying job are either out of reach completely or only precariously held. I would advise you to shift your thinking towards "I'm fortunate that with this unexpected subsidy I may be able to afford to live the sort of adult life in material terms and freedom from worry that other middle-class folks in my country were able to in the postwar period, if I'm very careful and a few things break my way" and away from "Money is no longer an issue to me, my biggest problem in life is figuring out what to do with my largesse."
posted by jeb at 7:07 PM on May 19 [3 favorites]

So my actual advice would to try to reframe your thinking from "I'm rich" to "I'm less poor than everyone else". For most of us in economies like the UK and US, living what we were raised to think of as a middle-class lifestyle is out of reach on normal incomes, and things like housing and healthcare and something to live on when we can no longer work a paying job are either out of reach completely or only precariously held. I would advise you to shift your thinking towards "I'm fortunate that with this unexpected subsidy I may be able to afford to live the sort of adult life in material terms and freedom from worry that other middle-class folks in my country were able to in the postwar period, if I'm very careful and a few things break my way" and away from "Money is no longer an issue to me, my biggest problem in life is figuring out what to do with my largesse."

I would gently disagree; I think it is important to be honest with yourself about your situation, and the reality is that having ~3.6m pounds (or Euros, or dollars) puts you in a very comfortable position and orders of magnitude above most households. Not in the realm of buying private jets to fly to your personal island, but definitely in the "don't need to work anymore unless you want to" territory, which is wildly out of reach for most people. Yes, the ultra-rich are far, far more wealthy, but that doesn't mean someone with this level of wealth isn't extremely privileged, and certainly is above mid-century middle class standards.

The math in his examples isn't perfect, but the point in this blog post about why even with considerably less money, and quitting your job today, you'd be unlikely to ever run out of money is relevant.
posted by Dip Flash at 7:26 PM on May 19 [2 favorites]

Don’t count your chickens before they hatch.

Don’t over count your chickens.

If you have some chickens, eat the eggs, not the chickens.
posted by thinman at 8:24 PM on May 19 [1 favorite]

that doesn't mean someone with this level of wealth isn't extremely privileged, and certainly is above mid-century middle class standards.

I'm in my forties, and I would consider US$4.5m barely enough to retire on at my age. (Note that the 4% withdrawal rate is not meant to last 40 years or more, but rather ~25, so 4% is not the rate someone in their 30s should be using!) Now, OP lives in the UK, so, at least until they succeed in killing off the NHS, he is insulated from some of the worst unpredictable costs that can strike in life, and thus maybe needn't be quite as conservative as an American. But this is "if you don't marry, don't have kids, don't want to own property in London, and don't develop any major support needs along the way, you can live in modest comfort without having to work anymore" money, not "you can transform your community" money. Is that still more well-off than all but ~5% of people? Sure. But this is not Succession wealth. It's important to keep perspective, because otherwise you get tempted to overspend.
posted by praemunire at 9:10 PM on May 19 [6 favorites]

At the time he heard a podcast and read some advice that suggested putting aside a certain amount -- not a specific amount or percentage, but there may be best practices around this -- as some immediate sort of mad money.


The sources I've seen typically recommend 1%. I think it's a really good idea whether you are more likely to accidentally overspend or underspend.
posted by plonkee at 1:08 AM on May 20

I planned for a situation somewhat like this recently, and the challenge is that you're plagued by a paradox - you shouldn't change anything about how you live until the money is in your bank account (or otherwise legally yours), but the minute it is, there's a tangle of legal/tax/financial decisions to make and professionals who range from wanting their piece of the pie to outright predatory. You're doing the right thing by thinking about this now so that when conditions change, you'll be able to make decisions quickly if needed.

I spoke to many financial advisors - it’s kind of like dating to find one that is values-aligned and understands you - and ultimately learned quite a bit from the process but decided to DIY the investing side of things. I found the FIRE and Bogleheads Reddit communities very helpful in getting “boring” financial advice, which is exactly what I wanted. I found it much more important to have an accountant who was tax-knowledgeable about my specific situation; having the right kind of estate lawyer might also be important for you.

I found it helpful to pull together the following:

* How much do I spend now? Not just how much do I think I spend, but looking at the last 2 years of statements (I used Mint for this), how much did I actually spend on different big categories of spending - rent, food, travel, entertainment, etc.
* In 5, 10, 20, 30 years, would I expect any of those numbers to change substantially? Would I want to buy a house (including property taxes / homeowner's insurance), move to a different city, need to pay for health insurance, or travel more and how would that change the numbers? If I took a year or two off, would I expect to spend more or less in that scenario?
* Even if I don't think I want to have kids, how would that change the numbers above?
* What are my values? What would I want to do that I feel like I can't do now? A lot of resources on this topic are geared towards older people with children/grandchildren or people who hate their jobs and want to retire forever, but in your position this could be things like buying a condo/house, spending more money to support your health goals, getting more help so you can focus on your startup if that is your path to outsized philanthropy, setting yourself up to be an investor/advisor for socially conscious enterprises at some point in the future, taking a year or two off in the event of burnout/health issues, or having enough flexibility to move out of a major city.
* What are my philanthropic goals and am I young enough that they are likely to change over the course of my lifetime? Are there any friends or family members I would like to support?
* Then re-project your numbers in the above scenarios to understand what it would cost to live your "ideal" life

At that point I found it helpful to go to the actual numbers and understand what income would come out of a windfall of $X at a conservative 3% withdrawal rate including taxes, which defined what was possible. As an analytically minded person, looking at actual numbers and understanding shades of gray between “work forever” and “jet around the world like on Succession” was incredibly valuable and gave me a lot more confidence that I understood what options I had.

When the time came, I committed to not making any binding decisions other than those I had to make and living as normally as I could for two years, outside of a comparatively small “fun money” bucket. I’m very glad I let the dust settle because it was such a strange and emotional experience. I did make one major real estate purchase in that time period, but because of the planning I had done prior it was “buy the sort of condo I was always going to buy, maybe a little bit nicer” instead of getting tempted into buying something bigger and out of line with my values just because I could.

Feel free to MeMail me from a sock puppet if the above resonates with you.
posted by SockPuppet17 at 8:27 AM on May 20 [2 favorites]

As I read your comments, much of the money is already yours in the sense that it is held in a trust for you and your sibling and so is no longer your father's money. So, the reality is that you need to adjust your thinking to include what it means to have access to this money.

Some thoughts:
Keep a very conservative buffer for the future. You are in your 30s. It is entirely likely that you may yet end of with a life partner that you will want to provide for. It is also likely, although far from certain, that you may have children come into your life (birth children, step-children) that you will want to provide at least the foundation for their future. Furthermore, although not so likely, you, the hypothetical partner or the hypothetical child might have an illness or injury that means that they will need life-long support it would be good to be able to do that a higher standard that the government would.

Second, if you don't marry, you will need to plan for a higher level of paid support than most people. If your father is in his 70s you probably haven't had much personal experience with what it looks like to care for people who are frail and forgetful and need a lot of day to day support even they aren't actually ill. But if you live in your late 90s, which is likely, you will want to have enough money to make sure that you are can provide appropriately for your own care.

Still, with this kind of money, even if you aren't spending much of it now, it does provide a safety net which means that you can either afford to earn less and still maintain a nice standard of living or you can spend/give away more of your own money since you don't need to saving for a rainy day the way most people do. I love Lyn Never's suggestion of thinking about your Batman career. If you could afford to ignore what the job paid, what kind of work would you be drawn to doing? You don't need to do a start-up to make lots of money and then do the thing - you can start doing the thing now (especially if involved still earning some money - just not the big numbers)

Finally, talk with financial planner and maybe start earmarking some money every year begin doing what you would do if you were really rich - maybe taking a leave of absence to pursue and interest or a special trip or buy that really nice thing that would make your hobby interest so much better or maybe being able to give generously and without strings attached to a friend or donating more to causes you really care about. I'm not talking about grossly increasing your expenses (especially not on a on-going basis) but allowing yourself to do something special and conciously with the extra slack in your budget.
posted by metahawk at 3:00 PM on May 20

I'm in my forties, and I would consider US$4.5m barely enough to retire on at my age. (Note that the 4% withdrawal rate is not meant to last 40 years or more, but rather ~25, so 4% is not the rate someone in their 30s should be using!)

Yeah, but that's your personal opinion, and the 4% withdrawal rate on $3m is $120k a year, which would last a full 25 if you invested it in nothing. So investing it in a safe something at a return greater than $0 would last longer than 25. So wrong wrong and wrong.

If you were trying to make a point about the value of $120k reducing over 25 years due to inflation, maybe you have a point. But $120k 25 years ago was also a pretty good salary.
posted by The_Vegetables at 3:59 PM on May 20 [2 favorites]

Here's a blog that goes into a lot of nitty gritty detail on safe withdrawal rates in case you're interested in the maths behind why a 4% withdrawal rate is much less appropriate over long time horizons.

I expect you know this, but just in case: inflation goes forward in time and not backwards. Assuming a consistent 2.5% inflation rate, then 50 years into the future, 120k in today's money will have the purchasing power of today's 35k - right at the time when medical and care expenses are likely to be high. The value of 120k 25 years ago is not relevant.

Anyway, a financial advisor/wealth manager is the person to help think it through... Ideally someone experienced in advising younger people looking at these long time horizons.

You might not currently be looking at immediate retirement, but it's worth at least considering what you might do if you became unable to work, had a spouse/kid/yourself with serious long term care needs at a younger than normal age, or just found work unsatisfying at some point and wanted to quit.
posted by quacks like a duck at 1:41 AM on May 21

One topic which was very big with me, that I haven't seen mentioned above, is relationships.


I am a person who inherited a house (two actually, over a decade, after the deaths of each single parent) with a sibling. It's a complex issue and one thing I might also think a little bit about now is whether you and your siblings all want the same things in terms of an inherited house or not. I was very lucky in that me and my sibling wanted the same thing, mostly. We wanted to keep one house and sell the other. Neither of us were too concerned with the upkeep of the house we were keeping, though my sibling was MUCH more sentimental about the house we were selling and things took longer than they should have, time which was stressful for me not because I needed the money but needed to be DONE with this house. But there are a lot of options including one sibling buying out the others, one sibling living in the house and renting from the others, keeping the house as a rental property, keeping the house as a vacation property, or selling (or even donating) the house. Personal relationships with your siblings will matter in a way they haven't before, so thinking about that in advance is time well spent.

Otherwise, yes to what others have been saying about not really counting on this money, but thinking about it is not a terrible idea. We "inherited" my father's money manager in addition to his money and it's been really helpful even though he's paid a percentage and not a flat fee. This is usually against MeFi advice, but it's worked for me and he does a lot of various things for me and my sibling. He's a sort of weird preppy guy who doesn't share my values but is able to do what I ask him to do. So we talk about plans (I am an unmarried woman with no kids and an odd assortment of jobs, really not his usual client) and he really listens and talks through figuring out how to do what *I* need and that is hugely useful for me.

I am frugal to a fault and it's been hard for me to get less that way. I donate a lot of money to very specific values-aligned places (for me it's abolishing medical debt, helping trans kids, food insecurity and immigrant rights, ymmv) and I did some of my OWN planning so that if something happens to me, this money goes where I want it to go. I still work but I get to work on the things I want to (I own this website for example) without having to always worry about whether it pays what I need it to pay. I do a LOT of civic work, possibly too much, and I find that rewarding so yes it's worth thinking about how you'd spend your time if you didn't have to work. Would you still work? You certainly can. Would you want to do non-paying work? Would you want to do volunteerism? Would you seek out new experiences now that you can afford them (I'll be honest, I mostly didn't and am 100% fine with this).

It has been really helpful for me to have a few friends with similar backgrounds to mine just so I can scenario-plan stuff without sounding like a weird braggart about it. Maybe seek those people out. And don't be coy about your situation, find a way to talk about it that isn't braggy but also isn't weird and squirrely. I have some friends in a similar situation to mine who put themselves on a "budget" and then will sometimes talk publicly about how something (a dessert at a restaurant, a new winter coat) isn't in their totally-self-created budget while maybe not being mindful that for many people a budget is a "I need to do this so I know I can afford food/bills/rent" situation. Think about how to be graceful about this good fortune, and know that many people equate money with intelligence and that's a false association. Know that many people equate money with power and also exploitation and that's likely more accurate. Best wishes.
posted by jessamyn at 11:35 AM on May 21 [5 favorites]

I would gently point out that AskMefi is not the best place for financial advice as some of the comments here are, frankly, ridiculous.

I have mentioned above but please do get yourself to FIREUK (Financial Independence Retire Early UK) on Reddit. These forums are (usually but not always) populated by people in a higher-income category, generally frugal. The posts cover not just financial but also life advice.

From there, you can find links to other bloggers who HAVE retired early or on the path to doing so, some with substantial nest eggs similar to yours. Fire v London comes to mind. It's good to read about how what they invest, and how they plan to withdraw their money. Another good blog is Monevator -- some of his co-bloggers have retired early with significant sums similar to yours.

Also, it's fine to use a safe withdrawal rate of 4% on £ 3.6 million is £144K a year. SWR is a calculated safe withdrawal rate that takes into account inflation. People get their knickers in a twist by putting all sorts of complications and scenarios on the 4% number -- and fair enough -- but at the end of the day, 4% should see you through many things. Let's be real: you are far more likely to die than run out of money.

Also, I live in London with kids. £144K a year, even with taxes, even in London, is a fairly decent lifestyle for a family with kids. You might just be able to squeeze in private education for two kids *if* you don't go for the five-bedroom Georgian mansion in Islington.

Ignore doommongers and the ultra-conservative and you will be fine.
posted by moiraine at 5:15 AM on May 22 [8 favorites]

Also, so much of financial advice floating around and also in this thread is geared toward Americans who have no medical support safety net and need to plan for a worst case bankruptcy scenario from medical expenses. Hence they have very conservative estimates of withdrawal rates.

Good news! You don’t need to. NHS is pretty decent (for now anyway. Please remember to vote for the political parties who don’t want to privatise the NHS).

And you can pay a small sum (compared to the USA) for private medical insurance for any elective work.
posted by moiraine at 7:14 AM on May 22 [1 favorite]

It sounds like you are already relatively frugal and that's great! Now think about how you're going to spend your time, arguably a much more precious resource than your money. Financial advisors aren't going to help with that. Now that you are physically comfortable, you are in a position to vastly enhance your own personal growth and that of those around you.

I might suggest learning a musical instrument. It's not too late. Personally, a few years back I made the largest discretionary purchase of my life in the form of a grand piano. I play it every day and it is a joy to me and my wife and, so I hear, to the people walking by outside. I wish that joy for you and for everyone.
posted by hypnogogue at 3:33 PM on May 22 [1 favorite]

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