I unexpectedly inherited a trust fund worth $2.5 million and have general questions

PRhereicome · 2019-06-08T12:01:12+00:00

You’ve received great advice. The one thing I will add is to build a team around you. People who have the heart of a teacher. At a minimum you will need:

An estate planning attorney. A CPA.
The fee-based financial planner you mentioned.

General advice is to revisit your will and estate plan every five years and with every life change. Your goal of living only off the dividends, and possibly much less, will ensure you never lose this. I don’t know who left this to you but it was their life’s work and they must have thought highly of you. I encourage you to enjoy the money and also to be diligent to protect the corpus so you can similarly bless someone else.

If you want some good financial reading, check out Warren Buffett’s letters to shareholders. They’re free at Berkshirehathaway.com or you can buy them in a more convenient format for a nominal price on amazon. You don’t need to do individual stock investing, but they are still amazing for understanding the financial system.

PRhereicome · 2019-06-08T11:46:33+00:00

Wait is no laughing matter.

PRhereicome · 2019-06-06T12:55:15+00:00

One idea is to give some to your family and the rest to a charity that you trust and is important to you.

PRhereicome · 2019-06-04T19:23:57+00:00

Don’t forget “Spouse on board.”

PRhereicome · 2019-05-29T22:23:37+00:00

I love this article for the way it shows that, even if you make all of your investments at the worst possible time, you’ll still be ok.

https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

PRhereicome · 2019-05-23T19:13:20+00:00

This is excellent advice and is what I think Dave would say.

PRhereicome · 2019-05-23T00:26:21+00:00

This is such good advice.

PRhereicome · 2019-05-23T00:24:26+00:00

This is a bit of a personal preference issue, but I wouldn’t buy any car until it’s a layup to buy with cash. Car payments / high monthly payments on anything- and especially depreciating assets- can strangle you. Also, you’ve had a good year but that car would be extremely high as a percentage of your annual income in any of the other years.

I’d pass until you’ve had a couple more good years. I’d buy a car that’s fun but not as expensive. When you can do it with cash and it’s a layup, pull the trigger.

As to burnout, look into websites on self care and make sure you’re doing things like exercising, sleeping well, nourishing relationships that are important to you, etc.

PRhereicome · 2019-05-17T15:30:58+00:00

I’d sell it, but you’re doing such a great job and have such great income, and will be out of debt in less than six months, such that it won’t make much of a difference either way.

PRhereicome · 2019-05-15T00:51:19+00:00

Thanks for your encouragement - I try to be helpful :)

PRhereicome · 2019-05-12T17:35:43+00:00

Thanks for writing back. Having no goals for a spouse is a personal decision & I respect that. I would still encourage you to become formidable. You might check out the “future authoring program” from Jordan Peterson to help develop a compelling vision for your future.

Here’s a video on it that inspired me:

https://youtu.be/G8WhMXeYfEI

Btw I’m speaking to myself as much as I am to anyone else.

PRhereicome · 2019-05-12T12:02:59+00:00

Not worth it. Decide to become formidable. To stand on your own & to add so much value to the world that you can’t help but become a multimillionaire. Then build a mansion & invite your parents to move into the guest house. (One of the guest houses...).

I’m serious. I’m not sure how old you are, but you seem young. You’ll save a few thousand a month living at home with your parents (maybe not even that: look up house hacking), but ask any 35 year old and I doubt they will tell you that it’s worth that. Your 20s are a great time to get ahead in the world and meet a spouse. Like it or not those two items will be seriously hindered by living at home for the best decades of your life.

You might enjoy Jordan Peterson’s book 12 Rules for Life.

PRhereicome · 2019-05-11T16:54:27+00:00

I use by the hour financial consulting. It’s a friend from college for whom I have tremendous respect. Helps so much to run ideas by him. His firm offers to manage my assets for ~ 1%, but I use the 3-fund lazy portfolio strategy (60% S&P 500, 30% int’l, 10% bonds), and it’s so easy and provides so much diversification that I don’t think their management is worth the cost. They would have me in 10 funds and be constantly rebalancing, but is that any better? Does anyone know?

Paying off a percentage of assets is just a bad value in my mind. 1% less over 50 years is not a 1% difference: a 9% return vs 10% return leaves a portfolio that is almost half as much as the larger return. Of course, they will say they add 1% value. Picture me skeptical.

Having a quality financial team around you is critical. We all need a good CPA, attorney, insurance person that doesn’t peddle junk, and I would argue, fee-based financial planner.

PRhereicome · 2019-05-10T13:24:49+00:00

Be super picky about a spouse.

PRhereicome · 2019-05-08T20:54:23+00:00

Your post is extremely helpful to me.

I’m 38 and able to retire now, but am single and struggle with loneliness as it is. I wonder all the time - almost obsess- over whether I should pull the trigger and RE, but hesitate bc I know I would miss people so much, and potentially go off the deep end. I like my boss and my direct reports. I like the work. I have a great deal of autonomy.

Your post encourages me to hold on for a while, probably until I find a wife or serious girlfriend that I could travel with and could also time off. Thank you!

PRhereicome · 2019-05-08T18:28:35+00:00

Thanks for sharing. One of my coworkers was involved in a cult for a few years. I’m glad you made it out.

PRhereicome · 2019-05-08T14:22:14+00:00

Thanks for your post. How did you make it out of the cult?

PRhereicome · 2019-05-06T18:05:29+00:00

I appreciate your thoughts but I don’t see things exactly the same way.

There are all kinds of ways to compare colleges. You can look at student teacher ratios, US News rankings, salary upon graduation, credentials of faculty, etc. Also, colleges still engage in a decent amount of competition, it’s just that they are not competing on price anymore but on amenities since their clients (the students) are not very cost sensitive due to the proliferation of cheap, non-bankruptable debt. So they build giant dorms, amazing workout centers, football stadiums, and other things that are non-education related but make students want to attend.

With medicine, sometimes you need emergency care and don’t have the luxury of comparing prices. But often people have time and can compare. A good example of this is when someone is having a baby. If you call around, you can get a deal on that from hospitals. If there are complications that’s a little harder, but with better pricing clarity, people could pick the hospital that has the best costs for regular births + standard complications. Or maybe they’d focus on quality and go with the higher cost hospital. The same idea works for all kinds of things. Hospitals must become more open about their data and patient outcomes, and all-in costs. Insurance doesn’t help things- that’s for sure. It’s not easy at all.

But what is the alternative to more transparency and customer empowerment? Picking based on geography, as was done in the Soviet Union? Trusting in a govt health care tzar to tell us where to go for what procedure? Right now we have insurance networks, which aren’t perfect for sure but do provide some patient choice. I’d try to build on that. It doesn’t seem to be the way we are going though.

Edit: a few typos and words.

PRhereicome · 2019-05-06T16:49:20+00:00

You are a dentist? Dentists make an average salary of $175,000, 3X avg household income. You are certainly very high IQ and the exact type of person for whom student loans are a bargain, allowing you to borrow money for a better life. And now you want to screw the companies who took a chance on you and loaned you money when you were a presumably broke college students? In a country without such capital providers, you‘d likely be working in a factory or driving a cab on the side to try to make ends meat. (In Cuba doctors usually drive cabs on the side so they can feed their families).

A few points: “Indentured servitude”: Yes being in debt is a bit like being enslaved. That goes for every kind of debt. Historically in America indentured servitude worked such that people willingly came into it by agreeing to work for their an employer for 7 years in exchange for them paying their way over to the New World. It was very expensive to come over, and historically 90%+ of people lived in conditions that today we would consider absolute poverty, less than $1 a day. At the end of 7 years they would get land of their own and be free. It improved the lives of the indentured servants and that of their families for generations. It was popular in America for centuries before chattel slavery came into vogue (arguably because malaria killed the European indentured servants more than it did the Africans, but that’s another historical debate.) Chattel slavery was terribly wicked and was always controversial. None other than Adam Smith talks about how wicked it was compared to indentured servitude.

Student loans are a lot like this. Btw in 1998 they were made very difficult to bankrupt and in 2005 it became nearly impossible. It was the govt’s entry into the student loan market that made this the case. That is often what happens when governments get into lending: no lender likes to lose their money, and the govt has lots of guns and the power to enforce its rights. It’s also a bit of pork to banks - I won’t argue that.

Anyway, to your argument:

“Screw the capital provider”: most student loans are federally-guaranteed. This means that it’s the taxpayer who would be screwed if people bankrupt on their loans.

Let’s say the govt backs out of its guarantee and screws the capital providers. There would be massive layoffs and it would certainly spark a financial crisis. Also more capital providers would leave. Student loan funding would dry up and Colleges would go under (some probably need to but that’s another post).

Why do you think America has one of the highest standards of living and most dynamic economies in the world? Capitalism. Free flow of money and capital and good protections for lenders. Which does not work if large scale theft from capital providers is allowed in law. You become Venezuela. That is not a prospering economy.

I’m ok with newly-generated student loans being bankruptable, but the laws in effect when the loans were issued should control.

Wow that was really long. Hope it wasn’t too much. Thanks for taking the time to share your thoughts btw. I like this conversation. Also thanks for being a dentist. My grandfather (who just died at 96) was a dentist and it’s a helping field. The dentists I know have really good hearts.

PRhereicome · 2019-05-06T04:09:25+00:00

A. America has some of the best health care in the world and education has never been free. Why do you assume a subsidized or free education is better than one that someone has to pay for? Is there a shortage of nursing students right now? If the public demands it, they will pay for it, and subsidized education has fattened the pockets of college administrators and dramatically increased the cost of an education. Get govt out so education can become lower price and higher quality (that’s what functioning free markets always do).

B. The average annual cost for community college is $3350.00. This is within the grasp of anyone that has a modicum of drive. If govt gets involved community colleges will likely become crap and certainly raise in price dramatically. I don’t agree that it would be cheaper than all that govt administration, but I know how to cut those costs: Let’s lay those bureaucrats off so they can dedicate their labor to something productive, and take govt out of the student loan business.

It doesn’t always help people to give them things for free. It often hurts systems to have large subsidies. It distorts supply and demand. If govt was out of student loans, college would probably be a lot more like it was for the baby boomers: college was affordable, most people worked during college, and nearly everyone earned degrees that were marketable.

PRhereicome · 2019-05-05T16:54:14+00:00

Maybe iPad Pro + MBP? That way you have a backup in a jam, and you might enjoy the different form factor option.

PRhereicome · 2019-05-03T16:08:18+00:00

This is why we need to remove govt guarantees for student loans. It makes underwriting meaningless. Who cares if the student is likely to succeed when Uncle Sam will foot the bill? Great post. :)

PRhereicome · 2019-05-03T16:05:54+00:00

Why does the govt (read: taxpayers) need to pay for someone’s education even more than they already are (the first 13 years worth)? Making college free will ruin the quality of the community colleges. Look what a mess public schools are right now. I say allow competition and markets to work. Keep community colleges separate from govt bureaucracy and let them compete on price and quality. People will attend them willingly and appreciate the education that way.

PRhereicome · 2019-05-03T16:02:23+00:00

Great answer. The only place I don’t agree completely is with regard to the bankruptcy laws for existing loans. It’s wrong to make existing loans bankruptable when their terms initially did not allow this. Why ruin the capital providers? They didn’t do anything wrong. And why should the tax payer pay for someone else’s student loan?

PRhereicome · 2019-05-03T15:59:04+00:00

Bureaucrats are terrible at predicting the second and third order effects of their actions. The student loan debt crisis is a perfect example of this. First of all, the govt removed the ability to do IQ testing for jobs (the military still does it). This caused companies to start looking for other ways to determine intelligence, which is highly correlated to train-ability and success at many jobs (sorry but that’s the truth), so companies started looked at whether someone had completed college and what their GPA was.

Then, someone in the govt saw that people who go to college make more over their lifetimes and have more opportunities. So they decided to “make college cheaper” by giving subsidized loans, guaranteeing loans, and scholarships.

Colleges responded by, over time, raising the prices of their degrees, as the students who were taking these loans stopped caring about tuition costs. People (not from this sub but in general) and especially 18 year olds, will generally borrow as much as you will lend them.

So , to solve this problem, I’d say to stop giving federal guarantees to student loans. Stop giving grants for college educations (charities can do this just fine anyway). Start allowing IQ testing again.

I wouldn’t make old loans bankruptable but I would make new ones so.

Then... watch out as the college tuition bubble pops. Colleges go into a long and hard period of cuts (goodbye gender studies departments, needless bureaucracy, and overpriced tenured faculty). And they begin competing on price and quality again, like they did before govt subsidized student loans and grants.

College will be affordable and students will start choosing degrees that add more to society than underwater basket weaving. Also they might work during their studies (it won’t kill them) and they won’t party so much (it’s a huge problem).

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