Ask HN: What did you do when you suddenly got rich?

Much of it involves don't make big lifestyle changes, invest smartly, get lawyers/financial planners together to protect yourself, and pay off any debt you have.

- Set aside money to pay taxes FIRST.

- Invest in mostly conservative instruments, as if you were a retiree.

- Keep a small position in risky stuff to capture some growth and get it out of your system.

- Diversify

- Keep quiet about it, don't get talked into crazy investment schemes. Think "old money" rather than "new money."

- Treat yourself a bit, recognize when you've hit "enough." i.e. more doesn't bring happiness. The number is lower than most realize.

- Remember mom, and others instrumental in your success. Everyone else can apply to your scholarship foundation, haha.

If your expenses are "reasonable" you could live off interest/dividends for the rest of your life. Donating time and charity to whatever causes you see fit.

Frank: You get up two and a half million dollars, any asshole in the world knows what to do: you get a house with a 25 year roof, an indestructible Jap-economy shitbox, you put the rest into the system at three to five percent to pay your taxes and that's your base, get me? That's your fortress of fing solitude. That puts you, for the rest of your life, at a level of f you. Somebody wants you to do something, f* you. Boss pisses you off, f* you! Own your house. Have a couple bucks in the bank. Don't drink. That's all I have to say to anybody on any social level. Did your grandfather take risks?

Jim Bennett: Yes.

Frank: I guarantee he did it from a position of f* you. A wise man's life is based around f* you. The United States of America is based on f* you. You have a navy? Greatest army in the history of mankind? F* you! Blow me. We'll f* it up ourselves.

Buy 30yr Treasury Bonds with enough of the cash to generate ~$200K/year passively for the next 30 years.

Then proceed to continue my normal life. I'd treat the extra income from the bonds like a raise, invest it smartly, buy things as I would normally. Except now I have an immense buffer to stop current work and/or the freedom to pursue other interests.

But I wouldn't change anything in the first year of such a cash influx.

That said, I put the remainder of a similar outcome in 60% stocks (VTI 75% + VEA 25%) and 40% short term bonds (VCSH). The stocks give you growth and the bonds give you stability. Rebalance this once a year and you are done. You are financial secure. Don’t get sucked into crazy complicated schemes - simpler and more diverse is better

2) Read this book: https://www.amazon.com/Investors-Manifesto-Prosperity-Armage... (or anything else by Bernstein, for that matter)

3) Try to steer clear of people/firms who want to manage your money for a hefty percentage fee. They're one step above crooks, sometimes not even. In the wise words of John Bogle, "you get what you don't pay for."

Good luck, and congratulations!

You can use that time to read some books on wealth management. Two classics are The Four Pillars of Investing and The Bogleheads' Guide to Investing:

https://www.amazon.com/Four-Pillars-Investing-Building-Portf...

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Lar...

It is also a good idea to not tell anyone, unless you want to be bombarded by requests from family and friends for loans, invitations to invest in weird ideas/schemes, and so forth.

In random order:

1) Take it slowly. You don't need to rush into investing, buying stuff, getting a new house, etc, all in two weeks. Slow, thoughtful decisions will usually be better than rushed ones.

2) If you are not financially literate, try reading some good books on the subject, and IMHO, not necessarily the most popular ones. Picking the right ones is NOT easy. There are several lists of "best financial books" or "best personal finance books", and reality is that you should read 15-20, and stick to the 2-3 that you really liked.

Financial literacy will allow you to take much more informed decisions about everything.

3) Depending on your age, where you live, and if you have kids or not, you might want to consider "estate planning", a broad category that includes, among other things, establishing "trusts" (legal entities) or similar and granting some amount of money to the trust, in order to get some tax advantage, and clarify what's going to happen to that money when you will eventually die of very very old age.

4) If you know a few friends who are also rich, talk to them and ask them to share their experience with you.

5) Don't tell others about your wealth, or don't be too specific about how much you have. A >$5M wealth creates issues, and provides strong incentives for people to try to manipulate you.

6) If you are married, share this burden with your spouse - I think it's a good idea to keep her posted, to tell him/her NOT to share too many details with friends and family, and possibly to get both of you financially literate.

7) There's a lot of BS around. Be very wary of any advice, including mine. (especially mine!) Be really, really skeptical about any claim by anybody. Remember there's no free lunch out there.

If you are considering investing in a 12% guaranteed annual return, well, let me tell you, it doesn't exist on Earth (both guaranteed and 12% together).

As a rule of thumb, take inflation + GDP * (1 - long term capital gain taxation) as the threshold beyond which you should start to be wary of any claim.

For US, currently: 1.6% inflation + 3.10% GDP[0] * ~0.75 = 3.92%, which means: any investment that is both guaranteed and above a 4% annual return, you should start being skeptical.

8) Try to invest in things that you understand well, or otherwise try to invest in things that are tax-optimized and dumb-proof (e.g. investing in an index is relatively simple to understand, can be done in a tax-smart way).

9) understand diversification. Key to this is that diversification should apply to your goal in life, and your risk-aversion. E.g. if you're 25, you might want to take a bit more risk, as riskier bets tend to pay slightly better over the long run, if you can take several of them (because comparatively less people are willing to play in risky territory). If you are 55, you might want to settle with a more conservative approach. Etc.

10) Big mistakes are usually made when investing in real estate. Try to separate the "emotional", irrational purchase of your main home, with the "investment" part. I wrote about the "rent vs buy" dilemma last year, it might be a useful read to get started. [1].

Finally, if you want this money to make you happier, the thing is, it probably won't, unless you're really really disciplined about it. Mae West used to say "Money isn't everything, if you have it". Once your basic needs are met, it's very hard to use money properly to be happier over a long period of time.

I personally try not to obsess too much about money, I try to use it to buy me "time" more than anything else, and I also try to...

- Set aside a large amount for taxes, invested it in US Treasury Bond (get an estimate of your taxes from an accountant)

- Got an accountant

- Read up on QSBS (this can save you a lot of money if you got stock when the company was small enough)

- Got a last will and testament drafted and signed. Also asked our probate lawyer about stupid things people do with money, so as to avoid those mistakes.

- Got a financial planner. Also asked about stupid things people do. (At your scale, probably ok to just do standard ETFs and bonds. Note that don't buy in all at once, diversify not just the investments but also by time, so you're not buying all into the stock market at once. This also gives you time to think and reflect about how you want to use your money and what legacy you want, while also getting some returns on investments)

- Set up a donor advised fund (you can donate stock directly to one and get a big tax break)

- Made a donation and got something cool named after two of my long time mentors

- Read book Silver Spoon Kids on how to talk to one's children about money (our financial advisor gave this to us)

- Read a lot about wealth and power in the United States, in particular sociologist and psychologist William Domhoff's "Who Rules America?" https://whorulesamerica.ucsc.edu/power/wealth.html (I stumbled on this by accident, but found it a fascinating read)

Time is on your side here, so don't rush into anything. I was really lucky to have a brother who already had high net worth, so he was able to give a lot of guidance and discussion of tradeoffs.

I recommend you read it all and take some time to digest it.

Don't do anything rash -- in fact, don't rush to do anything right away unless it's necessary. Necessary things include:

* Figuring out what your tax obligations are.

- You should get someone to recommend you a competent CPA who has dealt with this situation before. You want someone who will proactively help you sort out your tax situation starting NOW, not wait until tax time. But I would _not_ suggest a "wealth manager", or even a "financial advisor" at least to start with -- find someone who will just help you with the immediate tax consequences, and who will deal with you on a flat-fee basis with price given up front. A competent CPA should probably be able to handle this on a bare-bones basis for less than $1000, but _if_ you can get someone who comes highly-recommended and has significant experience with the specific issues you're facing, and can help you navigate the situation, paying a small multiple of that for more good advice won't kill you.

- Note that you are going to owe estimated taxes, which need to be paid quarter-by-quarter, not at tax time. At the federal level, you will not be subject to penalties, regardless of your income this year, as long as you prepay (in payroll withholding plus estimated tax payments) 110% of _last year's_ tax obligation. However, if you are in the state of California there is no such safe harbor for _state_ taxes if your income exceeds $1 million in a given year (which it will). (See https://www.bdcocpa.com/resources/articles/43 .) So make sure you pay California estimated taxes as promptly as you can manage. (But also, don't panic if you end up being charged penalties. For stuff like this (i.e. not fraud) they are generally quite small relative to the amount of taxes owed, especially if you aren't that late.)

* Figuring out your liquidity situation:

- Are you getting the money in cash, or liquid securities (i.e. that you will be able to sell easily), or illiquid securities (i.e. that you cannot reliably sell?) If your employer has been thoughtful towards you, you won't be in the third situation, which can be very messy come tax time. (If you are in that situation, there are people who can help advise you, but you'll want to start thinking _now_ about how you'll pay the taxes.)

- If you're getting securities (i.e. stock shares) that come to you in some sort of brokerage account, it's fine to _leave them there_ while you decide your next steps. Make sure you're able to sell enough to cover your tax bill, but you don't need to actually sell anything until you discuss it with your tax advisor.

- If you're getting cash, you will probably want to open a brokerage account to put it in (don't stick it in your checking account.) Charles Schwab and Fidelity are fine general-purpose brokers. Vanguard is good if your plan is to invest the money in low-fee index funds and then not touch it, which is generally a wise idea.

https://www.mrmoneymustache.com/blog/

$5mm+ is tremendous. Could last you a lifetime. You could try an annuity. Pop this formula into Excel or Google Sheets: =pmt(3%/12,50*12,5000000). A very conservative 3% annual growth rate can afford you $16k in monthly withdrawals for 50 years. The downside is, of course, you'll be drawing down on your wealth til zero.

Purchasing real estate for the rental income can yield more attractive returns. First off, you can leverage yourself up. Then cash-on-cash returns - in well selected locations - could be in excess of 10% (easily). Your principle in real estate is afforded some level of protection and may even grow as the economy and country grows ..standard investing caveats apply.

Emotionally, I was very shocked as I did not see this situation coming. Like you, I was also scared about making stupid choices. You probably had some idea that your shares had upside potential, but the money I received dropped into my lap with no warning and was approximately the same amount as what you received. My immediate advice is...do nothing. Wait for the shock to wear off and for you to acclimate to the situation. Don't tell anyone, don't run out and buy things, don't move assets; just keep on with your day to day life until you are ready to proceed.

Based on the fact that you are here asking these questions at all, my assumption is that the money likely will not change you much as a person. I still have the same friends and relationships that I had before I received my funds; my values are still the same; I'm still the same person. Most people who interact with me have no idea that I am as wealthy as I am. Who you were before you receive your money will largely be who you are now that you have received your money.

Economically, my general spending patterns have remained largely the same. The main thing I've found is that money is less about buying stuff (which I think is how most people without money view money) and more about buying time, cutting through bullshit, buying access, and creating opportunity. I feel much more free to spend money on education, conferences, vacations with my loved ones and friends, once in a lifetime opportunities etc. I'd encourage you to think about your funds this way too depending on your circumstances as I think it brings a lot more happiness than buying tons of shit you don't really need, a big house, cars etc. I'm not saying you need to live a frugal life, but I think excessive consumption gets boring quickly. You have "fuck you" money which gives you enormous power over how you craft your career and your life. Think hard about what you want to do. I still work but I've had the flexibility to explore career arcs that I would not have otherwise been able to with almost no risk.

I would be very careful about telling other people about your situation because it might alter your relationships. I think it's fine to say you are doing well at work, but definitely do not tell people you have 5 million dollars. You don't want people feeling jealous, resentful, etc. It can be helpful to have other wealthy people to talk to about issues and feelings. If other people you trust have money, feel free to talk to them. Alternatively, there are certain places that generally cater to the wealthy (eg social or country clubs, business associations, etc) where you can meet some people who will be in similar circumstances and will be happy to talk.

Moving on to what to do. I don't know how old you are or what your future earning potential is (meaning is there another chance for a payout this size), but in general what you do with five million dollars will not be dramatically different than what you do with a few hundred thousand dollars. I would seek out a wealth management group for a consultation. Make sure this entity is a fiduciary and are legally obligated to act in your best interest.

If you don't think you have more big payouts coming your way, then your strategy will likely focus on wealth preservation. If you think you can make more money you can be more aggressive. Either way, you will probably construct a well balanced portfolio of low cost index funds. Depending on your risk and needs, you could devote a portion of your portfolio to more exotic things like hedge funds or private equity or whatever. See what they say.

You have generational wealth, so if you have kids or are thinking about kids, you need to focus on general tax minimization and avoiding inheritance taxes (within the law of course). There are a variety of strategies that can...

1. Maintain high quality life

2. Improve skills for my career

3. Meet more interesting friends

With these three goals, I did these:

1. Maintain high quality life

  1.1. I bought myself a lot of insurance, both financial and life
  1.2. One nice apartment
  1.3. Put about 20% to some low risk fund

  2.1. Best keyboard, chairs and ... as a developer
  2.2. Books
  2.3. Donate some open source projects and make friends with contributors

  3.1. Host regular meetups of great developers in China
  3.2. Go to a nice gym as I find people who work out hard and keep self-discipline are normally class-a players
  3.3. Get much more opportunities when focusing on what's next than what you're paid

10/10 would slave away at a startup again (actually that's a lie, once was enough). We didn't owe any money other than the original mortgage, so there wasn't really anything else pressing to spend it on. Already owned a number of guns, motorcycles, and a basic sports car. No real plans to spend the rest, it's in the bank/bonds.

Basically I'm still living the life I always have, I just have a giant workshop now in which to play with my toys and pursue my hobbies. I think if this had happened 15 to 20 years earlier in my life, I'd be looking at things differently, but at this point I just plan to retire a bit earlier than I would have and not change much else. My father was also very savvy financially, I suspect he would have some pertinent ideas.

I now work for a small company as an integral cog in a relatively low pressure environment. I get to build things every day, come and go as I please, and my contributions are respected and valued. It's lovely :-)

Have you actually liquidated the funds? Or is that the value of your stock? I think a more interesting question for this audience is what to do when you have pre-IPO "unicorn" shares. On one hand, if you wait til IPO there may be a big "pop". OTOH, it could drop below what it's trading at in private markets. I think about diversification a lot too.

I haven't felt the need to hire a professional at this point, just put most of my liquid NW into a robo advisor (I use the Schwab one) and forget about it.

Really it just turns every conversation into a roundabout request for money. People are definitely nice to you and ask you onto all kinds of boards, funds, etc.. but it’s a hassle. You start to worry a little bit at least about personal security, especially if you have kids. You also worry about ruining them forever. (Also, watch out for temptation that could ruin your happy family life... suddenly you’re extra “attractive” it seems.)

On the bright side, you can try and get really big projects done, Elon musk-style. Just knowing you have the money helps a lot in getting meetings, raising more money, etc.

I’d just put it all in an s+p 500 index fund. Though of course I haven’t followed my own advice. I wouldn’t worry too much about dripping it in either, maybe put half in over a month and the rest over six months. Long term you’re pretty likely to wish you’d invested sooner rather than later.

Set up some estate planning stuff and buy a model 3!