Weekend!
I was asleep in our bed, dreaming. I dreamt that we had won the lottery.
Apparently, I had gotten the news while down in Fountain, Colorado, visiting a 3rd cousin that I never knew existed. Since it was one of the $343 million jackpots, they went out of their way to find *ME*, and I got the news and they gave me a receipt and an appointment to start the whole transfer of funds and whatnot and I got so excited, I thought that I needed to wake up and tell Maribou that we didn’t have to go into work tomorrow.
And then I woke myself up at 3 in the morning and realized that, no, I was in bed. I hadn’t won the lottery. There was no transfer of funds to be had. There was no receipt. I should fall back asleep.
So I feel back asleep and, immediately, I got shown the receipt again. “What do you mean you don’t have a receipt? It’s right here!”
So I woke myself up at 3 in the morning, again.
So I figured, what the heck, I’ll buy a Mega Millions. It’s not $343 million, but a dream is a dream.
Fingers are crossed.
Which brings us to “What If I Won The Lottery”.
I’ve reached the point in my life where winning the lottery wouldn’t really give me much of a chance to ruin it.
We all know the formula pretty much:
Your “winning the lottery” daydreams begin with buying stuff, then evolve to going places, then evolve to stuff like college funds and paying off mortgages of loved ones and making sure that retirement funds are properly balanced and, heck, there’s still money left over (this is a daydream, after all), maybe send a check to that one charity that you like so much.
Well, I’m still smack dab in the middle of “college funds” daydreams (“kiddo, just get accepted. You will be able to go. Bust your butt and work hard and get a major in whatever you want, so long as you minor in either business or economics”). But, after those get set up (how expensive could MIT be, after all?), there ought to be enough left over to retire early.
Maybe go to cooking class.
So… what would you do if you won the lottery?
(Image is “Play” by Clare Briggs. Used with permission of the Briggs estate.)
What amount?
If I won one of the huge mega million lotteries, I would
1. Buy a house (budget 3-4 million)
2. Buy cool furniture
3. Buy cool art. I’d like a Wayne Thiebaud and a Daniel Arsham piece. Plus I would look for some up and coming artists.
4. Do some traveling.
5. Put the rest in an Index fund.Report
I suppose that’s a good point. The Colorado Lottery right now has a jackpot of $2 Million.
Daydreams involving that mostly revolve around paying the taxes for it and thinking about how it’s pretty much enough to pay off the (current) house and then shoring up the retirement account.
Maybe take a trip?
But you’re still flying coach?
So that’s not really worth the dollar you’re paying for the daydream.
So daydream about something like the pot mentioned in the dream: $343 millionReport
For a relatively modest jackpot of $2 million, I’d spend most of it buying free time for myself. There never seems to be enough time anymore and not having to work for a living would be such an incredible boon that planning for early retirement would be the overriding goal. Other priorities, such as charity, vacations, buying stuff, would all be a distant second.
Not that I wouldn’t necessarily work at all, anymore, but it would be purely my terms. Self-employment or perhaps even some part-time work. Still seems like a worthy daydream.Report
A year or so back I bought a ticket for one of the lotteries that would pay a bit over a half-billion dollars to a single winner. I spent some time thinking about what I would have to do if I won (not “get to do”, but “have to do”). First thing on the list was the phone call to my daughter to tell her I was going to be so wealthy that we had to discuss how her life would have to change in order to provide adequate security against kidnapping for my granddaughter.
Many years back I was at a conference where Andy Grove (Intel co-founder) spoke. It turned out I was sitting where I could see the restroom that Andy used when he finished. One gorilla in a black suit, mirrored shades, and an ear-plug went into the restroom; a few minutes later a scared-looking guy came out and the gorilla motioned to Andy, who entered. While Andy used the restroom (with the first gorilla inside), a second gorilla in identical garb stood in front of the restroom door turning people away.Report
And you thought food-taster was a dangerous job.Report
Michael,
Ye gods, that’s not how it’s done. The first thing you do is call your lawyers and establish a blind trust. The second thing you do is tell no one.
Security is for when you take your daughter gold-farming in California (would you really hire mercenaries to keep your daughter and granddaughter safe?)Report
Read the tiny print on the back of the tickets, or on the web sites for the ones that are receipt printed out? If you want the money, they get to use your real name for advertising purposes.Report
Micahel,
They can’t use your name if you don’t give it to them. I do know someone who has created blind trusts for lottery winners, so what you’re saying doesn’t apply to all American lotteries.
http://blogs.findlaw.com/law_and_life/2013/12/for-lottery-winners-a-trust-can-really-pay-off.htmlReport
@michael-cain
I think the solution here that winners do is that they set up a Blind Trust first and then they claim their earnings.Report
When daydreaming about the billion dollar Powerball jackpot, it did occur to me that I’d have to pull my daughter out of public elementary school before collecting because I simply couldn’t be assured of her safety.
(No anonymous collecting or trusts in my state.)Report
In the past two and a half years, I went from working for the government and living in a different city than my wife to getting a private sector job and moving to the same city as my wife and then to moving to the other side of the globe with my wife for another job. The end result of the two job moves was a decent increase in my pay, while consolidating residences has put us right in the two-income no kids sweet spot.
All of that is to say that I am right now in the position of contemplating the best way to save and invest excess income where two years ago I was trying to figure out how to service my grad school loans and pay my mortgage and keep my credit card balances from running away from me. So I’ve been spending a lot of time thinking about personal finance and retirement planning.
One of the things I’ve been trying to do is to set myself up on enough of a plan that I would be able to handle a windfall without wasting it (probably not winning the lottery, something more like faster than expected career progression for me or my wife or an inheritance). I’ve spent the last several years studying the economies of less developed countries. The resource curse is a real thing. And it may be even more real on the micro level. The stats on what happens to lottery winners are a bit scary and enough to make me question the existence of the lottery. Generally, neither people nor countries tend to deal very well with shocks, whether they be positive or negative.
So, in the case of a lottery win or similarly large windfall, the plan looks something like this:
1. Give 10% of the after tax amount to charity, to some some combination of causes that I have a personal interest and causes that have the greatest impact (here is a good resource for finding the latter: http://www.givewell.org/charities/top-charities). In 2017, I’m planning to give about 5% of my take home pay to charity, as I’m still paying off the last of my student loans, and I’d like to get that up to a steady 10%; although if we have kids that may be difficult.
2. Take another 10%-15% and think about some kind of long-term charitable endowment. The more that our political culture becomes dysfunctional, the more convinced I am that the best course is simply to figure out what causes I care most about and take direct action. This would also be something that I would one day want to devote more time and energy to as I approach retirement from my day job.
3. Plug another 10%-15% directly into my existing retirement savings, which is currently all in 401ks and low fee indexed mutual funds.
4. Put about 50% into medium-term investments, some into securities but most into something that I would have more direct control over. Real estate investing or starting or investing in a small business are ideas that I like.
5. Take the rest and have some fun with it; this includes spreading a bit around to some relatives.Report
jr,
That list is pretty good, but it’s not future focused enough. What’s the point in saving people that we’re just going to kill later? Smart investment (aka what my friend who writes both policy papers and climatology research models) says invest in water purification. We’re going to need it before long ourselves, not just Africa anymore.
If you want to diversify into a small business, consider some actual diversification by creating it in Canada. That way, in case you ever want to move there… it makes it a lot easier if you have investment already there.Report
I’ve thought about this some since a few years ago the powerball got to 900m or something. The office had a woman who coordinate buying group amounts of tickets….anyway.
First thing I’d do is I’d pledge a shitload of cash to have NPR cancel their damn “spring pledge drive” which happened about 2 months after their “fall pledge drive”. “Help pay for the stories you like like Storycore.” Yah, I’d pay for that….rolls eyes.
If the amount was a boat load, see above, I’d probably consider moving, either within or outside the US. Might renounce my citizenship as well–or at least get dual somewhere. With that kinda cash, I could probably buy it. After the investments were set up and a manager hired, I’d probably buy a jet for all the travel I’ll be doing.Report
If we assume $400M winnings.
1. Pay Time… ($188M)
2. Pay Taxes…($88M)
3. Bathe in the money remaining…$124M
4. Create Family Trust with $110M… annual giving estimated between $4M-$5M
5. Retain $10M as personal wealth… annual estimated budget $300k (after tax)
6. Spend $4M in next 12-mos on all the various things you’ve dreamed of.
7. Now we know the nature of our wealth… we have $4-5M/year to work with.
8. Not go broke.
Ok… now for the juicy bits the OP is really looking for.
Of the $4M in first year… Block Grants for everyone!
$1M to Self to clear all debt and gifts for wife… travel, decompression, and prep for transition.
$1M to Brothers/Sisters/Parents
$1M to Cousins
$1M to Friends/Projects/non-Grant charities
After the dust settles, year two is when the work of spending the wealth begins.
1. Work on the regional food distribution project I’ve long studied (fund business development)
2. Build the Viandry idea I’ve long studied (10-yr plan)
3. Plant the vineyard on the Property… Sauvignon Blanc and a field blend of CabFranc/Merlot/Carignan
4. Investigate and find land at higher elevation for better vineyard.
5. Incubate Children’s, Friend’s, Stranger’s Projects in that order (for profit)
6. Fund various Catholic education projects my friends have developed
7. Fund various Catholic ecclesiastical projects my friends are working on
8. Fund various Catholic culture projects
9. Fund various local Catholic charitable projects
10. Other charitable projects (grants)
11. On-going petitions from family… yes, I’ll ask them to write up a petition for the foundation.
12. Plant trees for my grandchildren to enjoy.
There… that’s probably years 2-5… if/when projects start to pay-off, we’ll have more to invest and new projects to investigate.
But all that’s just off the top of my head… titillating, I know.
{edit: and invest in water purification and land in Canada}Report
I presume this is a non-trivial amount of money.
The selfish things I’d do:
1. Buy a very large plot of land just on the edge of town (so I would have city services). Have a house built to my specs on the land (it would not be a mini-mansion, but I WOULD like to have a dedicated library/music room in it). Post the land “no trespassing.” Hire a gardener or something so I don’t raise the town’s ire over “untrimmed hedges” or some nonsense.
2. Hire a personal cook, or at the very least someone to do the marketing for me.
3. Travel more, perhaps hire a private train car for that.
4. Hire a financial planner to invest enough of it that I would have a totally comfortable cushion upon retirement, even if my state’s teacher-pension fund went belly-up.
(I wouldn’t quit my job. I feel like I need some sense of purpose in the world and being a wealthy layabout would not give me that sense)
I honestly have most of the “things” I would want (more storage space in my house, and a dedicated library/music room with GOOD climate control (I own a 90-year-old piano) would be nice, though). What I’d really like would be more TIME to enjoy my hobbies and books and to play that piano…
The less-selfish things:
1. Endow a scholarship at my university. Not in my name; maybe in the name of someone I looked up to but who is now gone. Ask the campus library what they need and get it for them. Ask the local public library what they need and get that for them.
2. Donate enough to my congregation (anonymously, if at all possible, or if not that, with the stipulation that “we never speak of who did this”) that we don’t have to worry about our financial survival
3. Buy a large plot of semi-natural land, arrange for its management and upkeep, make it available to the field biology classes on my campus for field labs and research (it would have to be within a short drive of campus so idk – not a lot of undisturbed land available right now)
4. Find some worthy charities and give them money.
5. Invest money for my niece with the understanding that when she comes of age, she’s to use it to “get started” in life, whether that’s for higher ed, career ed, starting a business, whatever – just as long as it’s not spent on partying or other “frivolous” pursuits.
6. See if my brother and sister in law have any major debts and take care of those. (I know my parents are good, and I’m not that close to most of my cousins….)Report
*Yawn* I’d just get a blind trust and let my husband handle the whole thing. He’s the “creative” type, I’m sure he’d think of something fun.
Yes, it’s boring, but I trust him to have better ideas than I generally do.Report
Why a Blind Trust? That just means that you don’t know where the trust is investing its funds… not that the Trust itself is invisible. Unless you are worried about conflicts of interest?
Betsy? Betsy DeVos is that you?Report
March,
A blind trust means that the recipients don’t know what’s going on (you can set it up to disperse your money however you want I think). It also means that you can let a lawyer claim the money, without being compelled to give up your name, which is the important part.Report
I see; I’m not sure about the claiming anonymity differences between Kimmie’s Blind Trust and the Marchmaine Foundation… but I’ll take your word for it for now. But if I win, I’ll ask my lawyer for more details 🙂Report
Please, please talk to a lawyer if you win.
I’m not a lawyer — my friend who set one of these up isn’t a lawyer (he pays people for that sort of expertise).Report
http://info.legalzoom.com/blind-trust-work-lottery-winners-20115.html
So the blind trust actually owns the lottery ticket, and thus is the only one capable of claiming it. I’m assuming the blindness blocks the lottery from simply asking “and whose trust is this again?”Report
No. The “blindness” is between the trustee and the beneficiaries.
The confidentiality of the name of the trustor is due to the attorney-client privilege. Attorney X goes to the lottery board with the winning ticket and a redacted (ie, with the key names blacked out) copy of the trust agreement and his power of attorney. The name of the trust is not the name of the winner plus the word “trust” at the end, but instead something innocuous, eg the “Happy Happy Day Trust”.
When the lottery board asks for the name of the trustor, the attorney tells them to go pound sand.Report
When the lottery board asks for the name of the trustor, the attorney tells them to go pound sand.
And then the lottery board points to the fine print on the ticket that only says natural people can redeem them, and that they are non-transferable once the drawing happens, and, as the trust is not a natural person and it now cannot legally transfer the ticket to a natural person, that lottery ticket is *now void* and they aren’t paying out a dime of it, ever.
Seriously, you guys are making a lot of silly assumptions here.
If the lottery board demands to know who you are and to take pictures of you, they will *put it into the rules of the lottery*, and you will not be able to redeem the ticket without doing so, period, end of story.
I actually *don’t* think they require that, BTW. I’m pretty certain they give you the option of publicizing it or not.
But if they *wanted* to force you, they could, because *it is their lottery* and they write the rules of what you have to do to get paid!
EDIT: BTW, legally, tax-wise, that idea is nonsense. That ticket is worth millions of dollars, worth that before you put it in a trust. Which means you have to pay income tax on it, which means the lottery commission has to report your income.
Otherwise, somehow you magically gained a trust with millions of dollars of new money you never haven’t income tax on. You obviously could then report it and pay the taxes, but the IRS isn’t going to allow a system to operate like that where people are able to just magically get huge amounts of money funneled straight into trusts that they then *voluntarily* can disclose to the IRS.Report
Continuing my edit because I ran out of time:
Note my objection isn’t to putting the money in a trust.
Legally, that would possibly be okay. It wouldn’t help you any with the actual lottery money, legally, you personally won that (And then put it in the trust), not the trust, so you’d have to pay taxes immediately yourself. But you could perhaps defer taxes on any investment income *from* the lottery winnings, I am not sure?
My point is that the lottery commission, like pretty much everyone who hands you a large enough sum of money, is required to tell the IRS they did just gave you a bunch of money.
Which means they, legally, have to know who you are. They have to know who the person is who is required to pay taxes on all that money before they hand the money over.
There’s no way the IRS is letting some *trust* walk away with millions of dollars that is taxable via personal income tax, and just *hope* whoever earned the money that ended up in the trust admits it on their personal income tax.
So there’s no possible way that’s legal.Report
Dear DavidTC:
You are absolutely correct. My sole defense is that I was responding to Kim, so I wasn’t exactly putting out my best work.Report
They don’t. The IRS is notified that XYZ Trust has claimed the lottery, and the IRS is of course notified of the formation of XYZ trust, and the IRS is — again — notified when XYZ trust pays out any money to anyone, and of course those getting payouts from XYZ Trust have to declare it on their taxes.
It’s no different than any other legal entity. (And it simplifies things like, for instance, when a group wins the lottery. A trust accepting it than investing and distributing the money on a pre-agreed fashion, something that can’t be altered, is highly useful).
There’s downsides to using a trust. I’m pretty sure it requires a non-revokable one which is exactly what it sounds like. You, the lottery ticket owner, no longer won the lottery. You’re just the sole beneficiary of the legal instrument that did — whose terms you cannot change once you’ve signed on the dotted line.
The type of trust you’d need to use to collect a lottery ticket isn’t an agreement signed on the back of a napkin. It’s an actual, real thing. No different than the sort of trusts used to pay, you know, trust fund babies. (And the IRS has absolutely no problem ensuring those are taxed).Report
The type of trust you’d need to use to collect a lottery ticket isn’t an agreement signed on the back of a napkin. It’s an actual, real thing. No different than the sort of trusts used to pay, you know, trust fund babies. (And the IRS has absolutely no problem ensuring those are taxed).
That’s because those are created using *post-tax* income. Someone collected money all their life, presumably paying taxes on it along the way, and then put that into a trust for their children.
The IRS is notified that XYZ Trust has claimed the lottery, and the IRS is of course notified of the formation of XYZ trust
And? It’s not the *trust* that has to pay taxes. It’s whoever put the money in there, which the IRS is not aware of.
and the IRS is — again — notified when XYZ trust pays out any money to anyone, and of course those getting payouts from XYZ Trust have to declare it on their taxes.
Erm, I’m pretty sure it can’t work that way. That way lets you magically defer all your income tax. You can’t just divert personal income that you earned into a trust and only pay taxes on it when it comes *out*.
If you, personally, purchased a lottery ticket, and it won, you, personally, just made millions of dollars in income. You can, indeed, put that income into a trust, but you can’t *start* with that income in a trust. It has to, for tax purposes, come through you and *then* go into the trust. Even if it literally is just deposited into the trust. (Or, for another way to look at it, the *ticket* increased in value, and you have to pay income taxes on that increase, and then you handed the ticket, as an asset, to the trust, which cashed it in.)
If that was possible to skip *you* and just go straight to a trust, if you could just divert incoming personal wealth increases to a trust, *everyone* would do it, for literally all income, and we wouldn’t need things like 401(k)s and other tax deferral things. ‘Please make my paycheck out to my personal trust.’
Now, income that *the trust itself* earns is tax-deferred until it comes out, but if a human being creates a trust and puts assets in it, those assets generally are taxed before they get put in. (Well, unless the assets, themselves, are already tax-deferred, which is an extremely confusing situation and not really relevant here.)
I suspect a few people have tried to, cleverly, claim they put the worthless ticket, as an $1 asset, into a trust, and whatever happened after that is *trust* income, thus shouldn’t have to pay taxes on it until it comes out. I suspect the IRS shut those people down hard, too.Report
You do realize that it DOES work that way, right? There are a zillion trusts that claimed lottery tickets? Like you can google “Lottery winner trust” and get real world examples? And certainly plenty of easily googled explanations
You STILL have to pay income taxes on the winnings. You still won 200 million dollars, which you then placed into a trust. The trust holds the 200 million, in the form of a ticket, which it then converts to actual cash value.
Nobody is arguing that the blind trust avoids taxes. There are two primary benefits for using a blind trust: The assets are kept out of your hands (which means you can neither blow through it all nor be badgered to invest in your buddy’s big idea, because you can’t alter the terms nor withdraw the money) and if someone FOIA’s the winner’s name (or the lottery publishes it) they get the Trust’s name, not yours.
There’s no avoiding the taxes, and it’s income tax no matter how you slice it.
And like I said, the IRS knows about the Trust, knows the Trust claimed the ticket, and knows whether the relevant taxes are paid.
A blind trust to collect your winnings isn’t a tax dodge or shelter. It’s a form of self protection.Report
You do realize that it DOES work that way, right? There are a zillion trusts that claimed lottery tickets? Like you can google “Lottery winner trust” and get real world examples? And certainly plenty of easily googled explanations
Exactly *three* states allow you to present a trust’s name to the public when you claim winnings. Six more states allow you to just ask to be anonymous. All other states will out you regardless of where you direct the winnings:
http://www.natlawreview.com/article/using-llc-or-trust-to-receive-lottery-winnings
And note that’s ‘direct the winnings’, not ‘win the lottery’. No state allows corporate people to win the lottery, no state allows corporate people to walk up with a winning ticket and assert the corporate person owns the winning ticket and thus should be paid the winnings.
A human being, or group of human beings, are always the winner(s). They may direct the money into a trust, but the trust did not win the lottery.
There is, surreally, an example of a lottery winner actually trying this, to keep themselves secret from the lottery commission. It didn’t work. Someone created a trust called ‘Hexam Investments Trust’ and tried to send a lawyer representing the trust to get the money. You can google that trust name to see the story, but, long story short, they ended up *literally walking away from the money*. They withdrew their claim, because the lottery commission was, like, ‘So, who actually won this? Who bought this ticket?’ and they would not answer. (Not to get into a weird story, but this is because the ticket was purchased by a lottery employee and there is evidence he tampered with equipment.)
Here is the actual truth of the matter: Some states *do* allow you to remain anonymous as a lottery winner, and they don’t require a trust to do it. Some states *do not* allow you to remain anonymous under any circumstances.
And some states have a weird middle ground where they always announce the ‘claimant’ name, but if the winner has a trust to stick the money in, they’ll announce the trust name instead. But that’s not some sort of *magic trick*. It’s just the lotto commission has decided to *let* people remain anonymous, and the procedure for doing it there is for the winner to tell them the name of a trust…instead of just having the winner check a check box. (I’m not even sure the winner would then have to deposit the money *into* said trust.)
And considering that, again, only three states will do this, I have to suspect that almost all the results on Google are nonsense, or just examples of people putting their winnings into a trust for personal reasons, not in an attempt to keep them secret.
Nobody is arguing that the blind trust avoids taxes. There are two primary benefits for using a blind trust: The assets are kept out of your hands (which means you can neither blow through it all nor be badgered to invest in your buddy’s big idea, because you can’t alter the terms nor withdraw the money) and if someone FOIA’s the winner’s name (or the lottery publishes it) they get the Trust’s name, not yours.
First, that’s not a blind trust, and can we stop misusing that term? A ‘blind trust’ is a specific legal term that means you don’t know where the money is invested and can’t find out. That’s not this.
Second, I have no objections to putting the money in a trust after taxes are paid on it. No one has any objections to that.
I am pointing out that either a human shows up with the winning ticket and collects the money, and that gets reported to the IRS. In a few places, the lottery people *let you* ask them to not announce the name, and in even fewer places they *let you* present the name of a trust for them to announce, and everywhere else they just announce your name.Report
Now that I became curious, the National Law Review says that there are six states that allow the Power Ball winner — and that’s the really big payouts — to remain anonymous. Three others allow the winnings to be claimed through a trust or LLC. The rest require that the winner’s name, home town, and the location where they purchased the ticket be revealed. (I’m good — Colorado allows going the trust/LLC route.)
A different article said that which state’s laws apply is determined by where you purchased the ticket, not where you live. They suggested that if you aren’t in one of the nine but close to one, and buy infrequently, that you make the effort to go the state that allows anonymity for your purchase.Report
Kimmie, this was supposed to be an opportunity to talk about how you’d build a bong bigger than your car, not to mock others for not having the proper fantasy financial planners.Report
Jay,
*shrugs* I’m no boyscout but I do believe in always being prepared.
Your fantasy bears a surprising resemblance to my reality, so do excuse me for indulging in a fantasy where people might display some more common sense than is usual in this world.
In tangentially related news, lasagnacat is now back, and with a BUDGET!!
Draw your own conclusions.Report
Oddly, in the last year my wife and I have come into a rather large sum of money, though pain both physical and emotional. Not “win the lottery” large, but enough to completely change our finances. We are both in our ’40’s and had been looking at 20 odd years of retirement. Now, we are looking at 10 years of transitioning toward self employment (real estate, small boutique businesses) and retiring from our assets in our ’50’s. Part of the plan was getting out of high cost living in the bay area (took half a second to make that decision) and move to an area we could easily put 50% down on a house (the amount wouldn’t even get us out of PMI in the bay.) When your mortgage is a pittance the amount you need from a job goes way down, freeing up many other areas. We paid off student loans, funded retirement, brought CC balances down…
Amazing how life works.Report
Indeed.
Early on when I was married, we struggled to get out of CC debt. We did, and then things got better, and we only needed 1 income to cover expenses. I know this because I was considering starting a business with my BIL and I ran the numbers. I knew we could afford it. They could not.
There is a wonderful freedom and peace of mind you have when you don’t need the job you have to pay bills. Sadly, being single removed that to a large extent. 🙂Report
Frankly, if your answer to that question isn’t essentially ‘hire an accountant and a lawyer and pay off all debts and buy a house and invest most of the money’, you’re one of those dumbasses who are going to be broke in 4 years. Although I suspect a better test of that is if you get it lump sum.
So let me skip all that obvious stuff, and try to figure out what I would do, say, $200 million that I had available to put towards charity.
I have recently found myself wondering about non-profit competitors to industries that do very little, but make a lot of money off people anyway.
I recently saw a report on check-cashing places, and the report explained that a lot of what we thought about why people used them was wrong. Poor people do no use check cashing places because they are dumb, or because they cannot get service at a bank…they use check cashing places because they are 100% sure of the cost of every aspect of it. There are no hidden fees like bank accounts have, they can’t get dinned with some overdraft fee, there’s no getting to the front of the line and discovering that they are going to charge you to cash a check, etc.
Or to put it another way…a large section of the poor has been *burned* out of the banking system by asshole banks.
So, if I had enough money (and I confess I have no idea how much money it would cost), I would start a non-profit bank.
And, yes, I know about credit unions, but for some reason credit unions have decided to operate basically as banks do, with almost the same behaviors. They exist to provide services to their members, and they also have a bunch of odd restriction on membership. I mean, the thing I want might legally be a credit union, or legally be a bank, but the point would be that it operates pretty differently than existing one:
1) People would be able to get ‘accounts’ without putting any money at risk. They come in, and identify themselves to the bank, and it even tries to work with people without ID in some way. It would be nice if this was free, but it would work fine if the cost to open the account was $5 or so…whatever check cashing fees are.
2) Because the point, of course, is to provide *free* check cashing from that point forward, or extremely cheap. Oh, and free ‘suck all the money out of a pre-paid debit card’ service because assholes keep trying to pay poor people that way.
3) Additionally, the money can be put on a free ‘pre-paid’ debit card. Or…rather, it’s really a bank account, but we make sure people understand there aren’t any fees, you can’t overdraft with it, and the money doesn’t slowly disappear. Probably not have any real network of ATMs, though, but wouldn’t charge to let them use other banks.
And we slowly try to transition them to a ‘real’ bank account, after they understand we literally do not charge fees in any circumstances. They want us to do something, the cost will be posted in advance, and they can always just walk out with all their money.
4) Also get into payday loans. This, admittedly, is a bit tricker, because at least some of that cost is covering fraud, but surely they can be provided cheaper than the insane interest levels they are now.Report
David,
Yes, you can provide better “payday loans” with better securitization. If you really want to be responsible for people forgoing necessary medicine and food that is.
… because , welcome to America, this is the free world and if there’s a better idea, someone’s already doing it.Report
I didn’t say anything about ‘better securitization’. I said cheaper. (If it has any securitization, it’s not a ‘payday loan’, from what I understand. Although nothing’s stopping the bank from also doing ‘car title pawning’.)
At the bare minimum, in payday loans there is some level of profit margin involved, and that can be removed, while still charging enough interest to cover defaults.
I rather instinctively assume the profit margin is a *lot*. But I admit I have no evidence of this, and it is theoretically possible the 400% or more interest rates that payday lenders charge are needed to cover defaults. That would be a pretty absurd level of defaults, but maybe it’s happening, and a non-profit would just reduce costs by 5% or something.
Of course, assuming people started using it like a *real* bank, that might include direct deposit, which make it safer to give a ‘payday loan’, or rather a payday ‘advance’, because *the bank* is getting that money soon directly. (Yes, a small percentage of people would scam a loan right after they are fired, or change their paycheck from direct deposit, but it’s still, statistically, safer.)
It also might be worthwhile to check in if the payday loans can somehow go *directly* towards things, which might make them safer for the lender also. Like…can the bank pay the electric bill? I mean, bank *do* pay people’s electric bills all the time. Could they do that as a *loan*? Yes, yes, money is fungible, but that sort of thing would reduce scammers trying to get loans, run away, and keep all the money. Same with medical expenses, and all sorts of things.
If the loan is in the form of ‘I have been depositing my paycheck here for six months, I need this bill paid, can you wire them the money or write them a check for that amount? My paycheck to cover it, as you know, will by in my account in ten days, but this needs to happen now.’, I think the loan is less dangerous than ‘Fill out this form, get some cash!’. Probably.
And the less dangerous the loans are, the less interest the bank has to charge to break even. But, again, this is all vague ideas I have. Maybe loans are too risky to go into.
But even without any of the loan stuff at all, a non-profit bank that just operated as a place to cash checks and stick money in an account and get a free debit card to access that money, but with a promise of *absolutely* no hidden costs in any manner, no monthly billing of any sort, and everything with a cost has it clearly printed upfront and you pay it upfront…would be a helpful charity.
And, hey, cheap money orders would be useful also. Or cheap cashier’s checks…which are basically the same thing as money orders. I don’t think this bank should offer *customer* checking, or at least not for free, because that introduces all sorts of check processing stuff, and frankly the intended customers probably have never had a checking account in their life and hardly need one now. So, in the rare cases they need a check, instead use the money order/cashier check paradigm where the customer comes in and *pays* the money upfront to the bank to get a check written on the bank.
Another thing this bank would do: Not keep damn bankers hours.Report
I would do all the sensible/generous things that have been discussed, e.g. lawyers, trusts, charities, family, attempts at anonymity, etc.
I have a very bland, common name so I might be OK. Also if they made you take a picture, you could try the old “obscure face with huge check” trick.
As far as selfish, gold-toilet-seat, car-sized-bong type things:
–A small house on a great piece of land on the Maine coast.
–Buy $X,000 bottles of the “name” wines (e.g. grand cru red Burgundy, etc.) to see how they are. Maybe do some blind taste tests against some $20 bottles and write an article about it.
–Enter the $10,000 main event at the World Series of Poker
–Hire boat to sail us around Caribbean for a month, with our dog.
–Hiking trip in a location TBD. Wyoming?
–Hire a boot-camp language tutor who would force me to learn Spanish. Or possibly French. Then go on restaurant tour in the appropriate countries.Report
LOL.
I know a guy who’s basically done most of these (he hates playing poker, or he could do it professionally. would rather play wargames with he military)… (albeit the $500 bottles of vodka were an investment, and sold shortly thereafter)Report
I’ll confess to probably booking a European River cruise…but I’ll find the secret one that has the *really* good food… not cruise good, not NPR good, not even Whole Foods good, but really good.Report
I think after all the pesky financial stuff, it would be travel, till the wifes content.
For myself, several customized 57mm recoilless rifles. All the AT and HE rounds a guy would ever want. And a firing range, pretty big range.Report
I’d leave a bunch of money to causes close to my heart and stick the rest in the bank. I’d sell everything and wander around with world with my son.
In the spirit of your question, I’ll be pampering myself this weekend at a local resort. I’m treating myself to a little staycation. I’m almost halfway through this pregnancy and I’m in the mood for a little R&R. Work has been crazy. They moved me down the street and changed my title, but until we can complete the transition, I get to work both jobs!Report
Right now I just spend a lot of time thinking about how I could spend a year not doing anything I didn’t feel like doing right then.
The details of what I would feel like doing or what I would do before that or after that or whatever, those change almost every time I think about it, but the year of only being accountable to Jaybird and the cats?
Would be amazing.
This despite being very fond of my job.Report
This, right here.
I have a friend who is a handful of years older than I am and he retired from the AF a couple of years ago and now pretty much doesn’t do anything he doesn’t want to. Obviously his retirement pay doesn’t come anywhere near winning the lottery, but he’s financially secure enough that he doesn’t have to spend much time thinking about money. He hiked the Incline 26 times last year and volunteers at a dog rescue.
Sounds great to me.Report
As it turns out, I didn’t win.
*BUT*, I did get a Megaball +1.
So, hey. $2!Report
How in the heck does a Megaball +1 only pay off a buck above the price of the ticket?
You know what? I’m beginning to suspect that this game is rigged!Report
Yeah, a 1:1 payout for 56:1 odds. You don’t play megamillions for the non-jackpot payouts.
I wonder how bad the odds would have to get before people would actually stop playing — it’s such a pipe dream anyway, would anyone care if the odds were, say, 3 billion to one against, instead of 270 million to one?
Well, I suppose if there stopped being a winner every month or so then people would eventually get the hint.Report
Acquire the rights to the Blue Sox books and republish them.
Release restored version of all of the Marx Brothers movies.
Publish a uniform edition of all of Wodehouse’s writing, including the short stories and the humorous essays.
Buy up the rights to all the Marvel and DC characters and force some amount of creativity on Hollywood by not letting anyone make movies about them.Report
Mike,
*yawn* I know someone who wrote comics (Marvel) — he didn’t even know the backstory to the character!
(This is … kinda normal for him… he was telling a story once, and someone said, “that sounds like an episode of friends….” so, lo and behold, he writes an episode of Seinfeld… without even knowing the names of the characters).Report