Strategy for Material Windfall

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socialforums2019
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Strategy for Material Windfall

Post by socialforums2019 »

Fortunate to have a series of successes where I have received significant windfalls during the course of the last few years. Prior windfalls have allowed me to get everything in order financially (e.g. home purchase, education for kids, investments, etc.). I'm fortunate enough to have another windfall coming and where all the other windfalls were focused on setting myself up for the future, I wanted to ear mark this money more towards celebrating while still balancing some money allocated for the future/retirement. I've allocated it to be something like the below:

- $250K for taxes
- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)
- $45K cash (Beef up EF and have some extra cash on the side)

All tax-advantage accounts have been maxed for the year (401K, Roth, HSA)

The only debt I have is a ~$980K mortgage @ 2.375%. Home is estimated to be $2M.

If I execute the above, finances will look like:

- $1.5M portfolio at 80/20 AA
- $150K cash position (includes $75-$100K for EF and extra cash just to make me sleep better at night)

With that said, an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast. This would free up ~$8-$900 on my monthly expenses. I don't know if that is the best use of the money with such a low interest rate.

Do you see any other options I should be considering or does the above seem like a reasonable plan to celebrate but also continue to work towards setting myself up for retirement in the next 20-25 years?
Normchad
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Re: Strategy for Material Windfall

Post by Normchad »

How big is this windfall? 250K seems kinda low for taxes.

Also, we will riot about the car. So does anybody how to get the lowest price on torches and pitchforks :)

Congratulations on your windfall! All the best!
ButtFear
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Re: Strategy for Material Windfall

Post by ButtFear »

I'd leave the mortgage alone, 2.375% is cheap money!

What kind of car?
Topic Author
socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Normchad wrote: Tue Jun 28, 2022 7:46 am How big is this windfall? 250K seems kinda low for taxes.

Also, we will riot about the car. So does anybody how to get the lowest price on torches and pitchforks :)

Congratulations on your windfall! All the best!
Windfall pre-tax should be around $650K. I took 37% for federal, but then I guess I need to account for state too. I'll likely put my numbers in front of my tax accountant so he can guide me on the additional estimate taxes I need to contribute this year and then change my allocations accordingly.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

ButtFear wrote: Tue Jun 28, 2022 7:48 am I'd leave the mortgage alone, 2.375% is cheap money!

What kind of car?
To be honest, I don't even know yet on the car. I've always had manual toy cars and I miss it, but so many cars today aren't manual. That'll have to be my first decision on if I want to stick with manual or not. Considering the options below. Any others to consider?

- 2016 Mclaren 650S Spider
- 2018 Mclaren 570S Spider
- 2011-2012 Lamborghini Superleggera
- 2018 Porsche GT3 (manual)
- 2021 Porsche 718 GT4 (manual)
smitcat
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Re: Strategy for Material Windfall

Post by smitcat »

socialforums2019 wrote: Tue Jun 28, 2022 7:58 am
ButtFear wrote: Tue Jun 28, 2022 7:48 am I'd leave the mortgage alone, 2.375% is cheap money!

What kind of car?
To be honest, I don't even know yet on the car. I've always had manual toy cars and I miss it, but so many cars today aren't manual. That'll have to be my first decision on if I want to stick with manual or not. Considering the options below. Any others to consider?

- 2016 Mclaren 650S Spider
- 2018 Mclaren 570S Spider
- 2011-2012 Lamborghini Superleggera
- 2018 Porsche GT3 (manual)
- 2021 Porsche 718 GT4 (manual)
It might be best to find a way to get into these cars before putting a lot of research into any specific one of them. Some may not fit your size or agility getting in and out and others might not fit your idea of fun just sitting in them. It is an easy and quick way to potentially narrow down the list.
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HMSVictory
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Re: Strategy for Material Windfall

Post by HMSVictory »

Congrats on the windfall.

I like your plan except for one part:

You are spending 200k on a car while you owe $1M on your house. In effect you are borrowing on your house to invest in taxable and buy this toy.

This is extremely unwise. Pay the mortgage off and once that is done then get the car. Your only going to have $750k left after you zero the house out.

718 GT4 all day long and twice on Sunday or the GT3 if you are tracking it. Yes both should be manual even if they are slower.

They are both track tuned cars I would prefer a GTS model myself for tooling around in so as to not rattle my tooth fillings loose but YMMV.
Stay the course!
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Re: Strategy for Material Windfall

Post by retired@50 »

socialforums2019 wrote: Tue Jun 28, 2022 7:58 am ... Any others to consider?
https://www.astonmartin.com/en-us/model ... 12+Vantage

Regards,
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Watty
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Re: Strategy for Material Windfall

Post by Watty »

What is your income and how reliable is it? That will have a huge impact on how you should handle the windfall.

How long until you want to retire? If you want to retire in ten years your situation is a lot different than someone who is planning on working another 30 years.

Do you have a spouse? If so then you might also want to budget some discretionary spending for them if you are going to spend almost a quarter of a million dollars on the car and garage(with taxes and ongoing costs).
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am Do you see any other options I should be considering....
I didn't see an travel on your list.

You did not day how old your kids are but doing something like taking a couple of month sabbatical from work could be an option to consider. You would need to work around school breaks and plan it far in advance but taking some extended time off and traveling with them next summer might be a once in a lifetime opportunity before they grow up.
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am - $200K toy car (I know this will make all Bogleheads riot.)
At least it isn't a boat that would have higher ongoing costs. :D

More seriously though from what you posted you seem to have a net worth of around $2.5 million dollars so between the garage upgrade expenses and car cost that would be almost 10% of your net worth. That may be excessive.

Compared to something like a toy car that "just" costs $50K I would question if the incremental gains in the enjoyment of a car would be all that much greeter with a $200k car. With a less expensive car you might even drive it a lot more.

It varies but some "car guys" that I know seem to enjoy working on the car as much as driving it. Buying a less expensive car that needs some work might give you more quality time in the garage working on it.

Consider how many hours per year you are likely to be actually driving the car.
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am .... an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast. This would free up ~$8-$900 on my monthly expenses. I don't know if that is the best use of the money with such a low interest rate.
There are endless threads and opinions on paying off mortgages and no consensus.

One thing I would look at in your plans is being able to get the mortgage paid off by the time you retire. At least for me that made my retirement numbers work a lot better.

One thing to keep in mind is that investing the money and earning a higher after tax return is a lot harder than it sounds even though you have a low interest rate because you have a sequence of returns risk. Here is a very simplistic example of that which I have posted before. You might want to play with your actual numbers looking at it this way to see the impact of getting poor investing returns in the next few years.
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also pay a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To pay off the mortgage at the end of the second year you would need about $96.5K so you would need to gain back $12.5K and another $6,000 for the next years mortgage payments which combined is $18.5K. That would take a 22% return on the remaining $84K to get back to the point where you could pay off the mortgage.

In the past portfolios have declined in roughly one of four or five years depending on the asset allocation. (20 to 25 percent of the time)

https://investor.vanguard.com/investing ... allocation

The sequence of returns risk can also go the other way and you could get lucky and have the first couple of years get good returns that would put you on the path for large gains over the years. There will sometimes be very optimistic projections on just how much better not paying off the mortgage could be but one limiting factor that needs to be considered is that few people actually keep a 30 year mortgage for the full 30 years. It is difficult to put a number on it but many people who own a home will sell it in less than 10 years.
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JoeRetire
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Re: Strategy for Material Windfall

Post by JoeRetire »

socialforums2019 wrote: Tue Jun 28, 2022 7:39 am The only debt I have is a ~$980K mortgage @ 2.375%.

With that said, an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast.

I don't know if that is the best use of the money with such a low interest rate.
To me, the best use of the money is something that would be expected to return more than 2.375%.
Do you see any other options I should be considering or does the above seem like a reasonable plan to celebrate but also continue to work towards setting myself up for retirement in the next 20-25 years?
I would not pay down a mortgage at that rate. I would invest all of the windfall per my asset allocation strategy.

But it's your celebration, your windfall, your money, and your future. Whatever you do is "reasonable" if it still leaves you on a path to achieve your long term financial goals, whatever they may be.
This isn't just my wallet. It's an organizer, a memory and an old friend.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

HMSVictory wrote: Tue Jun 28, 2022 8:14 am Congrats on the windfall.

I like your plan except for one part:

You are spending 200k on a car while you owe $1M on your house. In effect you are borrowing on your house to invest in taxable and buy this toy.

This is extremely unwise. Pay the mortgage off and once that is done then get the car. Your only going to have $750k left after you zero the house out.

718 GT4 all day long and twice on Sunday or the GT3 if you are tracking it. Yes both should be manual even if they are slower.

They are both track tuned cars I would prefer a GTS model myself for tooling around in so as to not rattle my tooth fillings loose but YMMV.
Would you suggest putting the $100K into the mortgage or invest it now and let it ride for the 20-25 years? Anything I put into taxable I consider it as another "emergency fund" as I don't plan to touch it until retirement. I have enough cash on hand and a big enough EF to protect against 6-8 months of unemployment/bad times before I need to touch taxable if it comes to that.

The positive about the toy car is it isn't an essential. At anytime, I can sell it and sink that sale proceeds into the mortgage as needed.
toddthebod
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Re: Strategy for Material Windfall

Post by toddthebod »

Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Watty wrote: Tue Jun 28, 2022 8:21 am What is your income and how reliable is it? That will have a huge impact on how you should handle the windfall.

How long until you want to retire? If you want to retire in ten years your situation is a lot different than someone who is planning on working another 30 years.

Do you have a spouse? If so then you might also want to budget some discretionary spending for them if you are going to spend almost a quarter of a million dollars on the car and garage(with taxes and ongoing costs).
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am Do you see any other options I should be considering....
I didn't see an travel on your list.

You did not day how old your kids are but doing something like taking a couple of month sabbatical from work could be an option to consider. You would need to work around school breaks and plan it far in advance but taking some extended time off and traveling with them next summer might be a once in a lifetime opportunity before they grow up.
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am - $200K toy car (I know this will make all Bogleheads riot.)
At least it isn't a boat that would have higher ongoing costs. :D

More seriously though from what you posted you seem to have a net worth of around $2.5 million dollars so between the garage upgrade expenses and car cost that would be almost 10% of your net worth. That may be excessive.

Compared to something like a toy car that "just" costs $50K I would question if the incremental gains in the enjoyment of a car would be all that much greeter with a $200k car. With a less expensive car you might even drive it a lot more.

It varies but some "car guys" that I know seem to enjoy working on the car as much as driving it. Buying a less expensive car that needs some work might give you more quality time in the garage working on it.

Consider how many hours per year you are likely to be actually driving the car.
socialforums2019 wrote: Tue Jun 28, 2022 7:39 am .... an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast. This would free up ~$8-$900 on my monthly expenses. I don't know if that is the best use of the money with such a low interest rate.
There are endless threads and opinions on paying off mortgages and no consensus.

One thing I would look at in your plans is being able to get the mortgage paid off by the time you retire. At least for me that made my retirement numbers work a lot better.

One thing to keep in mind is that investing the money and earning a higher after tax return is a lot harder than it sounds even though you have a low interest rate because you have a sequence of returns risk. Here is a very simplistic example of that which I have posted before. You might want to play with your actual numbers looking at it this way to see the impact of getting poor investing returns in the next few years.
If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also pay a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To pay off the mortgage at the end of the second year you would need about $96.5K so you would need to gain back $12.5K and another $6,000 for the next years mortgage payments which combined is $18.5K. That would take a 22% return on the remaining $84K to get back to the point where you could pay off the mortgage.

In the past portfolios have declined in roughly one of four or five years depending on the asset allocation. (20 to 25 percent of the time)

https://investor.vanguard.com/investing ... allocation

The sequence of returns risk can also go the other way and you could get lucky and have the first couple of years get good returns that would put you on the path for large gains over the years. There will sometimes be very optimistic projections on just how much better not paying off the mortgage could be but one limiting factor that needs to be considered is that few people actually keep a 30 year mortgage for the full 30 years. It is difficult to put a number on it but many people who own a home will sell it in less than 10 years.
You bring up a few good points to address

1. Income is stable and reliable. I've based all budgets off of this base income. These windfalls are basically commission payouts and all commission payouts are excess money and not needed to cover any kind of annual expenses/retirement contributions/etc.

2. Ideally, I would like to retire in 20-25 years. With the model I've worked out with just maxing Roth IRA and 401K year over year and 4% average annual growth, in 20 years we are looking at ~$3M retirement portfolio. This includes paying for kids education expenses and paying off the mortgage. With 4% rule at $3M portfolio we would be looking at $10K/mo income with ~$4.3K/mo expenses.

3. Yes I have a spouse and she too will partake in the celebration

4. Travel is budgeted into our standard cash flow/base income budget so don't need to allocate windfall money to cover travel

5. You've hit the nail on the head regarding car guys wanting liking to stare at their car sitting in the garage vs actually driving it. This is something I'm trying to balance. Just because I have a $200K budget, it doesn't mean I'd spend it all. I don't want to be someone who buys a $200K type car and too scared to drive it.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
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Watty
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Re: Strategy for Material Windfall

Post by Watty »

socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
It likely will not be significant but also check on how that will impact your umbrella policy since that may go up too.

I don't have a clue how having a car like that could impact your insurance when you have teenage drivers. Be sure to rewatch the movie "Ferris Bueller's Day Off". :D
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TomatoTomahto
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Re: Strategy for Material Windfall

Post by TomatoTomahto »

I like your plan, with the possible exception of the car. We have spent considerable money on cars, but would not have at your financial stage. But, you do you.

I would personally not consider it a windfall as much as a “lumpy salary.”

Re solar: great. I would suggest also getting generators to recharge the batteries if the stuff hits the fan. A lot depends on your location, but that’s what we opted to do.
I get the FI part but not the RE part of FIRE.
NYCPete
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Re: Strategy for Material Windfall

Post by NYCPete »

socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
As long as you've already accounted for your overall goals, there's no problem with getting a nice car, if it doesn't set back your goals. One suggestion: you might want to include in your budget maintenance on the car, unless you're assuming the $45K added to your EF is also for the car. Based on the car models you've mentioned, you'll be spending as much on maintenance as you are on insurance. Something as simple as an oil change is not cheap for cars like a Mclaren or Lamborghini, and you're talking about buying used, which means possibly more than oil changes.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha
Afty
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Re: Strategy for Material Windfall

Post by Afty »

What's your marginal state tax rate? Let's assume it's 5%. I'd earmark 45% of the windfall for taxes. That leaves you with $355k. You're considering spending over 50% of your windfall on a car? I wouldn't do it. I would earmark 20% of the after-tax windfall for a toy, then invest the rest. I also wouldn't pay extra on a 2.375% mortgage, but I wouldn't argue with someone who did.

I guess part of it from my perspective is that while I'm a car guy, I'm not an exotic car guy. I wouldn't want to drive something that draws so much attention.
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Re: Strategy for Material Windfall

Post by HMSVictory »

socialforums2019 wrote: Tue Jun 28, 2022 8:34 am
HMSVictory wrote: Tue Jun 28, 2022 8:14 am Congrats on the windfall.

I like your plan except for one part:

You are spending 200k on a car while you owe $1M on your house. In effect you are borrowing on your house to invest in taxable and buy this toy.

This is extremely unwise. Pay the mortgage off and once that is done then get the car. Your only going to have $750k left after you zero the house out.

718 GT4 all day long and twice on Sunday or the GT3 if you are tracking it. Yes both should be manual even if they are slower.

They are both track tuned cars I would prefer a GTS model myself for tooling around in so as to not rattle my tooth fillings loose but YMMV.
Would you suggest putting the $100K into the mortgage or invest it now and let it ride for the 20-25 years? Anything I put into taxable I consider it as another "emergency fund" as I don't plan to touch it until retirement. I have enough cash on hand and a big enough EF to protect against 6-8 months of unemployment/bad times before I need to touch taxable if it comes to that.

The positive about the toy car is it isn't an essential. At anytime, I can sell it and sink that sale proceeds into the mortgage as needed.
This is an apples to oranges question.

Investment returns are based upon probabilities - paying off the house is a guaranteed return and once you have it paid off it eliminates your largest monthly bill (for most people). Investment returns are risk adjusted. You can see the return on a risk free asset (well sort of) with a US Treas 10Y note - pays 3.2% right now.

I sure as heck wouldn't buy a $200k car while $1M in debt....

The right move is to make a plan to be completely debt free by the time you are ready to retire (or sooner). I did it a lot sooner and highly recommend it.

When you are debt free making the kind of change you are AND have the nice fat portfolio you can drive anything you want too.
Stay the course!
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Re: Strategy for Material Windfall

Post by HMSVictory »

NYCPete wrote: Tue Jun 28, 2022 9:21 am
socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
As long as you've already accounted for your overall goals, there's no problem with getting a nice car, if it doesn't set back your goals. One suggestion: you might want to include in your budget maintenance on the car, unless you're assuming the $45K added to your EF is also for the car. Based on the car models you've mentioned, you'll be spending as much on maintenance as you are on insurance. Something as simple as an oil change is not cheap for cars like a Mclaren or Lamborghini, and you're talking about buying used, which means possibly more than oil changes.

Best,
Peter
Even routine service on a Porsche is $1200+ before you start to fix broken things. Tires and brakes? $3-4k. 911s eat tires!
Stay the course!
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hand
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Re: Strategy for Material Windfall

Post by hand »

socialforums2019 wrote: Tue Jun 28, 2022 7:39 am
The only debt I have is a ~$980K mortgage @ 2.375%. Home is estimated to be $2M.

If I execute the above, finances will look like:

- $1.5M portfolio at 80/20 AA
- $150K cash position (includes $75-$100K for EF and extra cash just to make me sleep better at night)
So post-windfall (and tax) net worth of $2.5M inclusive of $1M in debt? (not stated, but perhaps also an additional $0.5M for kids college?)

$200k (7%+ of your net worth) for a toy seems steep, especially if it a toy that is just for you rather than something the entire family can enjoy.
To me there is also a disconnect between the image you'll be projecting with one of the cars listed and your actual financial state unless you are able to monetize the image (i.e. the appearance of wealth is more important than actual wealth).

I'm all for celebrating and for cars, but took a different path - I found a fun car at the bottom of its depreciation curve and bought as a daily driver.
Net cost above a more practical car is not material if I drive it into the ground over 10 years, but in actuality costs so far have been negative as collectability factor (and Covid) has pushed prices up. At this point, if I had extra money, I'd probably spend it on track time vs a sporty road car.

Every pothole I hit makes me glad I bought something I could afford to drive and repair vs. my youthful Ferrari dreams.
Katietsu
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Re: Strategy for Material Windfall

Post by Katietsu »

You work the math. But I am having trouble seeing a $3 million retirement portfolio for a household as compatible for a couple with a $2 million house and $200,000 toy car.

Either that, or I need to go on a spending spree.😀

And to continue to sound skeptical, can a high income commission based sales job be described as stable? Coming from someone who graduated college in the 1980’s and starting serious investing in 2000, I guess do not have as rosy of a view about all the potential financial paths.
Vogatrice
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Re: Strategy for Material Windfall

Post by Vogatrice »

I once read that you can't be considered a real car person (ok car 'guy') until you have owned at least 50 cylinders. I'm at 12 cylinders lifetime, and I'm 62.

I never considered a commission-based job as I worried too much about the downside of not making quota.

So, now that we have established that your appetite for risk and cars is far greater than mine, I'd like to add a few points about risk management. If you list all the bad things you can envision, and attach two grades to each item, one for probability of the bad thing happening and one for severity of the impact if it does happen, you will see which potential risks would really bother you. This helps identify which 'bad risks' you'd like to mitigate up front with your cash, and which you will manage with cash flow only if they do happen.

For example, "disabled and unable to work at own occupation" could be one risk. Let's call it Medium probability, High severity. To mitigate this risk, you could buy a disability policy that increases your monthly expenses by $500. Or you could pay off the mortgage and know that with a fully-owned house powered by solar, your funds could easily stretch through your disability period until retirement.

Ok, I'm a former project manager and risk management was a key part of my job. But developing a risk assessment for my personal life helped me decide where to allocate my funds and then to sleep well at night. You know how you view risks generally, but if you develop specific plans to mitigate or not to mitigate your personal key risks, you will probably feel better about your spending or saving choices.

Me, I paid off our mortgage early and we limited our toys and discretionary expenses. In fact, very bad things did happen after the house was ours and we relied solely on my income for 20 years. Still hit retirement with $3.5M. And yes, I still worry if that's enough :D
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Re: Strategy for Material Windfall

Post by lakpr »

socialforums2019 wrote: Tue Jun 28, 2022 7:39 am
The only debt I have is a ~$980K mortgage @ 2.375%. Home is estimated to be $2M.
...
an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast. This would free up ~$8-$900 on my monthly expenses. I don't know if that is the best use of the money with such a low interest rate.
This is the best option. 2.375% in itself seems low, but remember that the deductibility of mortgage interest is eliminated beyond $750k principal balance. That 2.375% is after-tax rate you are paying on $230k, OR, if you paydown the mortgage principal balance by $230k, you will earn a before-tax-equivalent of 2.375% / (1 - 37%) = 3.77%.

As a comparison, long term treasuries are yielding 3.36% as of today. So you get a bit more squeeze out of the $230k if you pay down your mortgage, then recast.

The OP includes a $200k toy car + $45k for beefing up emergency fund. If you forego the toy car, and given that reducing the principal balance and recasting will make $45k beefing up EF almost not necessary, I suggest paying down the mortgage is a better use of the money.
Saving$
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Re: Strategy for Material Windfall

Post by Saving$ »

HMSVictory wrote: Tue Jun 28, 2022 8:14 am Congrats on the windfall.

I like your plan except for one part:

You are spending 200k on a car while you owe $1M on your house. In effect you are borrowing on your house to invest in taxable and buy this toy.

This is extremely unwise.
Pay the mortgage off and once that is done then get the car. Your only going to have $750k left after you zero the house out.
This x 1000
Saving$
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Re: Strategy for Material Windfall

Post by Saving$ »

Normchad wrote: Tue Jun 28, 2022 7:46 am
Also, we will riot about the car. So does anybody how to get the lowest price on torches and pitchforks :)
Made me laugh out loud. Thank you!
harikaried
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Re: Strategy for Material Windfall

Post by harikaried »

socialforums2019 wrote: Tue Jun 28, 2022 7:39 am$60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
Tesla Energy website quotes $40k for 12kW and 1 Powerwall (13.5kWh), so $30k with federal tax credit. Might be worthwhile to get another quote to save ~$15k.
socialforums2019 wrote: Tue Jun 28, 2022 7:39 amThe only debt I have is a ~$980K mortgage @ 2.375%. Home is estimated to be $2M.
- $1.5M portfolio at 80/20 AA
- $150K cash position (includes $75-$100K for EF and extra cash just to make me sleep better at night)

With that said, an alternative I was potentially thinking about was to pay down the mortgage to say $750K and recast.
Your overall asset allocation with "fixed income" including debt and cash would put you closer to $1.2M equities / -$0.5M fixed income / $2M real estate or as percentages: 44% equities / -18% fixed income / 74% real estate. If you kept your equities and used cash that would have gone into bonds to pay down the mortgage, your overall asset allocation would be the same but with $10k/yr extra cash flow from recasting.

The negative fixed income does reflect that you're leveraged, but that could be a reasonable overall asset allocation to maintain or shift away from. If you expect to need to borrow more money in the future, it doesn't make sense to pay down cheaper debt to borrow at more expensive rates. As others have pointed out, not paying down the debt while spending money is effectively borrowing money at 2.375% to buy solar, car, garage, etc., so as long as you realize that and are okay with it, there isn't a pressing need to deleverage.

Although if you did pay off the mortgage, sounds like you save nearly $50k/yr. What would you do with that extra cash flow?
vxdx
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Re: Strategy for Material Windfall

Post by vxdx »

I’d swap the 100k investment and 200k car.

I don’t know your prior car history but I’d imagine a very expensive car is harder to enjoy because you’re always worried about it and affording any issues / maintenance.

Depending on what you want from the car, a new Cayman gts might be a better choice for you unless you’re truly getting it for the track (in which case the expenses of tracking these cars… :shock: )
3funder
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Re: Strategy for Material Windfall

Post by 3funder »

Lower your toy car allocation to $100k, and invest the other $100k in taxable. You should be able to have quite a lot of fun with a vehicle that costs $100k. There's no reason to get carried away (I'd argue that you're still flirting with "getting carried away" at the $100k price point anyway).
Global stocks, US bonds, and time.
harikaried
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Re: Strategy for Material Windfall

Post by harikaried »

socialforums2019 wrote: Tue Jun 28, 2022 7:58 amConsidering the options below. Any others to consider?

- 2016 Mclaren 650S Spider
- 2018 Mclaren 570S Spider
- 2011-2012 Lamborghini Superleggera
- 2018 Porsche GT3 (manual)
- 2021 Porsche 718 GT4 (manual)
Not sure if you've seen or value Doug DeMuro's "DougScore" which tries to evaluate 10 categories across Weekend (Styling, Acceleration, Handling, Fun Factor, Cool Factor) and Daily (Features, Comfort, Quality, Practicality, Value) aspects.

https://www.dougdemuro.com/dougscore

Both the 650S and Model 3 Performance score 67, but the latter today new is probably 1/3 the price around $63k although "only" 3.1s 0-60mph.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

harikaried wrote: Tue Jun 28, 2022 4:01 pm
socialforums2019 wrote: Tue Jun 28, 2022 7:58 amConsidering the options below. Any others to consider?

- 2016 Mclaren 650S Spider
- 2018 Mclaren 570S Spider
- 2011-2012 Lamborghini Superleggera
- 2018 Porsche GT3 (manual)
- 2021 Porsche 718 GT4 (manual)
Not sure if you've seen or value Doug DeMuro's "DougScore" which tries to evaluate 10 categories across Weekend (Styling, Acceleration, Handling, Fun Factor, Cool Factor) and Daily (Features, Comfort, Quality, Practicality, Value) aspects.

https://www.dougdemuro.com/dougscore

Both the 650S and Model 3 Performance score 67, but the latter today new is probably 1/3 the price around $63k although "only" 3.1s 0-60mph.
I have a Model 3 Performance as my daily driver.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Afty wrote: Tue Jun 28, 2022 9:42 am What's your marginal state tax rate? Let's assume it's 5%. I'd earmark 45% of the windfall for taxes. That leaves you with $355k. You're considering spending over 50% of your windfall on a car? I wouldn't do it. I would earmark 20% of the after-tax windfall for a toy, then invest the rest. I also wouldn't pay extra on a 2.375% mortgage, but I wouldn't argue with someone who did.

I guess part of it from my perspective is that while I'm a car guy, I'm not an exotic car guy. I wouldn't want to drive something that draws so much attention.
For this year, income will exceed $1M so tax rates will be 37% fed/12.3% state, call it 50% even. So this commission payout will net $325K. This assumes I don't receive any further commission payouts the next 6 months, which historically have averaged to be about $10-$15K/mo.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Katietsu wrote: Tue Jun 28, 2022 11:41 am You work the math. But I am having trouble seeing a $3 million retirement portfolio for a household as compatible for a couple with a $2 million house and $200,000 toy car.

Either that, or I need to go on a spending spree.😀

And to continue to sound skeptical, can a high income commission based sales job be described as stable? Coming from someone who graduated college in the 1980’s and starting serious investing in 2000, I guess do not have as rosy of a view about all the potential financial paths.
The "projection" I've modeled is if I only contribute a minimum of 401K and backdoor Roth IRA max for the next 20 years and the market returns on average 4% annually, I'd be able to pay for $550K of education and pay off the house and have a $3M portfolio. In this model, I don't take into account any company matching, stock comp, commission, etc. Any additional contributions speeds up the retirement timeline and/or increases that $3M portfolio in 20 years.

In regards to the high income commission based sales job, I'm stating that the base income I receive is stable. We live/budget everything off of my base income and assume I'll receive $0 commission for the year. Because of this, I consider it stable as the prior job I left was higher base salary but didn't have the upside of commissions (10% company bonus program). I've been extremely fortunate the last few years ($590K, $530K and $1M so far this year) and I'm smart enough to know that these significant commission checks will sooner or later come to an end. It won't impact anything negatively because again everything is based on just my guaranteed base salary.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Vogatrice wrote: Tue Jun 28, 2022 11:51 am I once read that you can't be considered a real car person (ok car 'guy') until you have owned at least 50 cylinders. I'm at 12 cylinders lifetime, and I'm 62.

I never considered a commission-based job as I worried too much about the downside of not making quota.

So, now that we have established that your appetite for risk and cars is far greater than mine, I'd like to add a few points about risk management. If you list all the bad things you can envision, and attach two grades to each item, one for probability of the bad thing happening and one for severity of the impact if it does happen, you will see which potential risks would really bother you. This helps identify which 'bad risks' you'd like to mitigate up front with your cash, and which you will manage with cash flow only if they do happen.

For example, "disabled and unable to work at own occupation" could be one risk. Let's call it Medium probability, High severity. To mitigate this risk, you could buy a disability policy that increases your monthly expenses by $500. Or you could pay off the mortgage and know that with a fully-owned house powered by solar, your funds could easily stretch through your disability period until retirement.

Ok, I'm a former project manager and risk management was a key part of my job. But developing a risk assessment for my personal life helped me decide where to allocate my funds and then to sleep well at night. You know how you view risks generally, but if you develop specific plans to mitigate or not to mitigate your personal key risks, you will probably feel better about your spending or saving choices.

Me, I paid off our mortgage early and we limited our toys and discretionary expenses. In fact, very bad things did happen after the house was ours and we relied solely on my income for 20 years. Still hit retirement with $3.5M. And yes, I still worry if that's enough :D
Interesting rule of thumb regarding number of cylinders owned. In the last 5 years alone, I've already hit the 50 cylinder mark :D

I agree with you. This is my first commission-based job and I too was worried about having $ tied to hitting a quota and that is why I negotiated a large enough guaranteed base salary that we could live off of and accomplish all of our goals. That way, any commission payout was just "extra money" to help accelerate those goals. I've been very fortunate with the success I've had, but I know this kind of lucrative payout won't last more than another year or two. If it does, then great but I'm not modeling anything as if I'm going to be making this kind of money for the next 20 years.

At the end of the day, in the next 20 years, I've projected with hopefully conservative contribution models, that we will be able to pay for our kids college and payoff the mortgage and still have a $3M minimum portfolio. It is then we can decide to accumulate still for another couple years or FIRE.
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hand
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Re: Strategy for Material Windfall

Post by hand »

If you stop selling enough to earn the big commissions, will they really keep you on indefinitely at the base?
snowday2022
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Re: Strategy for Material Windfall

Post by snowday2022 »

socialforums2019 wrote: Tue Jun 28, 2022 5:21 pm
Katietsu wrote: Tue Jun 28, 2022 11:41 am You work the math. But I am having trouble seeing a $3 million retirement portfolio for a household as compatible for a couple with a $2 million house and $200,000 toy car.

Either that, or I need to go on a spending spree.😀

And to continue to sound skeptical, can a high income commission based sales job be described as stable? Coming from someone who graduated college in the 1980’s and starting serious investing in 2000, I guess do not have as rosy of a view about all the potential financial paths.
The "projection" I've modeled is if I only contribute a minimum of 401K and backdoor Roth IRA max for the next 20 years and the market returns on average 4% annually, I'd be able to pay for $550K of education and pay off the house and have a $3M portfolio. In this model, I don't take into account any company matching, stock comp, commission, etc. Any additional contributions speeds up the retirement timeline and/or increases that $3M portfolio in 20 years.

In regards to the high income commission based sales job, I'm stating that the base income I receive is stable. We live/budget everything off of my base income and assume I'll receive $0 commission for the year. Because of this, I consider it stable as the prior job I left was higher base salary but didn't have the upside of commissions (10% company bonus program). I've been extremely fortunate the last few years ($590K, $530K and $1M so far this year) and I'm smart enough to know that these significant commission checks will sooner or later come to an end. It won't impact anything negatively because again everything is based on just my guaranteed base salary.
Is that 550K in todays dollars or future? How many kids, and where do you think they may end up for college? Is this 529 money, do you have any yet?
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

So running some additional scenarios. Initial scenario was going to be:

- $250K for taxes
- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)
- $45K cash (Beef up EF and have some extra cash on the side)

Based upon the above, nothing changes in expense reduction (mortgage stays the same)

Alternative scenario could be:

- $250K for taxes
- $229K paydown mortgage
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)

The above would reduce monthly expenses by $903 through recast and you forego:

- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $45K cash (Beef up EF and have some extra cash on the side)
Normchad
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Re: Strategy for Material Windfall

Post by Normchad »

socialforums2019 wrote: Tue Jun 28, 2022 8:26 pm So running some additional scenarios. Initial scenario was going to be:

- $250K for taxes
- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)
- $45K cash (Beef up EF and have some extra cash on the side)

Based upon the above, nothing changes in expense reduction (mortgage stays the same)

Alternative scenario could be:

- $250K for taxes
- $229K paydown mortgage
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)

The above would reduce monthly expenses by $903 through recast and you forego:

- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $45K cash (Beef up EF and have some extra cash on the side)
I’m not going to riot over the car.

I’m impressed by the thought you’ve put into this, and how open you’ve been to advice. There are a million ways to do this, but ultimately it’s personal choice. I think you are going about the decision making process properly. Good on you!
aristotelian
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Re: Strategy for Material Windfall

Post by aristotelian »

Net worth excluding home equity is $650k? Buying a $200k car seems extremely unwise. If you ever lose your job you will be extremely screwed. I advise you strongly not to do this. Wait til your 20 year projections have borne out and then buy your fancy car.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

aristotelian wrote: Tue Jun 28, 2022 9:01 pm Net worth excluding home equity is $650k? Buying a $200k car seems extremely unwise. If you ever lose your job you will be extremely screwed. I advise you strongly not to do this. Wait til your 20 year projections have borne out and then buy your fancy car.
- $650K net worth
- $450K net worth after $200K car purchase
- Lose job
- Sell $200K car
- $650K net worth

The only screwed part would be losing the job, not a $200K car because you sell it and get money back. Job loss income would be covered by my 10 month EF.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Normchad wrote: Tue Jun 28, 2022 8:52 pm
socialforums2019 wrote: Tue Jun 28, 2022 8:26 pm So running some additional scenarios. Initial scenario was going to be:

- $250K for taxes
- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)
- $45K cash (Beef up EF and have some extra cash on the side)

Based upon the above, nothing changes in expense reduction (mortgage stays the same)

Alternative scenario could be:

- $250K for taxes
- $229K paydown mortgage
- $15K garage makeover (storage cabinets, flooring, lighting, etc.)
- $200K toy car (I know this will make all Bogleheads riot.)

The above would reduce monthly expenses by $903 through recast and you forego:

- $100K invested into taxable
- $60K solar system for house (includes 12-13kW system + batteries. This is pre 23-26% federal tax credit)
- $45K cash (Beef up EF and have some extra cash on the side)
I’m not going to riot over the car.

I’m impressed by the thought you’ve put into this, and how open you’ve been to advice. There are a million ways to do this, but ultimately it’s personal choice. I think you are going about the decision making process properly. Good on you!
I put thought into it because I know these material payouts are not going to be common so I want to maximize the ability to jump ahead in my saving goals for the future while also balancing enjoying life in the now.
Wanderingwheelz
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Re: Strategy for Material Windfall

Post by Wanderingwheelz »

socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
Even if it’s only for fun, go to your local Porsche dealer and ask to talk to the service manager. I’m almost positive he would be happy to tell you what sort of ongoing costs you can expect in the first few years of ownership. Year two will be somewhere @ $2,000 for the routine annual maintenace. Wait until spark plugs need to be done.. It goes on and on.

This is why you see so many 5 and 6 year old GT cars that have had 3 or more owners.
Being wrong compounds forever.
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socialforums2019
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Re: Strategy for Material Windfall

Post by socialforums2019 »

Wanderingwheelz wrote: Tue Jun 28, 2022 10:00 pm
socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
Even if it’s only for fun, go to your local Porsche dealer and ask to talk to the service manager. I’m almost positive he would be happy to tell you what sort of ongoing costs you can expect in the first few years of ownership. Year two will be somewhere @ $2,000 for the routine annual maintenance. Wait until spark plugs need to be done.. It goes on and on.

This is why you see so many 5 and 6 year old GT cars that have had 3 or more owners.
I would be curious why you believe maintenance costs is the reason for ownership turnover. In my own personal experience and with these types of cars, many own them for a year or two and then sell to move on to the next toy. If one is worried about spending a few thousand dollars for maintenance in the grand scheme of things, then yes, I'd agree, they can't afford ownership. No different than someone buying a house that is "within budget" but then not factor in the ongoing cost to maintain it.

P.S. I've owned Porsches already, they are probably the most reliable manufacturer out of all of them.
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Re: Strategy for Material Windfall

Post by JHU ALmuni »

Whatever you do, don't pay off the mortgage at 2.375%!
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Re: Strategy for Material Windfall

Post by chicagoan23 »

JHU ALmuni wrote: Tue Jun 28, 2022 10:28 pm Whatever you do, don't pay off the mortgage at 2.375%!
Agreed. I view a mortgage like this as a long term asset. Below market interest rate debt has value. I have a 15 year mortgage at 2.0% fixed and I will never pay even one dollar earlier than I have to.

Also, buy the expensive car. Cars in that range hold their value, especially in an inflationary environment. In three years you’ll sell it for more than you pay for it now.
"The Basic Choices for Investors and the One We Strongly Prefer" | | https://www.berkshirehathaway.com/letters/2011ltr.pdf
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Re: Strategy for Material Windfall

Post by HMSVictory »

socialforums2019 wrote: Tue Jun 28, 2022 5:06 pm
Afty wrote: Tue Jun 28, 2022 9:42 am What's your marginal state tax rate? Let's assume it's 5%. I'd earmark 45% of the windfall for taxes. That leaves you with $355k. You're considering spending over 50% of your windfall on a car? I wouldn't do it. I would earmark 20% of the after-tax windfall for a toy, then invest the rest. I also wouldn't pay extra on a 2.375% mortgage, but I wouldn't argue with someone who did.

I guess part of it from my perspective is that while I'm a car guy, I'm not an exotic car guy. I wouldn't want to drive something that draws so much attention.
For this year, income will exceed $1M so tax rates will be 37% fed/12.3% state, call it 50% even. So this commission payout will net $325K. This assumes I don't receive any further commission payouts the next 6 months, which historically have averaged to be about $10-$15K/mo.
I suggest you read the Millionaire next door or any of Tom Stanley's books. They are excellent.

You are income statement affluent but not balance sheet rich. Become balance sheet rich and then you can have any of these toys you want.

If you are buying 200k cars I'd say $10M is the minimum your net worth should be... and then the service costs won't really matter much.
Stay the course!
Wanderingwheelz
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Re: Strategy for Material Windfall

Post by Wanderingwheelz »

socialforums2019 wrote: Tue Jun 28, 2022 10:10 pm
Wanderingwheelz wrote: Tue Jun 28, 2022 10:00 pm
socialforums2019 wrote: Tue Jun 28, 2022 8:45 am
toddthebod wrote: Tue Jun 28, 2022 8:43 am Congratulations on your windfall. Just make sure to consider the cost of insuring a car like that. It can easily run you $400/month or more.
Already called my insurance to get a quote on cars. Additional $3K/year onto my premium and I've worked that into my cash flow/expenses.
Even if it’s only for fun, go to your local Porsche dealer and ask to talk to the service manager. I’m almost positive he would be happy to tell you what sort of ongoing costs you can expect in the first few years of ownership. Year two will be somewhere @ $2,000 for the routine annual maintenance. Wait until spark plugs need to be done.. It goes on and on.

This is why you see so many 5 and 6 year old GT cars that have had 3 or more owners.
I would be curious why you believe maintenance costs is the reason for ownership turnover. In my own personal experience and with these types of cars, many own them for a year or two and then sell to move on to the next toy. If one is worried about spending a few thousand dollars for maintenance in the grand scheme of things, then yes, I'd agree, they can't afford ownership. No different than someone buying a house that is "within budget" but then not factor in the ongoing cost to maintain it.

P.S. I've owned Porsches already, they are probably the most reliable manufacturer out of all of them.
It sounds like you’d be surprised by the number of buyers who acquire the thing they thought they would really appreciate long-term only to find out that isn’t the case. Big expenses are a leading reason why people sell things.

I wasn’t talking about broken parts being replaced. I used the word maintenace. To keep the book properly stamped on a Porsche GT car isn’t optional. It’s mandatory. You place the book on the passenger seat and make absolutely sure they stamped it before driving off.
Being wrong compounds forever.
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Re: Strategy for Material Windfall

Post by aristotelian »

socialforums2019 wrote: Tue Jun 28, 2022 9:40 pm
aristotelian wrote: Tue Jun 28, 2022 9:01 pm Net worth excluding home equity is $650k? Buying a $200k car seems extremely unwise. If you ever lose your job you will be extremely screwed. I advise you strongly not to do this. Wait til your 20 year projections have borne out and then buy your fancy car.
- $650K net worth
- $450K net worth after $200K car purchase
- Lose job
- Sell $200K car
- $650K net worth

The only screwed part would be losing the job, not a $200K car because you sell it and get money back. Job loss income would be covered by my 10 month EF.
Will you be destitute? Of course not. But that would be a pretty stressful 10 months. I doubt you get all $200k back on a depreciating asset. Say you are desperate to sell the car and take $100k loss. You'd still be seeing perhaps 1/6 of your net worth go up in smoke. Do you really want to take that risk? Heck, I wouldn't take that risk with 3X your net worth. Don't forget, whatever causes your job loss probably also affects the market value of your investments, so now your $550k is down to more like $300k.
ncbill
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Re: Strategy for Material Windfall

Post by ncbill »

aristotelian wrote: Wed Jun 29, 2022 10:28 am
socialforums2019 wrote: Tue Jun 28, 2022 9:40 pm
aristotelian wrote: Tue Jun 28, 2022 9:01 pm Net worth excluding home equity is $650k? Buying a $200k car seems extremely unwise. If you ever lose your job you will be extremely screwed. I advise you strongly not to do this. Wait til your 20 year projections have borne out and then buy your fancy car.
- $650K net worth
- $450K net worth after $200K car purchase
- Lose job
- Sell $200K car
- $650K net worth

The only screwed part would be losing the job, not a $200K car because you sell it and get money back. Job loss income would be covered by my 10 month EF.
Will you be destitute? Of course not. But that would be a pretty stressful 10 months. I doubt you get all $200k back on a depreciating asset. Say you are desperate to sell the car and take $100k loss. You'd still be seeing perhaps 1/6 of your net worth go up in smoke. Do you really want to take that risk? Heck, I wouldn't take that risk with 3X your net worth. Don't forget, whatever causes your job loss probably also affects the market value of your investments, so now your $550k is down to more like $300k.
In another severe recession a $200k vehicle bought now isn't going to be worth anywhere near $200k, no matter what any collector here thinks.

If the OP plans on keeping "the toy" only for a few years anyway why not lease?

It would be more expensive, but OP gets to hand it back & drive another new "toy" every few years.

Also, is that mortgage non-recourse so the lender can't pursue OP if they lose their job, toss the keys on the kitchen table, & walk out the door?
harikaried
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Re: Strategy for Material Windfall

Post by harikaried »

socialforums2019 wrote: Tue Jun 28, 2022 5:28 pmthe last 5 years alone, I've already hit the 50 cylinder mark :D
How many do you currently own? For our overall asset allocation, we lump together vehicles with real estate as part of illiquid "properties" assets. We don't actively rebalance in or out of these, but it's still useful to have a sense of how much of our net worth is in these types of assets relative to what we want for equities and fixed income.

You can split out vehicles from real estate for your overall asset allocation to see if you might feel you have "too much" allocated to vehicles. E.g., 44% equities / -23% fixed income / 74% real estate / 5% vehicles. Some people take 5% from their liquid asset allocation for "fun."
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