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Post by Wavey75 on Jul 23, 2015 18:47:57 GMT
Q. You’ve just won a huge lottery-like competition, but they say there’s a choice.
You can either:
1. Have a one time only payment of £5 Million pounds cash; or 2. Receive £50,000 pounds a year in cash, tax free for life.
Which one would you choose and why?
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Post by manson88 on Jul 23, 2015 23:10:04 GMT
£50,000,
You could live well on £50,000 a year. But I would have it paid in 12 instalments..
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Post by Deleted on Jul 24, 2015 0:13:55 GMT
Lump sum please. I would blow a chunk straight away and have the rest locked up in a trust fund and doled out on a daily basis. 4 mill stashed away would yield WAY more than 50K/annum. What did you do, give it to me to invest?
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Post by Wavey75 on Jul 24, 2015 11:33:38 GMT
£50,000, You could live well on £50,000 a year. But I would have it paid in 12 instalments.. Can't do that. In this scenario, you can only have a single annual payment or a lump sum. If you went for £50,000 a year, it would take 100 years to receive £5 million pounds. However, if you went for the lump sum and like @planetdave says, spend a chunk and then invest the remainder and live off the interst & profits that might not be as much. Let's say you spent a million, and you setup the £4 million lump sum in a simple savings account, you'd earn around 1% interest (some places offer 1.25%, but they are not guaranteed). 1% of £4 million is £40,000 a year in interest. If you put that lump sum in some sort of OEIC or unit trust or anothe high yield investment, the best you can hope for in today's economic climate is around 5% guaranteed without risk. 5% of £4 million is £200,000 a year in interest. If you lock your money away you can get that interest paid monthly, quarterly or at sum other interval that suits you, but usually the interest is paid either monthly or quarterly, with the next most popular being every 6 or 12 months. Some people prefer this method for reducing their spending on accountants for tax purposes, etc. If you went this way, your money would stay with you for your life, but it would never grow or work for you. This leads to an interesting term; Compound interest. This is basically referring to splitting your interest earnings so that your initial investment grows as well. If we follow the examples from before but this time instead of receiving all of your 5% interest, we paid ourselves 2.5% and kept the other 2.5% interest earnt in the same account as the £4 million lump sum, our interest payments would grow over time. So, in effect ,you'd be left t ocope with living on £100,000 for your first year, then you 2nd year would be half of £210,000. That might not sound like much, but if you look at it over ten or twenty years, your interest payments are even higher. As you can see from the attached table the lump sum in 2025 is now £5.12 million and 2.5% interest payments to live on are now £128,000 a year. In 2035 the lump sum is over £6.5 million and the interest payments to live on are almost £164,000 a year. Remember in 2015, we started off with £4 million and lived on £100,000. Just by applying this basic financial concept of compound interest, 20 years later we have increased our living income by almost two thirds and we did nothing more than spend a few hours setting it up in 2015. Things can get even more interesting if we decided to take some risks and invested our living income in some slightly higher risks, short term investments that could double our annual income, which would more than cover the cost of our expenditures, such as off shore tax havens and acountants, as well as a minimal tax bills. So, when I read about lottery winners going bankrupt after just a few years, the mind boogles. I would take the lump sum, follow the system I have explained in detail and then spend my time living without worry. Attachments:
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Post by vagueandrandom on Jul 24, 2015 15:17:26 GMT
Lump sum!
Spend some on stuff you need/want now and invest the rest.
It'll never happen as I don't play the lottery, but I'm looking forward to selling my London flat, buying a house up north outright and having about £100,000 left over.
It might as well be £5 million as I've never had enough money to live on, I'm out of work and skint at the moment and I don't need much.
I'm still finding it incomprehensible that I'll have money in a few months time. That's the evil London property market for you - totally ridiculous!
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Post by manson88 on Jul 24, 2015 16:21:09 GMT
Without being rude, Whenever the time comes I will pm you Wavey75 seems like you know what your at!
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Post by Wavey75 on Jul 24, 2015 17:52:11 GMT
vagueandrandom, That's terrific for you! Now, take that £100k and go buy a plot of land somewhere, wihtout any planning permission if possible, somewhere not greenbelt, but close enough to a main commute into any large town or city. Now, apply for planning permission to build 2 x semi detatched homes, 1x 3 bed & 1 x 2 bed. This should be easy to find on plotfinder.co.uk and will set you back around about the £25 - £45k mark. Now a builder will want about 10k for your foundations, and allow another 5k for supplying services (electric, gas, water, etc. If you can include some sort of ecco geothermal heating system or solar panels, it will add to the cost of the build, but also add to the for sale price, which means you make out like a bandit in the long run, it's definitely worth doing. So far, you've now spent, say £60,000 pounds and about 6 months have past. Next, go to one of the companies that supple pre-fabricated homes, german ones too and get quotes on thei pre-fab 2/3 bed ready to build homes. Choose hte most popular basic colours, interior fittings, carpets, etc. and the timber frames will be built on site within about 12 weeks, 4 weeks if the germans supply & build it. The best thing about this though, no mortgage. You put down a 20% deposit when you order, then you have 6 or 12 months to pay the remainder, depending on your deal. Your cost for these 2 houses will most likely be around the £125k mark, but you only paid 20% at most upfront, so it's actually cost you £25k, bringing your totl cost to £85,000. Now, after they're built, cleaned up and landscaped, you sell them both, 2 bed will be around the £145k and the 3 bed around the £175k mark. So, you have now got the following: started with 100k, spent 85k, leaving £15k in the bank, safe. 9 to 12 months later, now have 310k, with a debt of £100k to pay the house builders, plus interest. So, you now have £200,000 after repaying the house builders and say 10% interest (in won't be that much though, but it's a nice round number.) This example is also assuming that you sell your houses yourself, no estate agents. If you you estate agents, I think they take 5% of the sale, which is madness when you can stick it on eBay or another fixed price sale for like £50. so you now have doubled your money and all you did was get planning permission (which is a default yes at the moment) and provided more housing, reduced their carbon footprint (which significantly improves your chances for planning permission) and sack back and waited for everyone else to work, while you quietly slip of with more than twice as much money as you started with. Now, you could go thoruhg it all again, exept with 2 plots and 4 houses, but I think you get the idea :-) manson88, lol, not rude at all - I'm flattered.
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Post by manson88 on Jul 24, 2015 22:16:25 GMT
Wavey75 Your are the man. Respect to you! if you have done this or helping someone to do it or have helped someone. I admire your passion. My anxiety wouldn't let me do this..
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Post by vagueandrandom on Jul 24, 2015 23:02:52 GMT
Ooooh. . . fantastic idea, and I've looked at this and also just doing buy to let. . . .but like manson88 I need to do one thing at a time. . . All I can think about just now is getting the move done - which I want to happen NOW!!! not in about 3 months. I also have LOADS of business ideas - I would, I have ADHD - and, although I have an acute sense of money for when you don't have any, anything over £5,000 seems more than my brain can imagine and it may as well be millions or billions, or beans, or buttons. . . I'd still say take the lump sum, though
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Post by Wavey75 on Jul 25, 2015 10:49:13 GMT
Wavey75 Your are the man. Respect to you! if you have done this or helping someone to do it or have helped someone. I admire your passion. My anxiety wouldn't let me do this.. manson88, Never done it, but I have done it in my head often and taking on the planning committe is something I would relish, as I would have a huge upper hand in that I love confrontation, not aggressive or voilent, but face to face confrontation, especially when I know I'm right and there's nothing they can do about it.:-) I would help anyone who wanted to look into this and do it more. My cousin is building his shed, but he's learning block brick work and conrete flooring, etc and he's going to build a roof - by himself! I'm so jealous! lol I'd love to do that, but I can't due to illness & health. I miss the building trade so much, I was an apprentice electrician and I loved it. love DIY. With this lump sum, once I had setup the finances as I've described, I'd be off to boot camp for 6 to 12 months to slim down and build up so no more pain or back spasms, etc I'd look like a shorter version of Henry Cavil lol. Then, I build and project manage the houses myself! vagueandrandom, That's great to have loads of business ideas. My plan to double your money would mean you would have the capital to go out and try one of your business ideas, risk free, although I'd borrow the money, that way if it fails you haven't lost your own money. TANGENT!I have a great idea for Cinema. When I go to the cinema now, it's noisey from other people, unconfortable seats and the angle of the floor is not steep enough to stop the people in front of you from blocking your vision. I remember going to the cinema as a kid to see Star Trek 3. It was one of the most anticipated films of the year, the huge odeon was packed, not an empty seat in the house. Their was a couple of ushers wandering aorund with trays, selling ice creams, sweets, and drinks, etc. all adding to the atmosphere. Now, imagine the huge red velvet room's ligting starts to very slowly dim, the ushers stop wandering aorund and clear out of the cinema. All torch lights go out, from ushers showing people to seats. all there is now is the sound of conversations of hundreds of people, in this huge room. Then as the lights dim, the curtains at the front, start to move and the light appears on the screen. The screen is now covered in a black background with the certification image and written in white is the name of the film and it symbol showing the certification. The whole room suddenly errupts into applause! everyone is cheering! It's like a take that concert, it's awsome! Now, why can't we do that now? Have a cinema that makes going to the movies special? My idea is to hire performer/ushers, increase the steep angle of the floor, install individual seat gadgets that will blow air behind your head if the movie has an explosion, a call button for an usher if anyone is being noisey, the usher will warn them only once, and after that the film is paused, the lights come up quickly and the ushers perform their song "your gone, you're going out the door.." etc. and everyone else claps and sings along until this person or persona have left the cinema. I'd pay a little more for that kind of experience. The performers get the opportunity to perform live, little sketches or comedy skits, encouraging the audience to do some sort of mexican wave - but it's the left vs. the right side of the house, or the stands vs. the circle, depending on how big the venue is. The air can also blow by your feet for during the movie, if it's a horror film, but also for the pre-movie entertainment, like the performers can annouce ove the speaker system that some siders have escaped form the zoo next door and customers are advised to stay in their seat while they come and look for them, etc. then the guys at the controller station randomly turn the air blowing on for selected seats, bot hat the feet and head lol. There's so much more that could be added and included - a balloon artist at the beginging - loads more! also, install network blockers so no one's phone can access any network and anyone caught with their screen glowing will be ejected in the same, humiliating way described as before lol. this would be a huge bonus as it would reduce piracy I think and make going to the cinema a night out again.TANGENT!
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