Episode Transcript
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Speaker 1 (00:00):
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,
(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the
(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Speaker 2 (00:55):
Securities all produce a terror Financial Specialists LLC member fen
the SIPC reservices offered through Setara Investment Advisors LLC. SATA
firms are under separate ownership from any other named entity.
Four five to one two sixth Street, Troy, New York
one two one eight zero.
Speaker 3 (01:10):
Five had a million dollars.
Speaker 4 (01:13):
Five had a million dollars.
Speaker 3 (01:16):
Well, I'd buy what house?
Speaker 4 (01:19):
I would buy you house?
Speaker 3 (01:22):
Ay five.
Speaker 5 (01:22):
Welcome back to your Money Matters. The show where we
break down smart financial strategies and wealth building opportunities to
help you take control of your future. And I'm your host,
Drew Prescott, chartered retirement planning counselor and accredited wealth management Advisor,
President of Prescott Private Wealth, and I just wanted to
(01:44):
say thank you to those of you who are tuning
in for your first time, and thank you to those
of you who tune in each week. So wherever you
find yourself, I hope to provide an entertaining and educational
experience for you over the next hour here. I know
you have a lot of things that you could do
with your time, and I appreciate you giving me a
(02:05):
part of your Sunday. And how many of you are
sitting out here and thinking, boy, this uh, this cold
weather's almost over right, That's what I've been telling myself.
We were going to try to get away here, kind
of a last minute thing, you know. Natalie has no
school for the week, and I thought wouldn't it be
(02:28):
nice to get away down south someplace? And we didn't
plan it. I was trying to do it, and my goodness,
the the price of the flights are just incredible right now.
I mean, you can go you can always go down
to Florida for a fair price, but if you wanted
to do anything outside of that, the pricing is just absurd.
(02:50):
So it looks like we're gonna be kind of grinning
and bearing the cold weather here for a little bit longer.
At least. We have a little trip planned for April.
We're excited about that. And so in April, I've also
been invited to a seminar and it's kind of a
(03:14):
study group really for a lot of the advisors that
are kind of at a higher level and where we
are working with, you know, more sophisticated clients. And that's
in Las Vegas, And believe it or not, I've never
(03:35):
been there, so I'm I'm a little bit excited, a
little uncertain as to what to expect. So if you've
ever been to Vegas and you have some restaurants you
think I should try, I'd love to receive your input
if you have any good recommendations for me. You're kind
of what to stay away from. Even you know, everyone,
(03:58):
everyone's been kind and kind of shared their thoughts on it.
A lot of people I know they travel there quite
a bit, but nonetheless kind of looking for if you
know of any kind of off the beaten path restaurants.
I always find that those restaurants, in my opinion, are
always the ones that are better than these big chain places,
(04:22):
and the chain places seem to be overpriced, and I
like my food made with a little bit more love.
So if you have any recommendations, I'd love to hear them. Also,
if you think it's worth it to travel with your
golf clubs, let me know that too. I kind of
(04:43):
torn about that, so I'm going to the end of April.
Feel free to send me some emails. Drew at Prescott
PW dot com. I would love to hear from you.
So today's topic, as if I didn't already turn my
hand with our intro song, but today's topic is one
that we can have a little bit of fun with.
(05:04):
And the question is what would you do if you
suddenly inherited a million dollars? Would you invest it? Maybe
it'd splurge on a dream vacation. Maybe it'd even pay
off some debt or do a little bit of everything.
So we're going to break it all down. Plus we're
going to take a look at what would have happened
(05:25):
if this happened to you in twenty fourteen, and you
had decided to invest the money in the S and
P five hundred index. And before we jump into that,
let's just take a look at what's been happening in
the markets this week, and if you've been paying attention,
(05:46):
I think would be fair to say it's been a
little bit of a roller coaster ride. And we've seen
some major movement in our stock market, which has been
a good thing. And we also saw that key economic
data that was released was positive, and of course we
saw the ongoing battle of inflation here. So if we
(06:08):
look at the SMP five hundred last week, it went
up by one and a half percent, and we'll take
that that's a nice gain. The Dow Jones went up
by about a half of a percent, and then we
saw tech stocks make a move for a strong week
as well, where the Nasdaq finished up two point six percent.
(06:29):
So what were the major economic events that helped contribute
to this. Well, we had our corporate earnings and companies
such as MGM Resorts and Coincidental were talked about Vegas
now MGM, but they had good earnings. Ge healthcare technologies,
muls and cores and they all reported higher than expected
(06:53):
profits and that when that happens, that helps boost the
investor's confidence. Now, we also saw further developments with tariffs.
So despite Presidents trump recent tariff threats, including directives to
explore reciprocal tariffs against various trading partners, the stock market
(07:14):
remained resilient and investors really perceived that these tariffs are
more of a negotiating tool and it's been showing to
lead to a positive market response. Now, also we can
take a look at the inflation data here and we
saw that the producer price index for January arose by
(07:37):
about zero point four percent, which is slightly above the expectations. However,
the key components of the core personal consumption expenditures index
that closely monitor that's closely monitored by the Federal Reserve,
and it remained stable or declined, and it suggested that
(07:59):
the inflation pressures may start to be easing here. So,
speaking of money management, one of the biggest wealth killers
out there is taxes. And trust me, if you don't
have a plan, you could be losing thousands or even
millions over your lifetime. And that's why I put together
(08:22):
a free white paper for you. This white paper is
titled common Tax Errors to Avoid, so you can download
it right now at PRESCOTTPW dot com. You can just
go on the website, it'll pop right up. Just enter
your name and email address and you'll receive a copy. Okay,
so let's talk about that big question, what do you
(08:48):
do if you inherited one million dollars? Well, the temptation
to splurge, of course, is real, and hey, I get it.
After working hard for your whole life life and then
suddenly having seven figures at your disposal can really feel
like winning the financial lottery. But here's the deal. Did
(09:10):
you know that seventy percent of lottery winners and large
windfall recipients go broke in just a few years. So
today we're going to walk you through what a financially
smart person would do with one million dollars and what
not to do if you want to build long term wealth.
(09:32):
So let's be honest, right, when most people think about
coming into a million dollars, their mind goes straight to spending.
And listen, I'm not here to tell you never to
spend your money. Life is meant to be enjoyed, isn't it.
But let's talk about where that money could disappear if
(09:54):
you're not careful. And I have seen this several times
through my professional career, and I can tell you I
don't know exactly what the percentage is. I'm just throwing
a number out there. If I were to guess, I
would say I could probably guess with about a eighty
(10:15):
five percent accuracy what someone is going to do when
they come across a large windfall. And I can tell
you that the ones that I thought would spend it
all and give it away, they did exactly that. And
there's been a there's been one individual that I can
(10:36):
think of that I was sure that they were not
going to be able to overcome their desire to spend
all of the money, And as a matter of fact,
they actually ended up becoming the opposite, you know, they
really became I guess you know that old saying tighter
(10:59):
than two coats of pain. It was almost like it
was like a hoarder's mentality. They were scared to spend
the money. So there's a balance to be struck. And
so let's let's just talk about some of the common
splurges that drain wealth the fastest. Well. First would be
a luxury car and expensive toye so that three hundred
(11:22):
thousand dollars ferrari, it's losing value by the second once
you drive it off of the lot. Then expensive home purchases,
you know, property, as you know, can be a smart investment,
but an oversized home comes with huge upkeep costs and
(11:42):
huge tax bills. And then I've also seen people that
just go out and they'll rent a private jet or
get a subscription to a jet, or you know, even
one individual bought into uh shares of a jet and
(12:04):
they just didn't have the ability to keep up with
that lifestyle and they're buying designer wardrobes, living lavishly, and
you know, that lifestyle that falls apart very quickly if
you're not continuously backfilling with additional money. Then there's also
people out there that just they feel like they want
(12:25):
to help too many people. And don't get me wrong,
generosity is really a just a gift and it's a
beautiful thing. But without a plan, when you give away
money too much, too quickly, that can really drain your
(12:45):
fortune fast and indefinitely. So the key takeaway that I
want you to have is that a million dollars as
a windfall. It can disappear quickly, especially if you treat
it like it's an unlimited supply. So instead of asking
what can I buy, you would want to ask what
(13:06):
can I make? What can I do with this money?
I should say to help it work for me? Okay. Now,
if you're sitting here and you're thinking I already have
several million dollars or I'm on my way to saving
money and this doesn't apply to me, Listen, there are
some just fantastic lessons that I'm teaching in here. So
(13:28):
there are some pearls. Don't tune out. This is going
to be a very powerful program. You're gonna want to
hear this because I have packed in here some nuggets
of wisdom that can help you no matter where you
are on your journey. So just put yourself in this
situation for a second. See if you can't identify some
(13:49):
of these bad traits and some of these good traits
inside of yourself, and use it as a way to
reflect on where you are and where you're heading. Okay,
So what I had said was, Hey, what would happen
if you received a million dollars back in twenty fourteen.
Let's say that you were able to buy into an
(14:14):
index fund. Let's just use I'm not encouraging anyone to
buy this. I'm just using this as an example. Okay.
Let's just say that we use Spy as an example, okay,
because I have to have some type of a reference
point here. And you bought that in twenty and fourteen,
and let's say that it was trading for approximately one
hundred and eighty dollars per share at that time. Well
(14:36):
fast forward to today, let's trading around five hundred dollars
a share. So with reinvesting that million dollar investment, that
would now be worth approximately three point two million dollars
ten years after you deposited it. So what's the takeaway? Well,
that's more than tripling your money and without needing a
(15:00):
Wall Street degree, just patience and having discipline, working with
the right financial advisor to help you invest according to
your risk. Okay. Now, everyone's different everybody. There's some people
(15:20):
out there that go about it yourself. There's others that
like to have a professional take the wheel and guide
them and just make sure that you're not hitting potholes,
and if you are, make sure you're not hitting them
too fast. Okay, So this is why the wealthiest individuals
(15:40):
that we see out there do not panic sell when
market comes to a downturn because they understand that time
in the market beats timing the market. And I've said
that several times on the show, and I'll continue to
say it. Time in the market always beats timing the market.
So what you want to remember is that you cannot
(16:08):
win trying to get in and get out according to headlines.
We talked about that last week. So do you want
to make sure that you're keeping more of your hard
earned investment gains? Well? As I said a little while ago,
taxes can eat away at your returns if you don't
(16:29):
plant smartly. So download my free white paper titled common
Tax Errors to Avoid. You can get that by going
on PRESCOTTPW dot com and there's a pop up there.
Just put in your name and your email address and
that'll be instantly downloaded. Okay, so let's get back to
(16:49):
what we were talking about. What would you do if
you invest if you inherited a million dollars or wanted
with a windfall here, So how about the best of
both worlds? Right, we're just talking about investing the money.
What if we had a balanced strategy. So we've talked
(17:10):
about splurging, we've talked about investing, but let's be real,
most people want a mix of both. So what's a
responsible way to enjoy and to grow your money. Well,
a smart one million dollar plan could look like this.
You invest sixty percent or six hundred thousand into a
(17:31):
diversified portfolio and then use twenty percent for smart purchases.
So that's two hundred thousand dollars that you can use
to put it down payment on a home, a reasonable car,
or meaningful experiences. And now when I say that I
(17:54):
really want to hone in on this, okay, And when
I say a responsible car, what you need to do
when you come across wealth that is newly acquired, or
if you all of a sudden get a big commission
check or a big bonus, or you get a new
(18:15):
position that's supposed to pay you much more than what
you're used to making, you have to continue to live
like you did prior to this happening. Otherwise I've seen
time and time again people getting themselves into major financial issues.
So a reasonable car, So if you all of a
(18:36):
sudden you get a million dollars, that doesn't mean that
you should go from driving you know, let's say a
Toyota Camry to a seven series BMW or an S
class Mercedes, or you know, if you're used to driving
an E class Mercedes, and then all of a sudden
(18:58):
you get this windfall and you think it would be
a wise move to go out and buy a Ferrari
or a Lamborghini or something. You know. Number one, these
things are incredibly expensive to ensure. They also have maintenance
that requires flatbeds, and the oil changes are several thousand dollars.
(19:21):
You know's there's a lot to be thought of here.
Same thing as a home. Okay, So if you're gonna
go out and buy a home because you just come
across a windfall you inherited money or whatever, remember stay practical, okay,
and don't go and buy yourself some big house and
(19:45):
something that is going to require a lot of money.
That if all of a sudden you need a new
roof and you've got water in your basement, and you
got a hot water heater and you got an electrical issue,
those things add up quickly, and we see it even
with new homes. So just don't be foolish, take your
time and consider continue to live according to what you
(20:08):
were used to prior to this money coming in.
Speaker 4 (20:11):
Now.
Speaker 5 (20:12):
One thing we also say is that let's set aside
ten percent for emergencies or future opportunities, because if an
opportunity comes along that you get to purchase a rental
property or maybe you want a lake house or a
little cabin or something like that, have that money set
aside for that special purpose. And then also donate ten
(20:35):
percent you want to donate to causes that you believe in,
and in the Christian faith we call that tithing, okay,
so that ten percent would go back to the church
and just let God do his work with it. So
(20:56):
if you have the ability to donate large sums of money,
something that we like to talk to our clients about
is a donor advised fund. And we have enough experience
with them to know which ones have heavy expenses with
them and which ones seem to be the lowest with expenses.
(21:18):
Because you know, just like everything, nothing's good or bad
until you compare it to something else. And I've got
some experience with this and I can point you in
the right direction how to properly use donor advised funds
and not get completely beat up with fees. So if
you want to build a financial plan that not only
(21:39):
protects your wealth and gives you the freedom to enjoy it,
let's talk. Download common tax errors to avoid at PRESCOTTPW
dot com. If you'd like to meet with us in
the upper right hand corner, you can click on I
think it's under resources. Now let me just pull this up.
(22:01):
It's funny, you know you want something every once in
a while. You know we're always building it out for
marketing purposes, but then you kind of lose track of
exactly how things are titled. So let me just share
with you here we go, all right, So if you
go into our services in the upper right hand corner
(22:26):
and you can click on new clients, you'll see here
it says how we work, and I've put together a
three step process. The first is to have you complete
a risk profile questionnaire just so that I can understand
how you tolerate risk and your time horizon for your investments.
(22:46):
The second is a questionnaire. It's really a comprehensive questionnaire
so that I can understand about your family, your income,
your liabilities, your assets, your insurance details. And then this
is what I use to put to other financial plan
for you, and then the third step would be to
book an appointment. Now before before we go through that process,
(23:09):
what I would like to do is talk to you
on the phone, So give us a call five one
eight two zero three, one nine eighty three again five
one eight two zero three one nine eight three. And
the purpose of the phone call is to find out, Hey,
what are you trying to do. Are you looking for
some guidance with your investments? Are you looking for an
(23:30):
updated financial plan? And all all roads lead to financial
planning here and in the website under our services where
I just had to go for new clients, you can
go to fees schedule for services and you'll see at
the top of that page it as services, a little
(23:51):
splash at the top there, and then this shares with
you the different fees and the costs and hourly consulting
and whatever it is you're trying to do, and it'll
speak directly to that. If you see services that are
not offered here and something that you need, don't hesitate
to reach out, okay, And you can give us a
(24:12):
call or email us Jessica at PRESCOTTPW dot com or
five one eight two zero three, one, nine eight three.
So let us get back to where I was beforehand.
We talked about a smart one million dollar plan, investing
sixty percent into a diversified portfolio, use twenty percent for
(24:36):
smart purchases, set aside ten percent for emergencies and future opportunities,
and donate ten percent into causes that you believe in.
Next up, we'll break down some real life stories of
people who inherited big money and either built wealth or
(24:56):
lost it all. Plus we'll share more listener responses on
what you would do with a million dollars.
Speaker 3 (25:09):
If I had a million dollars, If five had a
million dollars, well, I'd buy what house?
Speaker 4 (25:18):
I would buy you a house?
Speaker 3 (25:21):
And if I had a million dollars five had a.
Speaker 6 (25:26):
Million dollars, life's toughest financial decisions don't have to be
faced alone. Drew Prescott at Prescott Private Wealth is here
to guide you, whether it's settling an estate, planning for retirement,
or making your final walk from your career into a
well earned rest. Don't let uncertainty weigh you down. Ask yourself,
did I do this right? Am I missing anything? With
(25:46):
Prescott Private Wealth, the answer is clear. You're on the
right path. Visit us at four or five to one
Who's six Street in Troy, New York, or online at
PRESCOTTPW dot com. Prescott Private Wealth your partner in navigating
life's financial journeys.
Speaker 5 (26:00):
Welcome back to your money matters. I'm Drew Prescott, chartered
retirement planning counselor and accredited wealth management advisor, your host,
and the president of Prescott Private Wealth as well as
a smartvestor pro through Ramsey Solutions. So, if you're just
tuning in, we've been talking about the ultimate money question,
(26:22):
what would you do if you suddenly inherited one million dollars?
And so we're going to dive into that. And in
our last segment we talked about the difference between splurging
and investing and how putting that money into the S
and P five hundred index back in twenty fourteen would
(26:46):
have turned one million dollars into one point two million
dollars today. That's the power of smart investing. But now
let's get into the real life side of things. What
happens when people actually come into money. Now, history is
full of people who inherited, were won large sums of
(27:07):
money and lost it all. But there are also plenty
of success stories, So let's break it down the smartest
and the dumbest ways that people have handled a windfall.
So let's start off with some cautionary tales. Now, if
you don't have a plan, your money can disappear faster
than you think. And here are some of the worst
(27:28):
ways that people have lost a fortune. The first one
is the lifestyle trap. I tried to tipy toe into
this a little bit when we're talking about vehicles and houses,
but spending the money like it will never run out. Now,
one of the most common mistakes that people make with
a windfall is upgrading their lifestyle way beyond their means.
(27:52):
It's one thing to treat yourself, but when spending gets
out of control, it leads to financial disaster. So let
me share with you a couple of stories here.
Speaker 3 (28:04):
Everybody, sit downcing down, please sit stortyi, storty.
Speaker 5 (28:14):
I love that. It always reminds me of when my
kids were little. But uh so here we go. There
was a man who won ten dollars in the lottery.
What was the first thing he did? Well? He bought
a mansion, He bought four luxury cars, and he started
taking private jet trips around the world. Now fast forward
five years, this man was completely broke. Why Well, because
(28:39):
while the money came in fast, it went out even faster.
And why does this happen? So, you know, if you
ever watch any of these shows, I think it's a
was it Bravo or see? I don't know, it was
one of those shows you know that like the same
type of program with you know, like My six hundred
(28:59):
Pound Life. Those things are so depressing, but my wife
loves watching them. I don't know, do you enjoy them?
I don't. I find it sad and just something that
I really don't even want to wrap my mind around.
But nonetheless, let me just share with you what we
have seen happen here time and time again. Now why
(29:20):
does this always happen to people that receive these big windfalls? Well,
because a sudden windfall really creates a false sense of
financial security, and big purchases come with big ongoing expenses.
Like I said, you've got property taxes, maintenance, insurance, and
when spending habits are not adjusted, money drains faster than
(29:45):
you realize. And just remember, just because you have a
million dollars doesn't mean that you can spend a million dollars.
If you want a shopping spree without a plan, you
could be right back to zero at no time. Also,
so we also find that a lot of individuals when
they come across big money, they will gamble or they
(30:12):
will try to get involved in like a get rich
quick scheme. And people who think that they can make
their take their million dollars in double it or triplet
by investing in risky, unproven ventures. We've seen that as well. Now,
I remember having a fella who for quite a while
(30:37):
he really had no income to speak of, barely was
able to provide for his family, but was a hard worker.
And this was before I had met him, and he
used to live in a trailer and could not really
afford even that lifestyle. Well, he's a great guy, he's
(31:03):
a great salesman. And then he just happened to come
across the right thing and it was one of these
like like a multi level marketing company, right, and he
did really well. And then all of a sudden, when
we met, I'd said to him, you know so, and
(31:23):
so I'm concerned. I'm always concerned about these types of things.
You know, you're doing really well, So congratulations, but I'm
concerned that this is like a five year wave and
currently you're living as though you're going to continue to
make more money in perpetuity. And I knew that that
(31:47):
wasn't the case. Now. I really tried to stress it
but also be you know, just kind and caring in
my approach here. And he he would sit there and yes, yes,
me to death, but never would make any changes. So
I finally got him to save some money. We put
(32:08):
some money together, you know, got all of his debts
paid off, and so he was invested, had the proper
insurance and everything, had a nice little plan for himself.
We started amassing some wealth. And then one of the
individuals inside of this multi level marketing program had told
(32:31):
him that, hey, I have a great program for you.
You really need to invest in this. And by the way,
everybody that you get to invest you can also get
a percentage of their income or I mean of their investment.
So when he called me up and he told me
about it, I said, wow, well this really doesn't sound good.
I don't think you should go anywhere is near this thing.
(32:52):
And I asked him tell me the fellaw's name. We
looked it up and he is not registered with any
of the governing bodies, and this is a true story.
He really you can't make this up, and you're always
blown away to find out that somebody would fall for
this stuff, and it's really sad. I'm certainly not poking
(33:14):
fun at this guy's a fantastic guy, and I love
this guy. He's a great man. But what had happened
was I look it up and this thing is one
hundred percent a Ponzi scheme. And I tried to explain
to him how this worked. Now, this everything for this website,
said Cayman Islands, and then he said, well, he lives
(33:36):
in Florida, and it just didn't seem right at all,
and so he couldn't help himself. He had to be
part of this. He couldn't couldn't be let the guys
that he was in this multi level marketing gig think
that that he wasn't as smart as them. That's that's
(33:57):
what his perception was. He needed to be in, to
be in at the ground level. This thing was going
to give him twelve percent guaranteed money, twelve percent plus
anybody that he referred in would get a five percent
I think is what it was. And it was just
(34:17):
it was just a terrible idea. And so I said
to him, listen, stay as far away from that thing
as you possibly can, and do not recommend anybody get
involved in this thing. You know, you need to call
an attorney. And then, you know, I also said, you know,
I think that you should call over to the SEC,
(34:39):
call over to the FBI. You need to call some
people on this. This is this is not a good thing.
So I went through the proper channels. I went to
my compliance department, we sat down with the SEC, gave
a statement over the phone, and so you know, it
was actually just kind of brushed off. Well, fast forward
(35:02):
about a year and a half and I was right, now,
this fella is in prison, the one that started this
ponzi scheme out of Cayman Islands, and he had built
tens of millions of dollars from people. So again, get
(35:23):
yourself with a financial professional, and when they give you recommendations,
and when they tell you to stay away from something,
stay away from it. That's that's awfully dangerous. You do
not want to be in something like this, and you
could actually be contributing to growing something like this. So
(35:43):
stay away. Okay, there is no such thing as getting
rich quick. So we share another story with you about
a man who inherited uh one point five million dollars
you know what, I don't want to tell you about him.
Here I got a better one. Let me tell you
(36:04):
about a young fella. So I had a doctor who's
a client of mine, and he called me up and
he said, hey, I got a young fella. He was
pretty badly hurt and had some pretty significant injuries from
an accident, and he is settling. He's getting about four
(36:25):
and a half million dollars. He's twenty three years old,
and he really has no idea what to do. Would
you meet with him? I said absolutely, So we get
together and I asked the young fellow, what do you
want to do with this money? And he says, well,
(36:45):
you know, it's that's a lot of money. And I said, oh,
I'm aware, and I said I'm also aware of that
it can become generational wealth if you if you do
this the right way. And he said, well, how so?
And so I explained to him how he can still
(37:08):
get a couple of things for himself, but just you know,
just get a nice house, don't get a blown out house.
You know, get a snowmobile. Don't get several snowmobiles and
get yourself the pickup truck that you wanted. So he goes, well,
you know, I think that basically what I've done here
(37:30):
is I've put together on a piece of paper what
I think I wanted to do, and I said, all right,
well let's talk about it. So the young guy goes
on to say, well, I want to get a Corvette.
I want to get a new Corvette because I don't
want to, you know, have anyone else's trouble. I want
to do this to it. I want to do that
to it. So when we got all said and done,
(37:52):
this kid's talking about spending It was about one hundred
and forty thousand dollars I think on this Corvette with
different modifications that he wanted to do. Then he wanted
to get himself a thirty five hundred Silverado, and he
wanted to get a trailer. It was a four place
trailer because he was going to go out snowmobile and
(38:14):
with his friends. But then his one friend who has
been his childhood friend, doesn't have any money, so he's
going to buy him a snowmobile. Then he wanted to
buy a boat. And then he wanted to buy and
it just kept on going on so and I just
let him go. And once he got done purging, I
said to him, I go, okay, so when all said
(38:39):
and done, you ultimately want to spend about two point
four million dollars of this money right away? And he
said no, no, no, it's not that much. So we
walked through the math I showed him. I said, yeah,
here it is. I said, so you want to only
save two point one million for the future and he said, yep,
(39:03):
I guess so, yeah, because I have to do those
things because I'll never have the opportunity to do them later.
And I said, well, can I show you something? Can
I show you how you could put together a financial
plan here? And I just went through with them quickly,
just kind of on a whiteboard type of a deal,
and I said, hey, listen, do you have to have
(39:24):
all of these things today or can we get a
couple here and then wait a year and get a
couple and you know, is it possible that we can
try some of these things out before you go throwing
all this money at it. You're sure that this is
something that you want to do, because remember this kid
hasn't had a boat before, he hasn't had a snowmobile,
(39:46):
he hasn't there's a lot of these things he hasn't enjoyed.
He's always wanted to, but he personally doesn't even know
if he would enjoy them. Okay, So what had happened
was because I is trying to be a voice or
reason to him and I couldn't get him to think differently.
I just said to him, listen, this is just this
(40:07):
is not going to be a good fit because ultimately,
the way that you're talking this money is nothing more
than just a deferred checking account. So I don't think
that I'm the right advisor for you. I don't seem
to have the ability to educate you in a way
that I can break through. So we've parted ways. Well,
(40:29):
come to find out, I think it was about let
me just think what year was this? So it's this
is two thousand, yeah, yeah, two thousand, yeah, twenty sixteen,
I would say, is when this when this was? I
think that's about right. It's got to be like twenty fifteen,
twenty sixteen, somewhere around there. So anyways, the doctor that
(40:53):
referred me to him said to me about a year
ago and said, hey, uh, you ever talk to so
and so anymore? And I said no, I said that
didn't work out. Well, wasn't really a good fit. And
he said, oh, well did you hear And I said,
well no, I don't know anybody in this kid's life,
(41:14):
only you, And he goes, yeah, this kid actually spent
all of that money and he gambled some of it
away and bought stupid things and then his parents took
him for a ride and it was just a bad situation. Now,
you could see those things coming from a mile down
the road, But the question is can you see them
(41:35):
in yourself? And I think that that's the challenge is
because when somebody comes across the windfall, they, like I said,
they feel like they earned it. They look at this
as though their whole life is led up to this
point and that it's just kind of a deferred paycheck,
and they, for some reason just think that it just
(41:57):
this money just doesn't stop it, I'll just keep comingming
in And that's not the case. Now I'll share another
story with you of a couple that I had worked with,
and this is going back I think like two thousand
and six. So this couple I'll stay a little hazy
(42:21):
on the details here because it was a pretty significant,
well known accident that had happened and the individual was
very badly hurt. I mean it was it was a
shame how badly hurt this individual was. And the money
that was received was very significant and there was a
(42:45):
total payout amongst the couple from Department of Transportation or
say like, all these different parties and they ended up
getting about five point I think it was about five
point eight. It was a while ago, so let's just
say it was just shy a six million dollars. Okay. Now,
(43:12):
this individual started with nothing at all. They they had
a a home that needed a lot of repairs. They had,
you know, a truck that was dicey to say the least.
(43:33):
And to their credit, they did an absolute wonderful job.
They did not want anybody to know about this wealth
that they have received. Now, they were very good at gifting,
not they didn't give money to their family members. Now
(43:54):
a lot of family members came out of the woodworks
on this one and they just refue used to buy
into that mindset. Now, they were very smart and listened
to the guidance and they were able to just take
some income from some bonds and they just and then
(44:16):
invested the rest into growth, and they bought I think
they bought like two rental properties or something. But again
they didn't go headlong in any direction, and it really
it worked out incredibly well for them. Now even today,
if you drove by their home, it's a very modest
home and their vehicles are not like brand new. They
(44:41):
really looked at this through the right lens. Now they
now are very wealthy, but they continue to live the
same lifestyle, and that's important. They didn't spend too much,
they didn't give too much away and generous people, but
(45:01):
they learned how to properly give it away. So that
that's a story of how a big windfall can be
a blessing if you don't let those guilty feelings creep
in when family members keep on asking you for money
when they're struggling, or when friends and family assume that
(45:25):
you have unlimited resources and that you should help them.
You know, there's a lot of family members that show
up out of the woodwork here, and you need to
have a clear plan and have boundaries in place and
kind of a personal.
Speaker 4 (45:43):
Charter.
Speaker 5 (45:44):
I would say of what you will and what you
would not do. And you have to have this agreement
with yourself, with your spouse and write it down because
in the moment, when emotions run high, it's very easy
to cave in to the emotions. But make yourself a
(46:09):
promise up front, and that's important with money. So even
if you're somebody that likes to take a risk on ponies,
or you are somebody that wants to play sports books,
no matter what it is business your family, write down
(46:32):
what you think is acceptable, what you think is the
winning strategy. So when you're in a situation that you
need that guidance, you've already given it to yourself, and
reflect back to that and don't deviate. It's really one
of the greatest gifts that you can give yourself. So
what about this idea of investing for the long term
(46:56):
growth of this money. So instead of spending it wildly,
the smartest people they take their windfalls and they put
it to work. And the easiest way to do this
is to have a well diversified portfolio. And so let
me give you an example. Let's use let's use this
(47:17):
one for now. There's a man that inherited seven hundred
and fifty thousand dollars back in twenty and ten, and
instead of spending it, he puts seventy percent into investing
and he used thirty percent to buy rental property. So
by twenty twenty four, his portfolio has grown to be
(47:40):
over two and a half million dollars and his rental
income provides him with consistent cash flow. So why does
this work Well, he has a compound interest in market growth,
which creates long term wealth for himself. He also has
real estate, which provides passive income and appreciation. An He's
staying invested and that prevents emotional decision making. So if
(48:06):
you want to make sure that you're investing the right way,
don't let taxes eat into your gains. Download my free
white paper titled common tax Errors to Avoid at PRESCOTTPW
dot com, or feel free to call us if you
have any trouble there. Five one eight two zero three
one nine eight three. I'm going to take a quick
(48:28):
break and when I get back, we'll pick up from
where we left off. I'll give you a couple of
ideas here for some income strategies for yourself if you
come across a windfall like this.
Speaker 6 (48:39):
At Prescott Private wealth. We understand your financial picture is unique.
Don't get lost in the noise of mixed advice. Visit
us at four or five to one who six Street
in Troy, New York, or online at Prescott PW dot com.
Led by Drew Prescott, our team offers comprehensive solutions from
investments and retirement plans to risk management around insurance and
estate planning. At Press Scott, we're fully licensed to safeguard
(49:02):
and grow your wealth Prescott Private Wealth, where your financial
future is secure. Visit PRESCOTTPW dot com today.
Speaker 5 (49:11):
Welcome back everybody. Thanks for spending your Sunday with me,
and for those of you who are listening for the
first time, this is your money matters. I'm your host,
Drew Prescott, chartered retirement planning counselor and accredited wealth management
advisor and president of Prescott Private Wealth, located in Troy,
New York. The phone over here is five poet eight
two zero three one nine eighty three. The website is
(49:34):
PRESCOTTPW dot com. And if you are in need of
some guidance, maybe you just had a loved one that
passed away, you just got divorced, you're just getting ready
to retire and you're trying to put your arms around
your financial picture, please reach out. We'd love to meet
(49:57):
with you and see if we could bring you some
value by putting a proper plan in place for you,
helping you understand what you have now and discuss what
you would like to do with your finances and you're investing. Okay, Now,
what I wanted to share with you here was what
(50:21):
are some things that wealthy people do when presented the
opportunity to receive a chunk of wealth. Well, a lot
of it at that point is really just strategy based, Okay.
So if somebody is already wealthy, and they already have
(50:43):
their investments established, and they've done some financial planning, So
if you are not there yet and you want to
understand these thought processes, let me share this with you.
Some times there's a need for income. I should say
a need is a desire for income. Okay. Sometimes people
(51:09):
will put money into like a dividend paying stock, and
maybe they'll invest some money into a business, maybe they'll
buy some rental properties, and the purpose of doing that
is to just create additional cash flow and let their
money work for them. So let's say that somebody comes
(51:34):
across a million dollars and they want to put that
to play and to create some type of income. Well,
if they put let's say they've put five hundred thousand
into a well diversified dividend stock portfolio and let's say
it average is about four percent, Well, that would kick
off about twenty thousand a year of passive income. And
(51:55):
let's say they already have a nice portfolio of rental
properties and they wanted to take four hundred thousand and
put that into some new properties. Again, let's just make
make some assumptions here. Okay, Let's say that they have
the wherewithal to manage this, create this, They understand the math,
(52:17):
and it kicks off another thirty six thousand a year
of income. And then they take one hundred thousand and
they put it into a side business. If they're effective
at managing, maybe they start off with this and it
starts to kick off one thousand dollars a month. But
all together, by taking that million dollars and diversifying it
(52:40):
across different areas to create some passive income for themselves,
that picture generated about sixty eight thousand dollars per year
and passive income. And they're really not touching the original
million dollars because they're investing these Okay, So if the
business does good, grows, if the properties increase in value,
(53:03):
that too will grow. And if the stock portfolio has
growth in addition to the dividends that is kicked off, well,
then they ultimately are just continuing to grow the asset,
but also taking advantage of the ability for these to
kick off some income. And that's very important strategy for you. Now,
(53:28):
if you are somebody that has recently come into some
wealth and you need some guidance with this, don't be
a stranger. Feel free to reach out. I'd love to
have you. We could talk about some tax efficient investing,
some capital gain strategies, and some estate planning and get
you to a place of where we can navigate away
(53:54):
from a tax mistake that could cost you thousands of dollars.
So we could help you by putting together a strategy
where we're focused on keeping you in the long term
capital gains tax bracket versus individual income because that can
(54:16):
be very significant in the tax planning realm of your finances. So,
if you're somebody that is recently retired, you're coming into retirement,
you are just finalizing a divorce or a settlement, feel
(54:37):
free to reach out. I'd love to meet with you
and give you some guidance. Here again, my name is
Drew Prescott, President of Prescott Private Wealth, chartered retirement planning
counselor and accredited wealth management advisor, and the phone number
here is five point eight two zero three one nine
eight three or PRESCOTTPW dot com. So again, thank you
(55:00):
for joining me today. I hope that you've found this
to be very valuable. I've enjoyed my time with you,
and I'd like to invite you back next week Sunday
at eleven am on WGY Radio eight ten or one
o three one FM.
Speaker 6 (55:18):
Life's toughest financial decisions don't have to be faced alone.
Drew Prescott at Prescott Private Wealth is here to guide you,
whether it's settling in a state, planning for retirement, or
making your final walk from your career into a well
earned rest. Don't let uncertainty weigh you down. Ask yourself,
did I do this right? Am I missing anything? With
Prescott Private Wealth? The answer is clear, You're on the
(55:38):
right path. Visit us at four or five to one.
Who's six Street in Troy, New York or online at
PRESCOTTPW dot com. Prescott Private Wealth your partner in navigating
life's financial journeys.
Speaker 3 (55:52):
If I had a million dollars, five had a million dollars, well,
I'd buy what house?
Speaker 4 (56:01):
I would buy you a house.
Speaker 3 (56:04):
And if I had a milking dollar,
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,
(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the
(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Speaker 2 (00:55):
Securities all produce a terror Financial Specialists LLC member fen
the SIPC reservices offered through Setara Investment Advisors LLC. SATA
firms are under separate ownership from any other named entity.
Four five to one two sixth Street, Troy, New York
one two one eight zero.
Speaker 3 (01:10):
Five had a million dollars.
Speaker 4 (01:13):
Five had a million dollars.
Speaker 3 (01:16):
Well, I'd buy what house?
Speaker 4 (01:19):
I would buy you house?
Speaker 3 (01:22):
Ay five.
Speaker 5 (01:22):
Welcome back to your Money Matters. The show where we
break down smart financial strategies and wealth building opportunities to
help you take control of your future. And I'm your host,
Drew Prescott, chartered retirement planning counselor and accredited wealth management Advisor,
President of Prescott Private Wealth, and I just wanted to
(01:44):
say thank you to those of you who are tuning
in for your first time, and thank you to those
of you who tune in each week. So wherever you
find yourself, I hope to provide an entertaining and educational
experience for you over the next hour here. I know
you have a lot of things that you could do
with your time, and I appreciate you giving me a
(02:05):
part of your Sunday. And how many of you are
sitting out here and thinking, boy, this uh, this cold
weather's almost over right, That's what I've been telling myself.
We were going to try to get away here, kind
of a last minute thing, you know. Natalie has no
school for the week, and I thought wouldn't it be
(02:28):
nice to get away down south someplace? And we didn't
plan it. I was trying to do it, and my goodness,
the the price of the flights are just incredible right now.
I mean, you can go you can always go down
to Florida for a fair price, but if you wanted
to do anything outside of that, the pricing is just absurd.
(02:50):
So it looks like we're gonna be kind of grinning
and bearing the cold weather here for a little bit longer.
At least. We have a little trip planned for April.
We're excited about that. And so in April, I've also
been invited to a seminar and it's kind of a
(03:14):
study group really for a lot of the advisors that
are kind of at a higher level and where we
are working with, you know, more sophisticated clients. And that's
in Las Vegas, And believe it or not, I've never
(03:35):
been there, so I'm I'm a little bit excited, a
little uncertain as to what to expect. So if you've
ever been to Vegas and you have some restaurants you
think I should try, I'd love to receive your input
if you have any good recommendations for me. You're kind
of what to stay away from. Even you know, everyone,
(03:58):
everyone's been kind and kind of shared their thoughts on it.
A lot of people I know they travel there quite
a bit, but nonetheless kind of looking for if you
know of any kind of off the beaten path restaurants.
I always find that those restaurants, in my opinion, are
always the ones that are better than these big chain places,
(04:22):
and the chain places seem to be overpriced, and I
like my food made with a little bit more love.
So if you have any recommendations, I'd love to hear them. Also,
if you think it's worth it to travel with your
golf clubs, let me know that too. I kind of
(04:43):
torn about that, so I'm going to the end of April.
Feel free to send me some emails. Drew at Prescott
PW dot com. I would love to hear from you.
So today's topic, as if I didn't already turn my
hand with our intro song, but today's topic is one
that we can have a little bit of fun with.
(05:04):
And the question is what would you do if you
suddenly inherited a million dollars? Would you invest it? Maybe
it'd splurge on a dream vacation. Maybe it'd even pay
off some debt or do a little bit of everything.
So we're going to break it all down. Plus we're
going to take a look at what would have happened
(05:25):
if this happened to you in twenty fourteen, and you
had decided to invest the money in the S and
P five hundred index. And before we jump into that,
let's just take a look at what's been happening in
the markets this week, and if you've been paying attention,
(05:46):
I think would be fair to say it's been a
little bit of a roller coaster ride. And we've seen
some major movement in our stock market, which has been
a good thing. And we also saw that key economic
data that was released was positive, and of course we
saw the ongoing battle of inflation here. So if we
(06:08):
look at the SMP five hundred last week, it went
up by one and a half percent, and we'll take
that that's a nice gain. The Dow Jones went up
by about a half of a percent, and then we
saw tech stocks make a move for a strong week
as well, where the Nasdaq finished up two point six percent.
(06:29):
So what were the major economic events that helped contribute
to this. Well, we had our corporate earnings and companies
such as MGM Resorts and Coincidental were talked about Vegas
now MGM, but they had good earnings. Ge healthcare technologies,
muls and cores and they all reported higher than expected
(06:53):
profits and that when that happens, that helps boost the
investor's confidence. Now, we also saw further developments with tariffs.
So despite Presidents trump recent tariff threats, including directives to
explore reciprocal tariffs against various trading partners, the stock market
(07:14):
remained resilient and investors really perceived that these tariffs are
more of a negotiating tool and it's been showing to
lead to a positive market response. Now, also we can
take a look at the inflation data here and we
saw that the producer price index for January arose by
(07:37):
about zero point four percent, which is slightly above the expectations. However,
the key components of the core personal consumption expenditures index
that closely monitor that's closely monitored by the Federal Reserve,
and it remained stable or declined, and it suggested that
(07:59):
the inflation pressures may start to be easing here. So,
speaking of money management, one of the biggest wealth killers
out there is taxes. And trust me, if you don't
have a plan, you could be losing thousands or even
millions over your lifetime. And that's why I put together
(08:22):
a free white paper for you. This white paper is
titled common Tax Errors to Avoid, so you can download
it right now at PRESCOTTPW dot com. You can just
go on the website, it'll pop right up. Just enter
your name and email address and you'll receive a copy. Okay,
so let's talk about that big question, what do you
(08:48):
do if you inherited one million dollars? Well, the temptation
to splurge, of course, is real, and hey, I get it.
After working hard for your whole life life and then
suddenly having seven figures at your disposal can really feel
like winning the financial lottery. But here's the deal. Did
(09:10):
you know that seventy percent of lottery winners and large
windfall recipients go broke in just a few years. So
today we're going to walk you through what a financially
smart person would do with one million dollars and what
not to do if you want to build long term wealth.
(09:32):
So let's be honest, right, when most people think about
coming into a million dollars, their mind goes straight to spending.
And listen, I'm not here to tell you never to
spend your money. Life is meant to be enjoyed, isn't it.
But let's talk about where that money could disappear if
(09:54):
you're not careful. And I have seen this several times
through my professional career, and I can tell you I
don't know exactly what the percentage is. I'm just throwing
a number out there. If I were to guess, I
would say I could probably guess with about a eighty
(10:15):
five percent accuracy what someone is going to do when
they come across a large windfall. And I can tell
you that the ones that I thought would spend it
all and give it away, they did exactly that. And
there's been a there's been one individual that I can
(10:36):
think of that I was sure that they were not
going to be able to overcome their desire to spend
all of the money, And as a matter of fact,
they actually ended up becoming the opposite, you know, they
really became I guess you know that old saying tighter
(10:59):
than two coats of pain. It was almost like it
was like a hoarder's mentality. They were scared to spend
the money. So there's a balance to be struck. And
so let's let's just talk about some of the common
splurges that drain wealth the fastest. Well. First would be
a luxury car and expensive toye so that three hundred
(11:22):
thousand dollars ferrari, it's losing value by the second once
you drive it off of the lot. Then expensive home purchases,
you know, property, as you know, can be a smart investment,
but an oversized home comes with huge upkeep costs and
(11:42):
huge tax bills. And then I've also seen people that
just go out and they'll rent a private jet or
get a subscription to a jet, or you know, even
one individual bought into uh shares of a jet and
(12:04):
they just didn't have the ability to keep up with
that lifestyle and they're buying designer wardrobes, living lavishly, and
you know, that lifestyle that falls apart very quickly if
you're not continuously backfilling with additional money. Then there's also
people out there that just they feel like they want
(12:25):
to help too many people. And don't get me wrong,
generosity is really a just a gift and it's a
beautiful thing. But without a plan, when you give away
money too much, too quickly, that can really drain your
(12:45):
fortune fast and indefinitely. So the key takeaway that I
want you to have is that a million dollars as
a windfall. It can disappear quickly, especially if you treat
it like it's an unlimited supply. So instead of asking
what can I buy, you would want to ask what
(13:06):
can I make? What can I do with this money?
I should say to help it work for me? Okay. Now,
if you're sitting here and you're thinking I already have
several million dollars or I'm on my way to saving
money and this doesn't apply to me, Listen, there are
some just fantastic lessons that I'm teaching in here. So
(13:28):
there are some pearls. Don't tune out. This is going
to be a very powerful program. You're gonna want to
hear this because I have packed in here some nuggets
of wisdom that can help you no matter where you
are on your journey. So just put yourself in this
situation for a second. See if you can't identify some
(13:49):
of these bad traits and some of these good traits
inside of yourself, and use it as a way to
reflect on where you are and where you're heading. Okay,
So what I had said was, Hey, what would happen
if you received a million dollars back in twenty fourteen.
Let's say that you were able to buy into an
(14:14):
index fund. Let's just use I'm not encouraging anyone to
buy this. I'm just using this as an example. Okay.
Let's just say that we use Spy as an example, okay,
because I have to have some type of a reference
point here. And you bought that in twenty and fourteen,
and let's say that it was trading for approximately one
hundred and eighty dollars per share at that time. Well
(14:36):
fast forward to today, let's trading around five hundred dollars
a share. So with reinvesting that million dollar investment, that
would now be worth approximately three point two million dollars
ten years after you deposited it. So what's the takeaway? Well,
that's more than tripling your money and without needing a
(15:00):
Wall Street degree, just patience and having discipline, working with
the right financial advisor to help you invest according to
your risk. Okay. Now, everyone's different everybody. There's some people
(15:20):
out there that go about it yourself. There's others that
like to have a professional take the wheel and guide
them and just make sure that you're not hitting potholes,
and if you are, make sure you're not hitting them
too fast. Okay, So this is why the wealthiest individuals
(15:40):
that we see out there do not panic sell when
market comes to a downturn because they understand that time
in the market beats timing the market. And I've said
that several times on the show, and I'll continue to
say it. Time in the market always beats timing the market.
So what you want to remember is that you cannot
(16:08):
win trying to get in and get out according to headlines.
We talked about that last week. So do you want
to make sure that you're keeping more of your hard
earned investment gains? Well? As I said a little while ago,
taxes can eat away at your returns if you don't
(16:29):
plant smartly. So download my free white paper titled common
Tax Errors to Avoid. You can get that by going
on PRESCOTTPW dot com and there's a pop up there.
Just put in your name and your email address and
that'll be instantly downloaded. Okay, so let's get back to
(16:49):
what we were talking about. What would you do if
you invest if you inherited a million dollars or wanted
with a windfall here, So how about the best of
both worlds? Right, we're just talking about investing the money.
What if we had a balanced strategy. So we've talked
(17:10):
about splurging, we've talked about investing, but let's be real,
most people want a mix of both. So what's a
responsible way to enjoy and to grow your money. Well,
a smart one million dollar plan could look like this.
You invest sixty percent or six hundred thousand into a
(17:31):
diversified portfolio and then use twenty percent for smart purchases.
So that's two hundred thousand dollars that you can use
to put it down payment on a home, a reasonable car,
or meaningful experiences. And now when I say that I
(17:54):
really want to hone in on this, okay, And when
I say a responsible car, what you need to do
when you come across wealth that is newly acquired, or
if you all of a sudden get a big commission
check or a big bonus, or you get a new
(18:15):
position that's supposed to pay you much more than what
you're used to making, you have to continue to live
like you did prior to this happening. Otherwise I've seen
time and time again people getting themselves into major financial issues.
So a reasonable car, So if you all of a
(18:36):
sudden you get a million dollars, that doesn't mean that
you should go from driving you know, let's say a
Toyota Camry to a seven series BMW or an S
class Mercedes, or you know, if you're used to driving
an E class Mercedes, and then all of a sudden
(18:58):
you get this windfall and you think it would be
a wise move to go out and buy a Ferrari
or a Lamborghini or something. You know. Number one, these
things are incredibly expensive to ensure. They also have maintenance
that requires flatbeds, and the oil changes are several thousand dollars.
(19:21):
You know's there's a lot to be thought of here.
Same thing as a home. Okay, So if you're gonna
go out and buy a home because you just come
across a windfall you inherited money or whatever, remember stay practical, okay,
and don't go and buy yourself some big house and
(19:45):
something that is going to require a lot of money.
That if all of a sudden you need a new
roof and you've got water in your basement, and you
got a hot water heater and you got an electrical issue,
those things add up quickly, and we see it even
with new homes. So just don't be foolish, take your
time and consider continue to live according to what you
(20:08):
were used to prior to this money coming in.
Speaker 4 (20:11):
Now.
Speaker 5 (20:12):
One thing we also say is that let's set aside
ten percent for emergencies or future opportunities, because if an
opportunity comes along that you get to purchase a rental
property or maybe you want a lake house or a
little cabin or something like that, have that money set
aside for that special purpose. And then also donate ten
(20:35):
percent you want to donate to causes that you believe in,
and in the Christian faith we call that tithing, okay,
so that ten percent would go back to the church
and just let God do his work with it. So
(20:56):
if you have the ability to donate large sums of money,
something that we like to talk to our clients about
is a donor advised fund. And we have enough experience
with them to know which ones have heavy expenses with
them and which ones seem to be the lowest with expenses.
(21:18):
Because you know, just like everything, nothing's good or bad
until you compare it to something else. And I've got
some experience with this and I can point you in
the right direction how to properly use donor advised funds
and not get completely beat up with fees. So if
you want to build a financial plan that not only
(21:39):
protects your wealth and gives you the freedom to enjoy it,
let's talk. Download common tax errors to avoid at PRESCOTTPW
dot com. If you'd like to meet with us in
the upper right hand corner, you can click on I
think it's under resources. Now let me just pull this up.
(22:01):
It's funny, you know you want something every once in
a while. You know we're always building it out for
marketing purposes, but then you kind of lose track of
exactly how things are titled. So let me just share
with you here we go, all right, So if you
go into our services in the upper right hand corner
(22:26):
and you can click on new clients, you'll see here
it says how we work, and I've put together a
three step process. The first is to have you complete
a risk profile questionnaire just so that I can understand
how you tolerate risk and your time horizon for your investments.
(22:46):
The second is a questionnaire. It's really a comprehensive questionnaire
so that I can understand about your family, your income,
your liabilities, your assets, your insurance details. And then this
is what I use to put to other financial plan
for you, and then the third step would be to
book an appointment. Now before before we go through that process,
(23:09):
what I would like to do is talk to you
on the phone, So give us a call five one
eight two zero three, one nine eighty three again five
one eight two zero three one nine eight three. And
the purpose of the phone call is to find out, Hey,
what are you trying to do. Are you looking for
some guidance with your investments? Are you looking for an
(23:30):
updated financial plan? And all all roads lead to financial
planning here and in the website under our services where
I just had to go for new clients, you can
go to fees schedule for services and you'll see at
the top of that page it as services, a little
(23:51):
splash at the top there, and then this shares with
you the different fees and the costs and hourly consulting
and whatever it is you're trying to do, and it'll
speak directly to that. If you see services that are
not offered here and something that you need, don't hesitate
to reach out, okay, And you can give us a
(24:12):
call or email us Jessica at PRESCOTTPW dot com or
five one eight two zero three, one, nine eight three.
So let us get back to where I was beforehand.
We talked about a smart one million dollar plan, investing
sixty percent into a diversified portfolio, use twenty percent for
(24:36):
smart purchases, set aside ten percent for emergencies and future opportunities,
and donate ten percent into causes that you believe in.
Next up, we'll break down some real life stories of
people who inherited big money and either built wealth or
(24:56):
lost it all. Plus we'll share more listener responses on
what you would do with a million dollars.
Speaker 3 (25:09):
If I had a million dollars, If five had a
million dollars, well, I'd buy what house?
Speaker 4 (25:18):
I would buy you a house?
Speaker 3 (25:21):
And if I had a million dollars five had a.
Speaker 6 (25:26):
Million dollars, life's toughest financial decisions don't have to be
faced alone. Drew Prescott at Prescott Private Wealth is here
to guide you, whether it's settling an estate, planning for retirement,
or making your final walk from your career into a
well earned rest. Don't let uncertainty weigh you down. Ask yourself,
did I do this right? Am I missing anything? With
(25:46):
Prescott Private Wealth, the answer is clear. You're on the
right path. Visit us at four or five to one
Who's six Street in Troy, New York, or online at
PRESCOTTPW dot com. Prescott Private Wealth your partner in navigating
life's financial journeys.
Speaker 5 (26:00):
Welcome back to your money matters. I'm Drew Prescott, chartered
retirement planning counselor and accredited wealth management advisor, your host,
and the president of Prescott Private Wealth as well as
a smartvestor pro through Ramsey Solutions. So, if you're just
tuning in, we've been talking about the ultimate money question,
(26:22):
what would you do if you suddenly inherited one million dollars?
And so we're going to dive into that. And in
our last segment we talked about the difference between splurging
and investing and how putting that money into the S
and P five hundred index back in twenty fourteen would
(26:46):
have turned one million dollars into one point two million
dollars today. That's the power of smart investing. But now
let's get into the real life side of things. What
happens when people actually come into money. Now, history is
full of people who inherited, were won large sums of
(27:07):
money and lost it all. But there are also plenty
of success stories, So let's break it down the smartest
and the dumbest ways that people have handled a windfall.
So let's start off with some cautionary tales. Now, if
you don't have a plan, your money can disappear faster
than you think. And here are some of the worst
(27:28):
ways that people have lost a fortune. The first one
is the lifestyle trap. I tried to tipy toe into
this a little bit when we're talking about vehicles and houses,
but spending the money like it will never run out. Now,
one of the most common mistakes that people make with
a windfall is upgrading their lifestyle way beyond their means.
(27:52):
It's one thing to treat yourself, but when spending gets
out of control, it leads to financial disaster. So let
me share with you a couple of stories here.
Speaker 3 (28:04):
Everybody, sit downcing down, please sit stortyi, storty.
Speaker 5 (28:14):
I love that. It always reminds me of when my
kids were little. But uh so here we go. There
was a man who won ten dollars in the lottery.
What was the first thing he did? Well? He bought
a mansion, He bought four luxury cars, and he started
taking private jet trips around the world. Now fast forward
five years, this man was completely broke. Why Well, because
(28:39):
while the money came in fast, it went out even faster.
And why does this happen? So, you know, if you
ever watch any of these shows, I think it's a
was it Bravo or see? I don't know, it was
one of those shows you know that like the same
type of program with you know, like My six hundred
(28:59):
Pound Life. Those things are so depressing, but my wife
loves watching them. I don't know, do you enjoy them?
I don't. I find it sad and just something that
I really don't even want to wrap my mind around.
But nonetheless, let me just share with you what we
have seen happen here time and time again. Now why
(29:20):
does this always happen to people that receive these big windfalls? Well,
because a sudden windfall really creates a false sense of
financial security, and big purchases come with big ongoing expenses.
Like I said, you've got property taxes, maintenance, insurance, and
when spending habits are not adjusted, money drains faster than
(29:45):
you realize. And just remember, just because you have a
million dollars doesn't mean that you can spend a million dollars.
If you want a shopping spree without a plan, you
could be right back to zero at no time. Also,
so we also find that a lot of individuals when
they come across big money, they will gamble or they
(30:12):
will try to get involved in like a get rich
quick scheme. And people who think that they can make
their take their million dollars in double it or triplet
by investing in risky, unproven ventures. We've seen that as well. Now,
I remember having a fella who for quite a while
(30:37):
he really had no income to speak of, barely was
able to provide for his family, but was a hard worker.
And this was before I had met him, and he
used to live in a trailer and could not really
afford even that lifestyle. Well, he's a great guy, he's
(31:03):
a great salesman. And then he just happened to come
across the right thing and it was one of these
like like a multi level marketing company, right, and he
did really well. And then all of a sudden, when
we met, I'd said to him, you know so, and
(31:23):
so I'm concerned. I'm always concerned about these types of things.
You know, you're doing really well, So congratulations, but I'm
concerned that this is like a five year wave and
currently you're living as though you're going to continue to
make more money in perpetuity. And I knew that that
(31:47):
wasn't the case. Now. I really tried to stress it
but also be you know, just kind and caring in
my approach here. And he he would sit there and yes, yes,
me to death, but never would make any changes. So
I finally got him to save some money. We put
(32:08):
some money together, you know, got all of his debts
paid off, and so he was invested, had the proper
insurance and everything, had a nice little plan for himself.
We started amassing some wealth. And then one of the
individuals inside of this multi level marketing program had told
(32:31):
him that, hey, I have a great program for you.
You really need to invest in this. And by the way,
everybody that you get to invest you can also get
a percentage of their income or I mean of their investment.
So when he called me up and he told me
about it, I said, wow, well this really doesn't sound good.
I don't think you should go anywhere is near this thing.
(32:52):
And I asked him tell me the fellaw's name. We
looked it up and he is not registered with any
of the governing bodies, and this is a true story.
He really you can't make this up, and you're always
blown away to find out that somebody would fall for
this stuff, and it's really sad. I'm certainly not poking
(33:14):
fun at this guy's a fantastic guy, and I love
this guy. He's a great man. But what had happened
was I look it up and this thing is one
hundred percent a Ponzi scheme. And I tried to explain
to him how this worked. Now, this everything for this website,
said Cayman Islands, and then he said, well, he lives
(33:36):
in Florida, and it just didn't seem right at all,
and so he couldn't help himself. He had to be
part of this. He couldn't couldn't be let the guys
that he was in this multi level marketing gig think
that that he wasn't as smart as them. That's that's
(33:57):
what his perception was. He needed to be in, to
be in at the ground level. This thing was going
to give him twelve percent guaranteed money, twelve percent plus
anybody that he referred in would get a five percent
I think is what it was. And it was just
(34:17):
it was just a terrible idea. And so I said
to him, listen, stay as far away from that thing
as you possibly can, and do not recommend anybody get
involved in this thing. You know, you need to call
an attorney. And then, you know, I also said, you know,
I think that you should call over to the SEC,
(34:39):
call over to the FBI. You need to call some
people on this. This is this is not a good thing.
So I went through the proper channels. I went to
my compliance department, we sat down with the SEC, gave
a statement over the phone, and so you know, it
was actually just kind of brushed off. Well, fast forward
(35:02):
about a year and a half and I was right, now,
this fella is in prison, the one that started this
ponzi scheme out of Cayman Islands, and he had built
tens of millions of dollars from people. So again, get
(35:23):
yourself with a financial professional, and when they give you recommendations,
and when they tell you to stay away from something,
stay away from it. That's that's awfully dangerous. You do
not want to be in something like this, and you
could actually be contributing to growing something like this. So
(35:43):
stay away. Okay, there is no such thing as getting
rich quick. So we share another story with you about
a man who inherited uh one point five million dollars
you know what, I don't want to tell you about him.
Here I got a better one. Let me tell you
(36:04):
about a young fella. So I had a doctor who's
a client of mine, and he called me up and
he said, hey, I got a young fella. He was
pretty badly hurt and had some pretty significant injuries from
an accident, and he is settling. He's getting about four
(36:25):
and a half million dollars. He's twenty three years old,
and he really has no idea what to do. Would
you meet with him? I said absolutely, So we get
together and I asked the young fellow, what do you
want to do with this money? And he says, well,
(36:45):
you know, it's that's a lot of money. And I said, oh,
I'm aware, and I said I'm also aware of that
it can become generational wealth if you if you do
this the right way. And he said, well, how so?
And so I explained to him how he can still
(37:08):
get a couple of things for himself, but just you know,
just get a nice house, don't get a blown out house.
You know, get a snowmobile. Don't get several snowmobiles and
get yourself the pickup truck that you wanted. So he goes, well,
you know, I think that basically what I've done here
(37:30):
is I've put together on a piece of paper what
I think I wanted to do, and I said, all right,
well let's talk about it. So the young guy goes
on to say, well, I want to get a Corvette.
I want to get a new Corvette because I don't
want to, you know, have anyone else's trouble. I want
to do this to it. I want to do that
to it. So when we got all said and done,
(37:52):
this kid's talking about spending It was about one hundred
and forty thousand dollars I think on this Corvette with
different modifications that he wanted to do. Then he wanted
to get himself a thirty five hundred Silverado, and he
wanted to get a trailer. It was a four place
trailer because he was going to go out snowmobile and
(38:14):
with his friends. But then his one friend who has
been his childhood friend, doesn't have any money, so he's
going to buy him a snowmobile. Then he wanted to
buy a boat. And then he wanted to buy and
it just kept on going on so and I just
let him go. And once he got done purging, I
said to him, I go, okay, so when all said
(38:39):
and done, you ultimately want to spend about two point
four million dollars of this money right away? And he
said no, no, no, it's not that much. So we
walked through the math I showed him. I said, yeah,
here it is. I said, so you want to only
save two point one million for the future and he said, yep,
(39:03):
I guess so, yeah, because I have to do those
things because I'll never have the opportunity to do them later.
And I said, well, can I show you something? Can
I show you how you could put together a financial
plan here? And I just went through with them quickly,
just kind of on a whiteboard type of a deal,
and I said, hey, listen, do you have to have
(39:24):
all of these things today or can we get a
couple here and then wait a year and get a
couple and you know, is it possible that we can
try some of these things out before you go throwing
all this money at it. You're sure that this is
something that you want to do, because remember this kid
hasn't had a boat before, he hasn't had a snowmobile,
(39:46):
he hasn't there's a lot of these things he hasn't enjoyed.
He's always wanted to, but he personally doesn't even know
if he would enjoy them. Okay, So what had happened
was because I is trying to be a voice or
reason to him and I couldn't get him to think differently.
I just said to him, listen, this is just this
(40:07):
is not going to be a good fit because ultimately,
the way that you're talking this money is nothing more
than just a deferred checking account. So I don't think
that I'm the right advisor for you. I don't seem
to have the ability to educate you in a way
that I can break through. So we've parted ways. Well,
(40:29):
come to find out, I think it was about let
me just think what year was this? So it's this
is two thousand, yeah, yeah, two thousand, yeah, twenty sixteen,
I would say, is when this when this was? I
think that's about right. It's got to be like twenty fifteen,
twenty sixteen, somewhere around there. So anyways, the doctor that
(40:53):
referred me to him said to me about a year
ago and said, hey, uh, you ever talk to so
and so anymore? And I said no, I said that
didn't work out. Well, wasn't really a good fit. And
he said, oh, well did you hear And I said,
well no, I don't know anybody in this kid's life,
(41:14):
only you, And he goes, yeah, this kid actually spent
all of that money and he gambled some of it
away and bought stupid things and then his parents took
him for a ride and it was just a bad situation. Now,
you could see those things coming from a mile down
the road, But the question is can you see them
(41:35):
in yourself? And I think that that's the challenge is
because when somebody comes across the windfall, they, like I said,
they feel like they earned it. They look at this
as though their whole life is led up to this
point and that it's just kind of a deferred paycheck,
and they, for some reason just think that it just
(41:57):
this money just doesn't stop it, I'll just keep comingming
in And that's not the case. Now I'll share another
story with you of a couple that I had worked with,
and this is going back I think like two thousand
and six. So this couple I'll stay a little hazy
(42:21):
on the details here because it was a pretty significant,
well known accident that had happened and the individual was
very badly hurt. I mean it was it was a
shame how badly hurt this individual was. And the money
that was received was very significant and there was a
(42:45):
total payout amongst the couple from Department of Transportation or
say like, all these different parties and they ended up
getting about five point I think it was about five
point eight. It was a while ago, so let's just
say it was just shy a six million dollars. Okay. Now,
(43:12):
this individual started with nothing at all. They they had
a a home that needed a lot of repairs. They had,
you know, a truck that was dicey to say the least.
(43:33):
And to their credit, they did an absolute wonderful job.
They did not want anybody to know about this wealth
that they have received. Now, they were very good at gifting,
not they didn't give money to their family members. Now
(43:54):
a lot of family members came out of the woodworks
on this one and they just refue used to buy
into that mindset. Now, they were very smart and listened
to the guidance and they were able to just take
some income from some bonds and they just and then
(44:16):
invested the rest into growth, and they bought I think
they bought like two rental properties or something. But again
they didn't go headlong in any direction, and it really
it worked out incredibly well for them. Now even today,
if you drove by their home, it's a very modest
home and their vehicles are not like brand new. They
(44:41):
really looked at this through the right lens. Now they
now are very wealthy, but they continue to live the
same lifestyle, and that's important. They didn't spend too much,
they didn't give too much away and generous people, but
(45:01):
they learned how to properly give it away. So that
that's a story of how a big windfall can be
a blessing if you don't let those guilty feelings creep
in when family members keep on asking you for money
when they're struggling, or when friends and family assume that
(45:25):
you have unlimited resources and that you should help them.
You know, there's a lot of family members that show
up out of the woodwork here, and you need to
have a clear plan and have boundaries in place and
kind of a personal.
Speaker 4 (45:43):
Charter.
Speaker 5 (45:44):
I would say of what you will and what you
would not do. And you have to have this agreement
with yourself, with your spouse and write it down because
in the moment, when emotions run high, it's very easy
to cave in to the emotions. But make yourself a
(46:09):
promise up front, and that's important with money. So even
if you're somebody that likes to take a risk on ponies,
or you are somebody that wants to play sports books,
no matter what it is business your family, write down
(46:32):
what you think is acceptable, what you think is the
winning strategy. So when you're in a situation that you
need that guidance, you've already given it to yourself, and
reflect back to that and don't deviate. It's really one
of the greatest gifts that you can give yourself. So
what about this idea of investing for the long term
(46:56):
growth of this money. So instead of spending it wildly,
the smartest people they take their windfalls and they put
it to work. And the easiest way to do this
is to have a well diversified portfolio. And so let
me give you an example. Let's use let's use this
(47:17):
one for now. There's a man that inherited seven hundred
and fifty thousand dollars back in twenty and ten, and
instead of spending it, he puts seventy percent into investing
and he used thirty percent to buy rental property. So
by twenty twenty four, his portfolio has grown to be
(47:40):
over two and a half million dollars and his rental
income provides him with consistent cash flow. So why does
this work Well, he has a compound interest in market growth,
which creates long term wealth for himself. He also has
real estate, which provides passive income and appreciation. An He's
staying invested and that prevents emotional decision making. So if
(48:06):
you want to make sure that you're investing the right way,
don't let taxes eat into your gains. Download my free
white paper titled common tax Errors to Avoid at PRESCOTTPW
dot com, or feel free to call us if you
have any trouble there. Five one eight two zero three
one nine eight three. I'm going to take a quick
(48:28):
break and when I get back, we'll pick up from
where we left off. I'll give you a couple of
ideas here for some income strategies for yourself if you
come across a windfall like this.
Speaker 6 (48:39):
At Prescott Private wealth. We understand your financial picture is unique.
Don't get lost in the noise of mixed advice. Visit
us at four or five to one who six Street
in Troy, New York, or online at Prescott PW dot com.
Led by Drew Prescott, our team offers comprehensive solutions from
investments and retirement plans to risk management around insurance and
estate planning. At Press Scott, we're fully licensed to safeguard
(49:02):
and grow your wealth Prescott Private Wealth, where your financial
future is secure. Visit PRESCOTTPW dot com today.
Speaker 5 (49:11):
Welcome back everybody. Thanks for spending your Sunday with me,
and for those of you who are listening for the
first time, this is your money matters. I'm your host,
Drew Prescott, chartered retirement planning counselor and accredited wealth management
advisor and president of Prescott Private Wealth, located in Troy,
New York. The phone over here is five poet eight
two zero three one nine eighty three. The website is
(49:34):
PRESCOTTPW dot com. And if you are in need of
some guidance, maybe you just had a loved one that
passed away, you just got divorced, you're just getting ready
to retire and you're trying to put your arms around
your financial picture, please reach out. We'd love to meet
(49:57):
with you and see if we could bring you some
value by putting a proper plan in place for you,
helping you understand what you have now and discuss what
you would like to do with your finances and you're investing. Okay, Now,
what I wanted to share with you here was what
(50:21):
are some things that wealthy people do when presented the
opportunity to receive a chunk of wealth. Well, a lot
of it at that point is really just strategy based, Okay.
So if somebody is already wealthy, and they already have
(50:43):
their investments established, and they've done some financial planning, So
if you are not there yet and you want to
understand these thought processes, let me share this with you.
Some times there's a need for income. I should say
a need is a desire for income. Okay. Sometimes people
(51:09):
will put money into like a dividend paying stock, and
maybe they'll invest some money into a business, maybe they'll
buy some rental properties, and the purpose of doing that
is to just create additional cash flow and let their
money work for them. So let's say that somebody comes
(51:34):
across a million dollars and they want to put that
to play and to create some type of income. Well,
if they put let's say they've put five hundred thousand
into a well diversified dividend stock portfolio and let's say
it average is about four percent, Well, that would kick
off about twenty thousand a year of passive income. And
(51:55):
let's say they already have a nice portfolio of rental
properties and they wanted to take four hundred thousand and
put that into some new properties. Again, let's just make
make some assumptions here. Okay, Let's say that they have
the wherewithal to manage this, create this, They understand the math,
(52:17):
and it kicks off another thirty six thousand a year
of income. And then they take one hundred thousand and
they put it into a side business. If they're effective
at managing, maybe they start off with this and it
starts to kick off one thousand dollars a month. But
all together, by taking that million dollars and diversifying it
(52:40):
across different areas to create some passive income for themselves,
that picture generated about sixty eight thousand dollars per year
and passive income. And they're really not touching the original
million dollars because they're investing these Okay, So if the
business does good, grows, if the properties increase in value,
(53:03):
that too will grow. And if the stock portfolio has
growth in addition to the dividends that is kicked off, well,
then they ultimately are just continuing to grow the asset,
but also taking advantage of the ability for these to
kick off some income. And that's very important strategy for you. Now,
(53:28):
if you are somebody that has recently come into some
wealth and you need some guidance with this, don't be
a stranger. Feel free to reach out. I'd love to
have you. We could talk about some tax efficient investing,
some capital gain strategies, and some estate planning and get
you to a place of where we can navigate away
(53:54):
from a tax mistake that could cost you thousands of dollars.
So we could help you by putting together a strategy
where we're focused on keeping you in the long term
capital gains tax bracket versus individual income because that can
(54:16):
be very significant in the tax planning realm of your finances. So,
if you're somebody that is recently retired, you're coming into retirement,
you are just finalizing a divorce or a settlement, feel
(54:37):
free to reach out. I'd love to meet with you
and give you some guidance. Here again, my name is
Drew Prescott, President of Prescott Private Wealth, chartered retirement planning
counselor and accredited wealth management advisor, and the phone number
here is five point eight two zero three one nine
eight three or PRESCOTTPW dot com. So again, thank you
(55:00):
for joining me today. I hope that you've found this
to be very valuable. I've enjoyed my time with you,
and I'd like to invite you back next week Sunday
at eleven am on WGY Radio eight ten or one
o three one FM.
Speaker 6 (55:18):
Life's toughest financial decisions don't have to be faced alone.
Drew Prescott at Prescott Private Wealth is here to guide you,
whether it's settling in a state, planning for retirement, or
making your final walk from your career into a well
earned rest. Don't let uncertainty weigh you down. Ask yourself,
did I do this right? Am I missing anything? With
Prescott Private Wealth? The answer is clear, You're on the
(55:38):
right path. Visit us at four or five to one.
Who's six Street in Troy, New York or online at
PRESCOTTPW dot com. Prescott Private Wealth your partner in navigating
life's financial journeys.
Speaker 3 (55:52):
If I had a million dollars, five had a million dollars, well,
I'd buy what house?
Speaker 4 (56:01):
I would buy you a house.
Speaker 3 (56:04):
And if I had a milking dollar,
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