Hi Everyone, Welcome to another week of newsletters. This is Mr. Daniel, I hope everyone is having a fantastic week!
What would you do with a million dollars?
This week’s newsletter is a bit longer. I am inspired to write about the topic when an old friend asked me for advice.
Firstly, this money would have to be after-tax money. Pre-tax one million income put you in the highest of the 7 Federal tax brackets at 37% and the highest of the State income taxes at 12.3% in California. The after-tax money would be a lot less than $1 million.
So let’s say you have $1 million tax-free money to do whatever you want.
If you choose to spend it all, there are a million ways to do it.
You can buy 4 Virgin Galactic Space flight tickets at $250,000 each.
SpaceX, Blue Origin, and Virgin Galactic have been testing their own versions of space tourism technology and ambitions.
Virgin Galactic, founded by famous billionaire Richard Branson, was the first publicly traded space company. It recently tested its sub-orbital flight to about 90km altitude successfully, taking it a step closer to commercial flight.
Virgin’s sub-orbital flight requires less spacecraft speed (about 2600mph vs airplane 550mph vs 17400 mph orbit speed) and does not actually orbit the earth. The 17400 mph orbital speed means that space tourism at orbital speed is incredibly difficult and costly. The Virgin Galactic spacecraft called SpaceShipTwo is carried by an aircraft carrier to about 13km and then released. SpaceShipTwo will boost for 60 seconds to reach the 90km altitude where it performs a microgravity spin and then free falls back to earth to land! Sounds Fun! You can see the video here
https://www.youtube.com/watch?v=NjgwXzVHAgs&ab_channel=CNETHighlights
A million dollars can be well spent for 4 passengers at $250k each. The flight is approximately 90 min in length with 3 days of flight preparation. So far more than 600+ reservations have been made. However, technically, you are still not in space, 90km is still within the boundary set for space. You’ll have to pay more for longer flights and actual space travel for SpaceX and Blue Origin flights.
Commercial airliners normally fly around 20km instead of 80km. The US officially considers a pilot who has flown above 80km to be considered an astronaut!
Here is a chart for reference.
With a million dollars, you can also purchase 4 new Tesla Roadsters with SpaceX packages at around $250k each.
One Roadster for each of your family members. The SpaceX package will be fitted at the rear end of the Roadster. Using cold air, ultra-high pressure thrust system in place of the rear seats, the Roadster breaks the theoretical road limit of 2.0 seconds and achieves 0 to 60mph in 1.10 seconds. It is unprecedented! The Tesla Roadster has to “fly” just a bit hitting this acceleration enable 1.10 second 0 to 60.
Check out the two videos below.
The first one uses AP Physics kinematics equations to calculate the theoretical road limit of 2.0 second 0 to 60mph (you can do this yourself)
The second one is a quick video on what Tesla Roaders’ acceleration from standing may look like.
Theoretical limit:
https://www.youtube.com/watch?v=Ph5eIu-p5lQ&ab_channel=CarsInsider
SpaceX packet accelerating:
https://www.youtube.com/watch?v=4Xvx6Kvf0w8&ab_channel=Schwanenwerder
You can also buy your own private island for $1 million!
The Florida Keys are islands off the southern coast of Florida. Here is one listed close to $1 million, 0.32 acres with rental income of $100k a year.
Quiet Cove Key, Florida KeysCourtesy privateislandsonline.com
This would be great if you have high disposable income (disposable income: income left over after taxes and deductions that you can spend, save or invest) and if you don’t mind the threat of a hurricane and the cost of maintenance. The $100k rental income after all expenses and property taxes would probably incur a loss). So this option is not so good for investment.
Instead of an exotic island, you can also invest your $1 million in US real estate.
In the most affordable states like Indiana, Iowa, Ohio, $1 million can get you a huge mansion.
Here is one from Fishers Indiana, a 5 bed, 5 baths, 7500 sq ft mansion listed for about $1 million: https://www.redfin.com/IN/Fishers/11318-Talon-Trce-46037/home/669947
The same million-dollar can only buy you a 2 bed, 1 bath, 1100 sq ft living space in San Francisco California. Here is one listed for $1 million
https://www.redfin.com/CA/San-Francisco/916-Silliman-St-94134/home/1480062
You can save $ 1 million dollars in a bank account for 30 years and buy nothing.
This would be a bad choice! According to inflation calculation, your $1 million dollars 30 years ago will only have half of the buying power today!
Using actual inflation data, $1 million in 1990 would only hold about $500k buying power. This means inflation increases the cost of living (cost of goods and services increases each year = inflation), the 1 million in 1990 has equivalent buying power as $ 2 million in 2021.
A 4% inflation means that your $1 million decreases by 4% each year in its purchasing power. If you save your $1million in a bank account, you will still have $ 1million in your bank account a year later but the same million dollars can only buy $960k equivalent of goods and services because the cost of good and services is inflated by 4%. This is why you can never save your way to wealth. Your money in a savings account will be eaten away in value by the silent monster called inflation.
Note to ourselves:
The CPI (Consumer Price Index) is used to measure the rate of inflation. CPI includes weighted average cost of Consumer goods and services such as
- Transportation (cars, airplanes, gasoline..)
- Food and beverages
- Medical care
- Clothing and Furniture
- Rent payments but not real estate costs.
CPI does not include stock, bonds, real estate as these are not consumption expenses.
In the past decade, the inflation rate hovers around 2% which is at historical lows. With Fed’s monetary policy and Biden’s fiscal policy, everyone is afraid of the inflation rate going up out of control. This explains the big volatility of the stock market recently especially in growth stocks over value stocks.
What to do with $1 million depends on your financial situation, age, and life story (lifestyle).
According to the popular 4% rule, if you need $40,000 each year for all living expenses, $1 million will last you 30 years without running out. If you are retiring soon, you can consider the 4% rule and investment strategies. If you are 50 years old and expect to live till 80 years old, the 4% rule may apply to you with $1 million. You can instantly retire and live off the $1 million dollars. If you only spend $30,000 each year for all living expenses, you only need $750,000 instead. This means that you can buy another Virgin Galactic space ticket and check off “space travel” from your bucket lists of wish items!
Your life story (lifestyle) determines how much you need to live comfortably. This is highly subject and no amount of money can bring you comfort and joy.
If you are young, you can invest the entire 1 million dollars into index funds with an estimated 8% return for 25 years. If you promise to max out your retirement contribution of $19,500 annually for 25 years, you will end up with a staggering $8.4 million.
If you minus 4% for average inflation over 25 years, you’ll end up with $3.5 million! Still great!
I also did the conservative calculations. I assumed a reasonable investment return of 8% (S&P 500 returned 13.5% in the past 10 years but only 5.9% in the past 20 years) and I set the inflation rate at 4% (this is a high estimate compared to the averages in the past 20 years).
There are many ways to use the $1 million to your advantage regardless of your age.
As I mentioned earlier, your financial situation, age and life story (lifestyle) play a big role in what you should do.
My advice would address 4 areas:
First: Pay down your high-interest debts first.
Credit card debts are the worst. It averages about 18%. Yes, when you use a credit card to buy stuff on Amazon, you will have to pay for it later. If you miss the payment, the amount owed is charged at the interest rate, your APR, and balance. So if you owe $1000 on a credit card at 18% normally means you end up paying closer to 20% or $200 due to compounding.
Second: Take care of your housing: If you want to live on your own, you can consider buying a multi-unit house for your primary residence. Finding a good deal on a multi-unit house (one physical building that can have 2 or more separate living) is not easy. So, keep looking!
If you are looking for a primary residence, remember the FHA loan available to first home buyers! There are many advantages of using an FHA loan.
Buy a multi-unit and rent out the bigger unit to a tenant to help with paying off your mortgage! Use some of the money to renovate the basics, nothing fancy, to make your units into good conditions yourself and for lease. You may be able to live for free or for a low monthly cost with a tenant paying your mortgage.
Here is another tax benefit: If you live in a multi-unit house for 2 out of 5 years, (you can rent out after 1 year), you can avoid paying capital gain tax on the unit. ($250k for a single person, $500k for a married couple). This means that if you sold your house for a gain, the first $250k gain is tax-free.
https://www.fha.com/fha_loan_requirements
Think of outside the box!
You can rent a room with your parents, or pay no rent at all and invest the $1 million dollars.
You can buy a house with the money and charge your parents and siblings for rent and become a landlord. It is okay to charge families for rent, everyone can be benefited.
Third: Keep a general emergency fund. This can be approximately 6 months of your living expenses. You can calculate your monthly expenses by adding up everything you spend. There are apps you can download to help you keep track of them.
Fourth: Invest the rest. Let the compound interest work for you. Your tolerance for the risk of investment depends on your current age and lifestyle. Make sure your projected investment is higher than the rate of inflation! If you are young, be aggressive in the economic sectors or companies you believe in! If you are 5-10 years into retirement, you need to diversify your investment and focus on stability and dividends (or returns of investment).
And one more thing, don’t expect to earn a return in days, weeks, or months. Great investments often take time, reinvest the dividends. Learn to be a smart long-term investor!
If I can go back in time and confront my younger self, the best financial advice I can tell myself would be
“Read avidly, read daily on all subjects – tech, real estate, finance, economy, science, even politics” – don’t read useless Social media fads and watch too much K-drama.
“Live below your means and defer gratification” – do not buy fancy cars after cars and don’t have fancy vacations when you are young!
“Don’t think too much, the best time to invest long term is now” – there is no better time than now to invest. Don’t try to catch market fluctuations and low points.
“Be content and gracious with what you have been given” – don’t complain about life and things happening to you. Don’t be toxic and be grateful.
So how would you spend your million dollars?
Best regards
Mr. Daniel
Note to ourselves:
Debt: what you owe. For example credit card expenses, the mortgage on a house, student loan you borrowed for college.
Asset: what you own. For example, your cash at the bank, stock or bonds (securities), patents, real estate. However, I do not consider that a house is an asset unless it is paid off.
Net worth: Asset minus liability
Income: money received from work and/or investments or money that goes into your bank account
Expenses: money spend for living, food, clothing, insurance, or money that goes out of your bank account
Cash flow: income minus expenses.
大家好，歡迎收看新一週的新聞快訊。 我是丹尼爾，希望大家度過愉快的一周！
如果你有一百萬美金，你會用一百萬美元做什麼？
這週的時事通訊比前幾州更長一些。 當一個老朋友向我尋求建議時，啟發了我寫關於這個話題文章的靈感。
首先，這筆錢必須是稅後錢。 如果是稅前一百萬美元的收入這將會使您在加利福尼亞州7個聯邦稅級中最高，在加利福尼亞州的州所得稅中最高，為12.3％。 稅後的錢將遠遠少於100萬美元。
因此，我們假設您有100萬美元的免稅資金可以任你支配。
如果您選擇的是花所有的錢，那麼會有百萬種方法可以做到。
您可以每張$ 250,000的價格購買4張Virgin Galactic Space機票。
SpaceX，Blue Origin和Virgin Galactic一直在測試他們自己的太空旅遊技術和野心。
由著名億萬富翁理查德·布蘭森（Richard Branson）創立的維珍銀河（Virgin Galactic）是第一家公開交易的太空公司。 最近，它成功地測試了其亞軌道飛行至大約90公里的高度，使其更接近商業飛行。
維珍航空的亞軌道飛行所需的航天器速度較低（大約2600英里/小時，相對於飛機550英里/小時，相對於17400英里/小時），實際上並沒有繞地球軌道飛行。 17400英里/小時的軌道速度意味著以軌道速度進行太空旅遊非常困難且成本很高。 名為“太空船二號”的維珍銀河號航天器由一艘航空母艦載運約13公里，然後被釋放。 SpaceShipTwo將加速60秒到達90公里的高度，在該高度執行微重力旋轉，然後自由落回地面降落！ 聽起來很有趣！ 你可以在這裡觀看相關視頻
https://www.youtube.com/watch?v=NjgwXzVHAgs&ab_channel=CNETHighlights
以一百萬美元每位25萬美元4位乘客來說的花費是不錯的。 飛行時間大約需要90分鐘，並且需要3天的飛行準備。 到目前為止，已有超過600的預訂。 但是，從技術上講，您仍然不在太空中，而90km仍在太空邊界範圍內。 您需要為更長的航班和SpaceX和Blue Origin航班的實際太空旅行支付更多費用。
商業客機通常飛行約20公里，而不是80公里。 美國正式將飛行80公里以上的飛行員視為宇航員！
這是一張圖表供參考。
只需花費一百萬美元，您還可以以每套25萬美元的價格購買4台帶有SpaceX套件的特斯拉跑車。
這樣每位家庭成員都有一輛敞篷跑車。 SpaceX套件將安裝在Roadster的後端。 使用冷空氣，超高壓推力系統代替後排座椅，Roadster突破了2.0秒的道路極限理論，並在1.10秒內達到了0至60mph的加速度。 這是史無前例的！ 特斯拉跑車達到此加速啟用1.10秒0到60mph的速度已經快到像要飛起來了。
請觀看下面的兩個視頻。
第一個使用AP Physic物理運動學方程式來計算2.0秒的理論道路極限（0至60mph）（您可以自己執行此操作）
第二個快速視頻是介紹特斯拉Roaders的站立加速效果。
理論極限：
https://www.youtube.com/watch?v=Ph5eIu-p5lQ&ab_channel=CarsInsider
SpaceX數據加速：
https://www.youtube.com/watch?v=4Xvx6Kvf0w8&ab_channel=Schwanenwerder
您還可以以100萬美元的價格購買自己的私人島嶼！
佛羅里達礁島是佛羅里達州南部海岸附近的島嶼。 這是一處近100萬美元，0.32英畝，年租金收入10萬美元的清單。
Quiet Cove Key，佛羅里達礁島礁圖片由privateislandsonline.com提供
如果您有很高的可支配收入（可支配收入：扣除稅額後的剩餘收入，你可以用來消費，儲蓄或投資金），並且您不介意颶風的威脅和維護成本，那就太好了。 扣除所有費用和財產稅後的10萬美元租金收入可能會蒙受損失）。 因此，此選項不太適合投資。
您也可以將一百萬美元投資在美國的房地產上，而不是一個充滿異國情調的島嶼。
在印第安納州，愛荷華州，俄亥俄等最負擔得起的州，一百萬美元可以買到一座豪宅。
這是一個來自Fishers Indiana的房子，有5張床，5個浴室，7500平方英尺的豪宅，標價約100萬美元：https：//www.redfin.com/IN/Fishers/11318-Talon-Trce-46037/home/669947
同樣的百萬美元只能在加利福尼亞州舊金山市為您購買2床1浴1100平方英尺的居住空間。 這是一幅標價100萬美元的作品
https://www.redfin.com/CA/San-Francisco/916-Silliman-St-94134/home/1480062
您也可以將100 萬美金存入銀行帳戶30年，什麼也不買。
但是這將是一個糟糕的選擇！ 根據通貨膨脹來計算，您30年前的100萬美元，現今購買力也僅剩一半！
使用實際的通貨膨脹數據，1990年的100萬美元只能擁有約50萬美元的購買力。 這意味著通貨膨脹增加了生活成本（商品和服務的成本每年增加=通貨膨脹），1990年的100萬俱有等同於2021年200萬美元的購買力。
4％的通貨膨脹意味著您的100萬美元的購買力每年下降4％。 如果您將100萬美元存入銀行帳戶，那麼一年後您的銀行帳戶中仍然會有100萬美元，但是同一百萬美元只能購買等價於96萬美元的商品和服務，因為商品和服務的成本被惡性篷漲了4 ％。 這就是為什麼你的方法永遠無法致富的原因。 儲蓄帳戶中的錢將被稱為通貨膨脹的沉默怪獸吞噬掉。
注意事項：
CPI（消費者價格指數）用於衡量通貨膨脹率。 CPI包括消費品和服務的加權平均成本，例如
運輸（汽車，飛機，汽油..）
食品和飲料
醫療服務
服裝和家具
支付租金，但不支付房地產成本。
CPI不包括股票，債券，房地產，因為這些都不是消費支出。
在過去的十年中，通貨膨脹率徘徊在2％左右，處於歷史低位。 隨著美聯儲的貨幣政策和拜登的財政政策，每個人都擔心通貨膨脹率失控。 這意味著最近股市的巨大波動，尤其是成長型股票超過價值型股票。
100萬美元的處理方式取決於您的財務狀況，年齡和生活經歷（生活方式）。
根據流行的4％規則，如果您每年需要40,000美元來支付所有生活費用，那麼100萬美元將使您持續30年而不會用完。 如果您即將退休，則可以考慮採用4％的規則和投資策略。 如果您現年50歲，並且預計可活到80歲，則適用4％的規則適用於您的收入為100萬美元。 您可以立即退休，以100萬美元為生。 如果您每年僅花費30,000美元來支付所有生活費用，那麼您只需要$ 750,000。 這意味著您可以購買另一張維珍銀河太空艙門票，並從您的願望清單中查看“太空旅行”！
您的生活故事（生活方式）決定了您需要舒適生活的程度。 這是一個高度主題，沒有多少錢可以帶給您舒適和快樂。
如果您還年輕，您可以將全部100萬美元投資於指數基金，並在25年內獲得8％的回報率。 如果您承諾在25年內將您的退休金每年最大化19,500美元，您最終將獲得驚人的840萬美元。
如果您將25年的平均通脹率減去4％，最終將獲得350萬美元！ 還是很棒！
我也做了保守的計算。 我假設合理的投資回報率為8％（標準普爾500指數在過去10年中的回報率為13.5％，但在過去20年中的回報率僅為5.9％），我將通貨膨脹率定為4％（與美國平均水平相比，這是一個很高的估計） 過去的20年）。
無論年齡大小，都有很多方法可以利用這100萬美元來為自己謀取利益。
正如我之前提到的，您的財務狀況，年齡和生活經歷（生活方式）在您應做的事情中起著重要作用。
我的建議將涉及4個領域：
第一：先還清高息債務。
信用卡債務是最糟糕的。 平均約為18％。 是的，當您使用信用卡在亞馬遜上購買商品時，您可以稍後付款。 如果您未付款，則按照利率，實際年利率和余額收取欠款。 因此，如果您以18％的利率欠信用卡1000美元，則通常意味著您會因複合而最終支付接近20％或200美元的費用。
第二：住宅管理：如果您是獨自生活，你可以考慮為主要住所購買多單元房屋。 在多單元房屋（一棟可以有兩個或兩個以上獨立生活的物理建築物）上找到一筆便宜的交易並不容易。 所以，繼續尋找！
如果您正在尋找主要居所，請記住首次購房者可獲得的FHA貸款！ 使用FHA貸款有很多優點。
購買多戶型公寓並將更大的單元出租給租戶，以幫助您還清抵押貸款！ 用一些錢翻新基礎，一點也不花哨，使您自己的單位和租賃的房屋狀況良好。 您可以通過租戶支付抵押貸款來免費或以低廉的價格生活。
這是另一個稅收優惠：如果您在多單元房屋中居住5年中的2年（可以在1年後租出去），則可以避免為該單元繳納資本增值稅。 （單人25萬美元，已婚夫婦50萬美元）。 這意味著，如果您出售房屋賺取了收益，則最初的25萬美元收益是免稅的。
https://www.fha.com/fha_loan_requirements
跳脫傳統思維！
您可以向你的父母租一間房間，也可以絲毫不付任何房租，然後投資一百萬美元。
您也可以用這筆錢買房，向父母和兄弟姐妹收取租金，並成為房東。 可以向家庭收取租金，每個人都可以從中受益。
第三：保留普通應急基金。 這可能是您大約6個月的生活費用。 您可以將所有支出加起來計算出每月支出。 您可以下載一些應用程序，以幫助您跟踪它們。
第四：餘額轉投資。 讓複利為您工作。 您對投資風險的承受能力取決於您當前的年齡和生活方式。 確保您的預計投資高於通貨膨脹率！ 如果您還年輕，請在您所相信的經濟領域或公司中進取！ 如果您5到10年即將退休責需要分散投資，並專注於穩定性和股息（或投資回報）。
還有一件事，不要指望在幾天，幾週或幾個月內就獲得回報。 偉大的投資通常需要時間，將紅利再投資。 學會做一個聰明的長期投資者！
如果我能回到過去，面對自己的年輕時，我能告訴自己的最好的財務建議就是
“狂熱閱讀，每天閱讀所有主題-科技，房地產，金融，經濟，科學，甚至政治”-不要閱讀無用的社交媒體風尚，也不要過多看K戲劇。
“盡力而為，延緩滿足”- ，年輕時不要一直追求購買高檔名車，高級旅遊。！
“不要想太多，現在是長期投資的最佳時機”- 沒有比現在更好的投資時間了，眼光放遠，做長期投資不要試圖抓住市場波動和低點。
“對所獲得的一切感到滿足和寬容”-不要抱怨生活和正在發生的事情。 不要有消極，要心存感恩。
那麼，您將如何花費數百萬美元呢？
此致
丹尼爾
注意事項：
債務：你欠的。 例如信用卡費用，房屋抵押貸款，您上大學借的學生貸款。
資產：您擁有的資產。 例如，您在銀行的現金，股票或債券（證券），專利，房地產。 但是，除非房屋還清，否則我不認為房屋是資產。
淨資產：資產減去負債
收入：從工作和/或投資中獲得的錢或進入您的銀行帳戶的錢
費用：用於生活，食物，衣服，保險或您銀行帳戶中的資金的支出
現金流量：收入減去支出。
