How MacArthur Geniuses Handle Their Money Windfalls(nytimes.com)
nytimes.com
How MacArthur Geniuses Handle Their Money Windfalls
https://www.nytimes.com/2015/09/26/your-money/how-macarthur-geniuses-handle-their-money-windfalls.html
10 comments
These seems like very different programs to me. The MarArthur Fellowship is a no strings attached financial grant to nominated individuals in any field, they do not allow applications. The Shuttleworth is by application and specifically funds individuals working on projects related to "openness".
Most people who randomly get a windfall of money were previously poor. If you’re poor and suddenly get lots of money, you most probably can’t handle it; “#4. Extra Money Has to Be Spent Right Goddamn Now!”: http://www.cracked.com/blog/the-5-stupidest-habits-you-devel...
MacArthur winners have two advantages: First, they are probably good at something, and therefore are likely not poor. Secondly, even if they are poor, they are probably very focused on their thing which made them get the prize, and any money goes to their thing, not to themselves, which makes most people a little more rational when deciding things.
MacArthur winners have two advantages: First, they are probably good at something, and therefore are likely not poor. Secondly, even if they are poor, they are probably very focused on their thing which made them get the prize, and any money goes to their thing, not to themselves, which makes most people a little more rational when deciding things.
I think this depends on your poverty culture. Growing up poor as an Asian immigrant, my experience has been "Extra money must go in the savings account, no luxuries EVER!", which is bad in its own way.
I’m not sure I would call it bad.
http://www.mrmoneymustache.com/
http://www.mrmoneymustache.com/
One and two are usually true of Darwin award winners too, but even if that came with a cash prize, the other thing MacArthur geniuses have going for them (by comparison) when it comes to managing the windfall is that they're MacArthur geniuses... surprised this didn't make your list!
the very first example in the story was a dancer that paid off $180k in loans - almost a textbook example of someone that's 'poor'. this grant is literally a lottery win for some of them
The article misses the point that people who’ve achieved enough to warrant the award needed to have a financial system in place already that allowed them to focus on whatever they’re doing. For people with such a system the award money itself is a relatively minor change, which is pretty much what the article reports.
>Steve Coleman, a saxophonist who won last year at age 57, said he had created a life over decades that required little money to maintain and could be supported with even less when times were tough.
I spend quite a bit of time thinking about this but it doesn't appear to be a solveable problem for people with kids/family even if their earnings as an IT/SDEV person are well above average.
I spend quite a bit of time thinking about this but it doesn't appear to be a solveable problem for people with kids/family even if their earnings as an IT/SDEV person are well above average.
Check out Mr Money Mustache[1] for one example of solving this problem.
[1]https://www.mrmoneymustache.com/
[1]https://www.mrmoneymustache.com/
One half of his solution is having two professionals earning good money for a while. His initial savings rate would have been very different if his initial circumstance was more blue collar, there was a serious illness in the family, and any number of other things.
The principle of not wasting money is well taken, though.
The principle of not wasting money is well taken, though.
MMM is a charlatan whose entire ethos can be boiled down to "make a lot of money initially to pay off all your debt (debt is an emergency), then do little things that make very little difference (no air conditioning), then make a ton of money off of credit card affiliate offers (his entire business)."
Yes his stuff works in the same way that Amway works for the people making a lot of money off of it - it's not realistic for the majority of people who want to do it.
Yes his stuff works in the same way that Amway works for the people making a lot of money off of it - it's not realistic for the majority of people who want to do it.
Have you read his blog entries? He did not start out making money on his blog. Maybe he is a bald faced liar and is drinking bottles of Dom Perignon in a secret penthouse apartment in NYC, but he reports his spending for 2015 for a family of 3 was $23,941 and ballooned up to $30,193 in 2016 due to Obamacare caused rises in healthcare costs[1].
He is almost the antithesis of an Amway salesperson. His philosophy is mostly don't buy stuff you don't need and you need way less than our consumerism based world tells you to need. He also is very much "find your own way".
[1]http://www.mrmoneymustache.com/2017/05/19/2016-spending/
PS - When you are trying to live on $25,000 a year so you can choose what you work on, a $200-$500 a month air conditioning bill some people have for half the year is significant.
He is almost the antithesis of an Amway salesperson. His philosophy is mostly don't buy stuff you don't need and you need way less than our consumerism based world tells you to need. He also is very much "find your own way".
[1]http://www.mrmoneymustache.com/2017/05/19/2016-spending/
PS - When you are trying to live on $25,000 a year so you can choose what you work on, a $200-$500 a month air conditioning bill some people have for half the year is significant.
Your partner is really key, if you are both thinking off the same page then it makes a huge difference.
Renowned indie games developer Jason Rohrer raised his family for several years on a budget of $10,000 per year. It's possible to live on very little if a) you're prepared to move to somewhere cheap and b) you're prepared to examine your definition of the word "essential". Possible, but not necessarily pleasant.
http://hcsoftware.sourceforge.net/jason-rohrer/simpleLife.ht...
http://hcsoftware.sourceforge.net/jason-rohrer/simpleLife.ht...
>you're prepared to examine your definition of the word "essential".
This is the real, real big issue. We are surrounded by our peers spending money and ads that tell us to spend more. It makes us lose touch with what's a need vs a want and what sort of spending would actually improve our lives. It's going to be different for everyone, of course, we aren't the same, we all have different priorities in life. I remember reading a Reddit post where someone thought a stay at home mom selling her (financed) car was totally ridiculous because the kids might have a doctor's appointment one day. This was an upvoted post. This was a second car and the family was in very siginficant debt. Sure, a second car is very nice but not anywhere near a "need" for a stay at home parent.
Like, uh, if she needs the car one day she can jut drive her husband to work and pick him up again.
Personally, my family can certainly afford a second car, but we have one car because a second car would costs thousands of dollars and it's just not worth thousands of dollars to us just to avoid the inconvenience of dropping my husband off at his work on my way to my work and picking him up again. That money is better spent on things that give us more joy then avoiding spending more time in the car together.
Every dollar spent requires trade-offs.
Having a spouse that agrees with you in the realm of personal finance and life goals is incredibly important. I don't think a marriage could last without having the same financial/life goals. Not without a large amount of resentment anyways.
This is the real, real big issue. We are surrounded by our peers spending money and ads that tell us to spend more. It makes us lose touch with what's a need vs a want and what sort of spending would actually improve our lives. It's going to be different for everyone, of course, we aren't the same, we all have different priorities in life. I remember reading a Reddit post where someone thought a stay at home mom selling her (financed) car was totally ridiculous because the kids might have a doctor's appointment one day. This was an upvoted post. This was a second car and the family was in very siginficant debt. Sure, a second car is very nice but not anywhere near a "need" for a stay at home parent.
Like, uh, if she needs the car one day she can jut drive her husband to work and pick him up again.
Personally, my family can certainly afford a second car, but we have one car because a second car would costs thousands of dollars and it's just not worth thousands of dollars to us just to avoid the inconvenience of dropping my husband off at his work on my way to my work and picking him up again. That money is better spent on things that give us more joy then avoiding spending more time in the car together.
Every dollar spent requires trade-offs.
Having a spouse that agrees with you in the realm of personal finance and life goals is incredibly important. I don't think a marriage could last without having the same financial/life goals. Not without a large amount of resentment anyways.
Doable as long as nobody gets sick and requires the attention of a doctor.
Or as long as you live in a country that considers health care as important as infrastructure and defense.
And as long as you don't plan on retiring, paying for college, leaving town to survive a hurricane, etc. "Living on" 10k typically doesn't include responsible levels of savings.
You don't think it's possible "living on" refers to day-to-day expenses and retirement/emergency savings are in addition to that?
Yes, that's how I always understood it.
Living on $10k doesn't have to mean only having income of $10k. I personally say "we live on $50k" but our income is more than 3x that.
Living on $10k doesn't have to mean only having income of $10k. I personally say "we live on $50k" but our income is more than 3x that.
Currently in the process of cutting our "living on" budget from 110% of our yearly income to 50% or less. It is a painful process for sure.
When I did this, I used Mint (https://www.mint.com/) initially, and then moved to YNAB (https://www.youneedabudget.com/) that has been awesome.
So being poor is not responsible?
Most of my family living in or near poverty aren't saving responsibly, no. Most because they don't have a choice, but I wouldn't call it a sustainable or exemplary lifestyle.
Why do you think that's so? I have a wife and kids and I've been working towards something like this. The difficult part is getting debt-free (no student loans and paid off mortgage), but once you've accomplished that you really just need to be able to afford health insurance and food.
I think it takes lots of compromises and some luck to get there. Housing is another costly thing you need to factor - depending on your current and future job prospects that may be a significant source of expenditure. Buying also limits your job choices unless you want to live separately / travel. (In our case we bought a decent 2800sq.ft. house where we could afford it but the house was older and so we have had significant expenses maintaining it (roof, hvac, other stuff). Renting is very expensive in this city - we pay less mortgage than renting a smaller town home in a nice area where the public schools are decent.
Two working people == two cars in most places where public transportation is unavailable or very inconvenient. There's insurance, taxes and maintenance. Health insurance - I probably don't need to say much but it's insanely expensive for most people.
I guess for a couple without kids and the right jobs at right places some things are simplified. You could rent a 1BR without worrying about the school districts, have decent health insurance for two, use public transportation and keep your entertainment needs limited. That might get you to a semi comfy retirement at not very old age but it feels like anything else is just going to be a constant hustle.
Two working people == two cars in most places where public transportation is unavailable or very inconvenient. There's insurance, taxes and maintenance. Health insurance - I probably don't need to say much but it's insanely expensive for most people.
I guess for a couple without kids and the right jobs at right places some things are simplified. You could rent a 1BR without worrying about the school districts, have decent health insurance for two, use public transportation and keep your entertainment needs limited. That might get you to a semi comfy retirement at not very old age but it feels like anything else is just going to be a constant hustle.
Yeah that makes sense. I agree with you, and I'm not sure it's feasible living a regular middle-class lifestyle.
Me, my wife, and our two kids all live in a 720 sq ft, 2 bedroom house in a worse part of town. We have one car (1999 minivan bought in cash). Right now I work remotely, but I take the bus to work when I'm not remote. It's definitely not living large, but I like the freedom and low-stress.
Me, my wife, and our two kids all live in a 720 sq ft, 2 bedroom house in a worse part of town. We have one car (1999 minivan bought in cash). Right now I work remotely, but I take the bus to work when I'm not remote. It's definitely not living large, but I like the freedom and low-stress.
There was no mention in this article of Lin-Manuel Miranda (who won a MacArthur genius grant in 2015), but he reported on Twitter at the time that he had used his grant to pay off his and his wife's student loans.
Maybe because they covered one case of a grantee repaying their $180k(!) student loan.
The doesn't seem all that large for someone with a professional degree, like a M.D. or J.D. America is the land of the free until you get to university.
It seems like a tremendous amount when you consider that the amount of prestige "BigLaw" jobs that can shoulder that debt burden are a fairly small portion of the average graduating cohort's employment.
In contrast, I completed my professional degree and a masters in law at the two best universities in my country for a total out of pocket tuition cost of approximately $9,000. That's around 1.3 orders of magnitude apart.
I'm sure there will be replies about the quality of the alumni networks or the level of scholarship (which would be very poorly founded), but that misses the point: the magnitude of debt is shocking.
In contrast, I completed my professional degree and a masters in law at the two best universities in my country for a total out of pocket tuition cost of approximately $9,000. That's around 1.3 orders of magnitude apart.
I'm sure there will be replies about the quality of the alumni networks or the level of scholarship (which would be very poorly founded), but that misses the point: the magnitude of debt is shocking.
Really? This is an incredible amount IMO, regardless of profession. That is a massive amount of debt that can't ever be absolved without paying, and an incredible amount of interest.
One year before he made multiple hundreds of millions of dollars with Hamilton.
did he actually make that much or are you guessing? :-)
i'm sure he's doing well, but the play business is a tricky one and never that large, afaik. i'm sure he's well positioned tho!
i'm sure he's doing well, but the play business is a tricky one and never that large, afaik. i'm sure he's well positioned tho!
Interesting, this Time article says he made about $6M from the Broadway production in 2016, out of a $100M gross.
http://time.com/money/4362742/hamilton-cast-earnings-lin-man...
I would have thought you'd make a lot more money for creating such a huge cultural force, but I suppose the economics of live theater don't scale much no matter how popular you are.
I'm sure he made a pretty penny from the Moana soundtrack though
http://time.com/money/4362742/hamilton-cast-earnings-lin-man...
I would have thought you'd make a lot more money for creating such a huge cultural force, but I suppose the economics of live theater don't scale much no matter how popular you are.
I'm sure he made a pretty penny from the Moana soundtrack though
That’s just from the production in 2016. It will make more in 2017 and for a decade, plus the album (#12 on Billboard) plus the book (top seller on Amazon) plus the merchandise and eventual stage film.
Richard Stallman made good use of his $240,000 grant when he used it to fund the Free Software Foundation.
I found it a little disconcerting that the most selfish usecase (spent it on "her children") among the 5 or 6 reported got a picture. Apparently looks matter even in the genius world.
I don't follow this at all, what are you saying?
First off, there are two pictures in the article, so the idea that "looks matter" as pertains to selfishness, whatever that means, is in question.
Secondly, the idea that "looks matter" doesn't make sense. She seems rather regular looking, not picked out specifically because of her looks.
Lastly, spending money on your children to me is far less selfish than paying off your personal debt, which did not get a photo.
First off, there are two pictures in the article, so the idea that "looks matter" as pertains to selfishness, whatever that means, is in question.
Secondly, the idea that "looks matter" doesn't make sense. She seems rather regular looking, not picked out specifically because of her looks.
Lastly, spending money on your children to me is far less selfish than paying off your personal debt, which did not get a photo.
The TLDR of this is basically that the MacArthur Geniuses have a solid trajectory/purpose in life so the sudden windfall does not seem to affect them in the way that the lottery does to some people.
However, while this is certainly a windfall and I wouldn't turn it down its not a lifestyle changing windfall. I would say this is enough money to do anything for at least a short amount of time, but it is certainly not enough to do nothing. I think that combined with the fact that the awards are given to people who are pursuing their passion is a large differentiator to those who've won the lottery and aren't rooted in some cause.
However, while this is certainly a windfall and I wouldn't turn it down its not a lifestyle changing windfall. I would say this is enough money to do anything for at least a short amount of time, but it is certainly not enough to do nothing. I think that combined with the fact that the awards are given to people who are pursuing their passion is a large differentiator to those who've won the lottery and aren't rooted in some cause.
For me—in my 20's living at home—this kind of money would mean I could buy a house/apartment without needing a mortgage.
It would be a huge kickstart to my independent adult life, and the savings over the decades from not having a mortgage would absolutely be lifestyle changing. I'm not talking about yatchs and lamborghinis, but it would certainly provide the freedom to live on less income in exchange for more free time to pursue hobbies and side projects.
Not that I have any reason to complain, I'm very grateful for who and what I have in my life right now.
It would be a huge kickstart to my independent adult life, and the savings over the decades from not having a mortgage would absolutely be lifestyle changing. I'm not talking about yatchs and lamborghinis, but it would certainly provide the freedom to live on less income in exchange for more free time to pursue hobbies and side projects.
Not that I have any reason to complain, I'm very grateful for who and what I have in my life right now.
I get the sentiment, but I'd just like the point out that with current interest rates it makes sense put 20% down and invest the rest in mutual funds. You get mortgage interest deduction and are paying 4% interest while making 7% market gains. Buying a house all cash is not the way to do it.
>Buying a house all cash is not the way to do it.
It's _a_ way to do it though. My argument isn't that buying a house with the cash is the optimal way to spend it, simply that having a house fully paid for is a massive financial burden taken off one's shoulders.
In Australia where a typical house can easily sell for $800K-$1M AUD in desirable locations, the repayments on a mortgage (or rent) can be crippling. I would be more than happy for that to be a non-issue for me!
It's _a_ way to do it though. My argument isn't that buying a house with the cash is the optimal way to spend it, simply that having a house fully paid for is a massive financial burden taken off one's shoulders.
In Australia where a typical house can easily sell for $800K-$1M AUD in desirable locations, the repayments on a mortgage (or rent) can be crippling. I would be more than happy for that to be a non-issue for me!
You get an interest deduction, but you need to pay taxes on capital gains. The added flexibility is probably worth more in theory but risks spending that money on other things.
A larger issue IMO, is condo's / houses have large upkeep costs and reduce mobility. So, simply renting while investing 90% of the money for a very early retirement is probably the best bet.
A larger issue IMO, is condo's / houses have large upkeep costs and reduce mobility. So, simply renting while investing 90% of the money for a very early retirement is probably the best bet.
They, yes, the nebulous "they," say you should expect to spend around 1% of the house's value a year for repairs, upkeep, and maintenance. This rule of thumb doesn't quite work when the local housing market is in a bubble though.
Of course, there will be years you spend much less and years your roof needs replacing so you'll spend much more, so that's why you amortize.
Of course, there will be years you spend much less and years your roof needs replacing so you'll spend much more, so that's why you amortize.
Not just repairs. Depending on what you get your facing everything from condo fees, taxes, lawn care, etc and it can all add up quickly.
The real savings from renting is the flexibility to up size, downsize, relocate etc as needed and with minimal transaction costs. Thinking of starting a family some day? That does not mean you need to pay for more space today, unless your planing to stay put for 15+ years.
The real savings from renting is the flexibility to up size, downsize, relocate etc as needed and with minimal transaction costs. Thinking of starting a family some day? That does not mean you need to pay for more space today, unless your planing to stay put for 15+ years.
>You get mortgage interest deduction
People say this but do they know what it means? It's not like the "woooo, free money!" people make it out to be. You are spending a lot of money and saving a little bit of money. It's only a very significant decrease in taxes if you pay a real lot in interest and have high property and income tax.
In my experience buying a house saved me only about a whopping $500 in taxes the first year. And you better fucking believe that $500 went right back into the house in the form of maintenance and upkeep.
Furthermore,
You don't get the mortgage interest deduction if you don't itemize and take the standard deduction instead. Due to new tax laws the standard deduction after 2017 is so high it will be taken by 97% (IIRC) of Americans. So mortgage interest deduction is totally irrelevant from 2018 on.
One of my biggest concerns with putting the vast majority of my wealth in my house is a lack of asset diversion and if it causes you to negligent the tax advantages of contributing to retirement account. ESPECIALLY when your in your 20s, that's when compound interest work most of it's magic.
People say this but do they know what it means? It's not like the "woooo, free money!" people make it out to be. You are spending a lot of money and saving a little bit of money. It's only a very significant decrease in taxes if you pay a real lot in interest and have high property and income tax.
In my experience buying a house saved me only about a whopping $500 in taxes the first year. And you better fucking believe that $500 went right back into the house in the form of maintenance and upkeep.
Furthermore,
You don't get the mortgage interest deduction if you don't itemize and take the standard deduction instead. Due to new tax laws the standard deduction after 2017 is so high it will be taken by 97% (IIRC) of Americans. So mortgage interest deduction is totally irrelevant from 2018 on.
One of my biggest concerns with putting the vast majority of my wealth in my house is a lack of asset diversion and if it causes you to negligent the tax advantages of contributing to retirement account. ESPECIALLY when your in your 20s, that's when compound interest work most of it's magic.
So let's look at the mortgage interest tax deduction on a theoretical $3k/mo mortgage ($635,000 loan at 3.92% for 30 years).
The first twelve months payments total $36,028.44, of which $24,689.72 is interest. At the top marginal tax rate of 37%, that's $9,135.20. For married couples your HHI has to be above $600k to be in that marginal bracket so your household is pulling in at least $630k+ in this example.
Does a household making $53,000 a month get anything by saving $9,000? Especially if they need to spend $36,000 to get it?
The first twelve months payments total $36,028.44, of which $24,689.72 is interest. At the top marginal tax rate of 37%, that's $9,135.20. For married couples your HHI has to be above $600k to be in that marginal bracket so your household is pulling in at least $630k+ in this example.
Does a household making $53,000 a month get anything by saving $9,000? Especially if they need to spend $36,000 to get it?
In all seriousness, what does it take to get a Macarthur grant?
You don't apply. You get nominated; and nominators are invited by the foundation.
https://www.macfound.org/fellows-faq/
https://www.macfound.org/fellows-faq/
What a nonsensical article. Similar to Malcolm Gladwells revisionist podcast (episode: My Little Hundred Million) these awards predominantly go to well connected faculty at elite schools who are already well funded and who don't need the money (other than to add to their palmares). Many of these awardees are already millionaires. They should just split this award into smaller grants and give it to faculty/teachers at smaller unknown schools in the midwest. You don’t have to be a genius to see this would do more good.
> other than to add to their palmares
I learned an interesting, though obscure, word today:
palmarès: a list of races a (bicycle) rider has won. (French, meaning list of achievements or list of winners).
I learned an interesting, though obscure, word today:
palmarès: a list of races a (bicycle) rider has won. (French, meaning list of achievements or list of winners).
Thank you! You saved me a) a quick Google search myself, and b) the attendant self-conscious wondering about whether this is a word everyone knows and that I too should know by now.
I don't think it's that obscure in British english usage, even outside of cycling contexts (source: American living in the UK)
Interesting. It's not in the Oxford Dictionary of English powering the Dictionary bundled with macOS, and it's not known to dictionary.com, so I'd say it's fairly obscure.
http://www.dictionary.com/misspelling?term=palmares
http://www.dictionary.com/misspelling?term=palmares
I’ve known a few MacArthur grant winners, and none of them were wealthy, or even upper middle class. Most were stably employed, but some extra money with no strings attached can really help a lot if people want to set aside time to work on their own projects, not beholden to some employer or grant agency expecting quarterly or yearly status reports with well-defined short-term project goals.
Personal art projects, long-term research projects, etc. are often difficult to get funded because they are risky and may not have an immediate path toward revenue. There is surprisingly little money available in the world designated to fund people’s green-field creative work, with project leads allowed to just hire smart people and tell them to work on whatever interests them for 5+ years without worrying about immediate payoff.
Personal art projects, long-term research projects, etc. are often difficult to get funded because they are risky and may not have an immediate path toward revenue. There is surprisingly little money available in the world designated to fund people’s green-field creative work, with project leads allowed to just hire smart people and tell them to work on whatever interests them for 5+ years without worrying about immediate payoff.
This
I had a Shuttleworth Fellowship for 2 years which is very similar to the MacArthur Genius grant. They are both often enough to not worry about having to work a job to pay your bills and feed your family. (The Shuttleworth fellowship includes enough to pay for legal, financial, travel, contractors, etc)
I worked harder during my fellowship than I can recall otherwise. I knew it was a once in a lifetime opportunity and that I only had a finite amount of time to do something great.
I wrote about my experience as a fellow here.
http://jaisenmathai.com/articles/shuttleworth/