The Powerball Lottery and Financial Planning

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The “Powerball” discussion is just another way of saying “If money were not an issue, what would you do?”

I was recently at a dinner party with a group of people at the time when the Powerball Lottery prize hit a record $1 Billion. As an ice-breaker, our group discussed what we would change in our lives if we won. While initially everyone said they were happy with their own current lifestyle, the conversation continued and people started to dream. A few ideas started to emerge: traveling; catching up with friends; cutting back to part-time work or having a more flexible schedule; and adding convenience services such as lawn care, housekeeping, or even a private chef for family meals. For all of the people in our group, significant lifestyle changes were not part of the initial plan (although maybe this would change when the lump-sum after-tax payment of $300 million was actually wired into our Freestone account!). The dominant theme resonates: More time to do the things that are truly important.

This discussion struck me as a great starting point for Financial Planning. The “Powerball” discussion is just another way of saying “If money were not an issue, what would you do?” I am always struck by how readily college students and young adults travel (even internationally), and how freely they spend for “entertainment.” Clearly, travel and free time is not merely a financial issue. Most everyone has lived on less (even significantly less) at some point in their lives. It is true that it takes a great deal of effort and talent to create a sizeable nest egg to support you for the rest of your life, but, as with most things in Financial Planning, it comes down to choice. 

Do I own a larger house but travel less? Buy a boat, but work another few years? Do I want time to do charitable work? Learn to play the guitar? Get in better shape physically? What is truly important?

We have some great resources at Freestone that allow us to run a detailed financial plan, but as with any financial modeling, the inputs have to be defined. The Annual Spending Policy (commonly known as a “budget” – but a lot less fun to say) will determine the portfolio size required and/or the number of working years to reasonably attain the goal. However, the financial inputs will not define what it is that you truly want.

In thinking about what is truly important, you may be able to attain some of these things now on a more affordable scale. One of my friends said that if she won the Powerball, she would hire a personal chef. She greatly values family dinners at home, but with her busy career and schedule, the nightly dinner further stretches her already busy schedule. Instead of hiring a full time private chef, a step in the right direction may be to order-in from a restaurant one night a week, or to hire someone from a local culinary school to do an occasional on-site meal, or even cut down on the work by ordering from one of the local food prep companies that deliver prepped ingredients along with a recipe. Likewise, a boat can be chartered on occasion instead of purchased, a second home can be rented instead of bought, etc. Whole industries have been created to allow people to get what they need without the expense of ownership (Uber, Lyft, and Airbnb, to name a few).

At Freestone, we work closely with clients to assure that their Financial Plan will “work.” This is an important part of the Wealth Management process. Defining what you really want is equally important, as well as determining if these objectives can be attained now or in a way that meets the desired goals, but at lower costs. Thinking about how you would change your life if you were to win the Powerball may be one way to help you determine what you truly value. Of course, to actually win the Powerball, you have to buy a ticket…

We encourage you to contact a Client Advisor with any questions.

Important Disclosures: This article contains general information, opinions and market commentary and is only a summary of certain issues and events that we believe might be of interest generally. Nothing in this article is intended to provide, and you should not rely on it for, accounting, legal, tax or investment advice or recommendations. We are not making any specific recommendations regarding any security or investment or wealth management strategy, and you should not make any decisions based on the information in this article. While we believe the information in this article is reliable, we do not make any representation or warranty concerning the accuracy of any data in this article and we disclaim any liability arising out of your use of, or reliance on, such information. The information and opinions in this article are subject to change without notice, and we do not undertake any responsibility to update any information herein or advise you of any change in such information in the future. This article speaks only as of the date indicated. Past performance of any investment or wealth management strategy or program is not a reliable indicator of future results. Portions of this article constitute “forward thinking statements” and are subject to a number of significant to a number of significant risks and uncertainties. Any such forward-looking statements should not be relied upon as predictions of future events or results. 

Posted By: Andrew Erisman, CIMA®

Andrew Erisman, CIMA®, is a client advisor and Partner at Freestone. For over 30 years, he has helped successful individuals and families navigate the complexities associated with wealth. He works closely with his clients, developing a deep understanding of their goals and concerns so they can feel comfortable with their financial decisions. Andrew & his wife Stacy split time between Bellevue and Leavenworth, and are adjusting to life as “empty-nesters”.