If I won a million quid on the lottery
I'd buy a house (now is a good time) and a Land Rover Defender, and I'd stick the rest in the bank and live off the interest.

Say I had £900k left after buying my house and a few other bits (with some left over for a rainy day).

Think about it. Several banks offer even the most basic of current accounts with an interest rate of around 5%.

That's £45k a year interest. I could easily live VERY comfortably on that.

Tight bastard? Me? No. I'm 22 now. For the rest of my life I'd have £45k a year, for doing NOTHING, and a bit fat lump of money to leave for my family when I die. Why not? I couldn't use the other £900k anyway!
(Half of Stephen Fry's right buttock pissed on your dog on, Fri 24 Oct 2008, 16:28, 18 replies)

"Living off the interest" is what twats who don't understand money say
if the country's inflation level is 3%, and you're making 5%, it means that in fact you're only making a 2% profit, which is only 18k. Granted, that's nice, but you'll still be taxed on the 5%, so you have to pay 9k in tax, which means you're trying to live on 9k a year.

Fucking hell, that's poverty level.
( Grrrmachine the indifference engine, Fri 24 Oct 2008, 16:34, closed)

Exactly.
The only sort of cash account which would allow larger profits is of course ISAs, which strangely have a £3600 annual limit.
(Vikingheadache, Fri 24 Oct 2008, 16:41, closed)

"Living off the interest" is what Actuaries at pension annuity providers say
Admittedly, they indulge in some more complicated investments than just bunging it a bank account, but the gist of it is that they aim to turn a profit, on a combination of you dying early, and them being able to earn more than they give you.

You are correct that 1M won't last forever, but I'm not convinced that one couldn't live off the interest of £900K for at least a good long while.

Yes, you get taxed, but £45K Gross PA is still a pretty nice salary, that plenty of two-income households still don't reach. It will continue to be at least an above-average one for some years to come.

It's even nicer for someone who owns their home outright, thereby dropping somewhere between 8-20K off your outgoings. Not to mention that they no longer have to save up to buy somewhere. My home costs me and Mrs Watermelon about 13K PA (and I've already paid tax on the income that gave me that), so your 9K in the pocket looks more like 22K, which plenty of people wish they could receive gross.

Yes, the £900K in the bank and the £45K it earns is decreasing in value, but a healthy dose of frugality, particularly in the early years, can decrease the effect of that.

The OP's premise that they will have a nice lump sum to leave to their offspring is flawed; and good luck to him finding a home cheap enough to give change of £100K to buy a Landy; and let's hope, for his sake, that interest rates don't drop, as each % is 10K.

At 22, a millionaire has a fuck of a long time to live off that cash, and someone who spends their prime career-building years living off the interest, might well have to start serving school dinners in their 30s or 40s when they find they have to start eating into the capital.

The point is that it's not "what twats who don't understand money say", but "what 22 year old twats who don't understand money say", a 50 year old middle-manager could live quite recklessly off that money, and still have enough left at 55 to buy an annuity that will match his current salary.

All of this rambling of mine has made me wonder two things:
1) At what age does one cease to be a twat for thinking one can live off the interest on £1M?
2) How much of a lump sum would a 22 year old need, in order to live a normal lifestyle, without ever depleting the capital (80+ years to go)?
(Rastus P Watermelon, Fri 24 Oct 2008, 18:05, closed)

All your massive ramble has done
is prove that I, and my statement about twats, is correct. If you wanted to make 1m work for you, you'd have to do a hell of a lot more with it than just stick it in a bank. And increased gain means increased risk, so a higher chance of losing the capital lump to begin with.
( Grrrmachine the indifference engine, Fri 24 Oct 2008, 20:00, closed)

you are an angry man
and you were also wrong in the first instance.

So be a good chap and shut up.
(rockdoctor, Fri 24 Oct 2008, 20:08, closed)

He isn't.
No he is not.
And who are you to tell him to shut up?
So why don't you show us what your accurate explanation is then!
( turb0t, Fri 24 Oct 2008, 22:27, closed)

make sure you spread the money around
just in case ...
(TheWeeWitch hasn't been here much recently .., Fri 24 Oct 2008, 16:34, closed)

The flaws:
1) You won't get much of a house for £100k-landrover defender. Or even much of a flat. Possibly a garage in which to park the Defender.

2) £45k won't be worth much soon
( prince-igor si tacuisses, philosophus mansisses, Fri 24 Oct 2008, 17:00, closed)

If £45k isn't worth much
Then I'm doomed
( whenanimalsattackhumans clad in global hypercolour, Fri 24 Oct 2008, 17:12, closed)

Nice idea...
But inflation is a bitch. If you divided up your £1m into the number of years you expected to live, then tried to live on *that* I suspect you'd be okay.
(Merrep, Fri 24 Oct 2008, 17:47, closed)

I'd just spend it
on beer and high end hookers! : )
(dampwookie failing to understand everything from birth up to, Fri 24 Oct 2008, 19:03, closed)

And the rest you'd waste
Badum Tish
(Sir Tainley Barking Ezekiel 23:20, Sat 25 Oct 2008, 21:31, closed)

You're 22?
Fuck me, I've assumed you were about 45 after your description of yourself a few months back.
(Bazongaloid, Fri 24 Oct 2008, 20:27, closed)

In addition to all the other comments...
I have to point out that the OP said that he would want to live off the interest while "doing nothing".

He'd get mighty bored!

If you don't have a job, you need things to do during your days. There's only so much time you can spend sitting and watching TV. And in order to entertain oneself, it costs money. Especially if - as you don't have a job - you have ALL DAY EVERY DAY to find things to do.

I think you'd find that you ended up spending a lot more on your lifestyle than you do currently - simply because you'd have more time to fill up. This would be true even if you did not spend all your money flying first-class on exotic holidays all the time.

As much as most people's everyday jobs are regarded as a grind, would you really want to live out the rest of your days idle?

I'd say the best thing to do - if you came into a lot of money very early in life - is to figure out exactly what you want to do. What contribution do you want to make to the world? Then use your fantastic position to your advantage in realising that dream.

Even if you have no huge plans, one sensible thing to do, for example, would be to buy a small business in an area that interests you. Run the business - thus giving yourself a job, an income, a goal and a sense of satisfaction.
(EuroSong I love horse meat: best of all the animals, Fri 24 Oct 2008, 20:56, closed)

Wisdom
Once you've got you're mortgage paid off, you only need a modest salary, keep it enjoyable and not too risky!
(cherrynicola, Sat 25 Oct 2008, 15:00, closed)

err
I know this because I am a millionaire (not actually so rare in the UK now). No bank will accept a deposit account that large, they will turn you straight over to their investment side and you will be offered options in trusts or other forms of fund management. Even private banks (and I also know this to be true through experience) will want you to invest that kind of sum rather than let you keep it on deposit. And to be honest you will be better off that way. Do some research and find a good financial management company and let them invest for you. You will have to take the ups and downs of the stock market (I am over a £100,000 down since July) but what goes down will come up again and you will still get dividends every year. (£50,000 in dividends last year, due to good accountants I will only pay a small amount of income tax and the rest will be taxed for capital gains in the future).
Banks aren't the best option and the lottery advisers will explain that to you very carefully. (yep, winners do get some financial advice from the lottery.)
(godisdove I like cheese, Sun 26 Oct 2008, 1:53, closed)

£900K?
You'll be lucky to see that much change after buying a house and a Land Rover.
( El Lazarus is calm now, Ish,, Sun 26 Oct 2008, 16:18, closed)

My house is only worth £89,000
and my dad's Defender cost him £11,000 second hand.

Just saying.
(Seance Trumpet has got no beef with a man enjoying a croissant, Wed 29 Oct 2008, 13:47, closed)