The Problem With Spending $1,000,000 In 24 Hours | Mr Beast

What's up guys? It's Graham here.

So I've been following the series by Mr. Beast in which 16 people compete for the chance to win the grand prize of 1 million dollars. Over the last month, those contestants have been whittled down to a remaining four, and a few days ago, the winner was officially announced as the last one to remove his hand from a stack of $1,000,000.

Now I shouldn't have to tell you this, but $1,000,000 is a significant amount of money. Even after taxes, that's enough invested to make a livable wage for the rest of your life, without lifting a finger and without ever touching the principle. However, the series did not end here, because just the other day Mr. Beast posted the final video of this incredible saga, spending 1 million dollars in 24 hours. Within minutes, my inbox was flooded from people asking my thoughts and my reaction as to how the money was spent.

Now here's the thing: if you're new to the channel and you have not seen me before, then first of all, welcome! But second of all, I started this channel to share my enthusiasm towards personal finance, saving money, and investing. I've been fortunate to have been able to build up a multi-million dollar net worth in my 20s, starting entirely from scratch, without inheriting anything and without any daddy's money or anything crazy like that. I did that by learning how to invest in real estate, optimize my spending, manage my finances, and as always, smash the like button for the YouTube algorithm.

So in a way, I built my entire career from every aspect of personal finance. I'm going to be sharing my thoughts from the perspective of how the money was spent, how it could have been optimized, and what he should be doing from this moment forward.

First, before addressing the big elephant in the room that I'm sure everyone is thinking about, let me just say this: What Mr. Beast has done for Mark, the winner, and the opportunity this afforded to him now is absolutely incredible. Money like this is unconditionally life-changing, no matter how it's spent. The generosity of Mr. Beast to give away so much is absolutely selfless, not to mention he recently hit his goal of planting 20 million trees. So I think it's pretty safe to say that Mr. Beast is definitely out there making such a big difference and making such a positive impact on the entire planet. It really goes to show you how much of a difference each and every one of us can make, and Mr. Beast has taken this to an extreme by helping and giving away pretty much everything that he's made.

So I just want to make it very clear that no matter how this money was spent, Mr. Beast changed this guy's life so positively, and not only him but also his entire family as well. For that, in a space of giving Mr. Beast style, whatever money this video makes in ad revenue for the first 30 days is all going to be donated back to Team Trees.

So yes, this video is monetized; we will see some annoying ads throughout it, but at least we could use that to help plant more trees and turn this planet into a much greener place.

So anyway, let's get back to the video at hand and address the elephant in the room that I'm sure we're all thinking about, and that would be taxes. Here's the thing: any time you win money like this, or even if you receive a gift and you go to a game show, you win a free house or a free car, the IRS will tax you on the value of what you received and treat it as though that is your earned income.

There's no way around it. The IRS is always going to want their fair share for anything that you receive, and this is something that Mr. Beast actually addressed at the end of the video. From the $1,000,000, the winner Mark gave $100,000 to his challenge coach Chandler; he also gave $50,000 to his past contestant Jeremy. So now he is left with $850,000 in prize money, and that is the amount that he's taxed on. Now, the winner Mark estimated that he would be paying about 40 percent of that amount in taxes, which works out to be $340,000, leaving him with a remaining $510,000 left over.

So just right there, it's pretty surprising how quickly $1 million turns down to $510,000 before even spending a single dime on himself. Taxes can definitely be, should we say, a lot. Now here's a word of my advice coming from someone who's been in this sort of tax bracket before, and that would be hire the best CPA you possibly can. That is so important because this is such a large one-time windfall. It's really important to do as much as you can to bring down your tax liability upfront, and a really good CPA will be able to guide you through every single option you have at your disposal in order to do this. You should also go and immediately open up a high-interest savings account through banks like Wealthfront, Ally Bank, or PNC Bank and put all $340,000 of your tax money in there.

This way, you're going to be able to make an extra 1.6 to 1.9 percent in interest on your tax money before you file your tax return, which by the way, on $340,000 works out to be an extra $2,100 in interest just for opening up an account and letting your money sit there for a little bit.

But anyway, now knowing that there's $510,000 remaining, I'm not gonna lie, the beginning of the video had me a little bit worried. The first purchase was at Best Buy and included thousands of dollars worth of gaming electronics: seven iPhones, three MacBooks, two iPads, and a variety of other items, the total of which came to $23,800. Now Mark explained that those purchases were not for himself, but rather gifts for his friends and family. So that is absolutely commendable, and you have to respect him for that type of generosity. So come on, you got to enjoy that; you got to respect that. He's a really good person and has really good intentions.

However, at the same time, I also think it's really important to recognize that any time you receive a windfall like this, it's easy to feel a false sense of security or lose perspective on just how far or how long $510,000 is really going to last. After all, once the money is gone, it's gone, and it's not coming back. Ideally, in this situation or any situation in which you inherit or receive a large amount of money, the best thing you could do is lock it away for one year in a high-interest savings account or CD and then do absolutely nothing. Doing this allows your body and your mind to adjust to having that type of money so you don't get caught up in the excitement of having more money than you know what to do with.

Now, just to go and put that into perspective, even though the video shows that he's only spending 2.4 percent of his $1,000,000, in reality, when he's only keeping $510,000 after taxes, he is spending 4.7 percent of his available money in one trip. That would be the equivalent of him spending an entire year's worth of profit from a $510,000 investment in the stock market, adjusted for inflation.

I think that if someone presented it in such a way where if he wants the money to last the rest of his life, he could only spend a certain amount of that every single year. If he knew that that one Best Buy trip would exceed his spending for the next 12 months, he may have been just a little bit more cautious about his spending.

However, I don't know the context of those winnings or if it was a condition to go and splurge all $1,000,000 on your loved ones in the event you won, because I gotta say, from a content perspective, that was absolutely the right thing to do. Because going and spending for other people just makes really good content. It makes you feel really good to watch and see that, and filming that would give Mr. Beast more opportunities to give more money away to more people in the future.

I also believe it's Mark's money. He won it fair and square, and he deserves to spend the money however he wants. So I can't fault him for whatever he decides to spend his money on.

Anyway, in terms of the spending, after Best Buy, Mark Whitten bought two cars. There wasn't enough information in the video to tell whether or not these cars were newer or used, but looking at the types of cars he bought, it looks as though he bought a 2020 GMC Yukon and a newer BMW 3-series sedan for a total of $100,000. Meaning, at this point, he spent about 24% of his winnings.

Though some might say that the cars will have residual value, and this is true—he will be able to recoup some of his cost by the time he sells—not to mention these cars should be built to last quite a long time. So it's not like he's out there going and buying a Maserati or a used V12 Mercedes.

However, my biggest concern would be the depreciation of two new cars and how much value they'll have left by the time he sells them, if ever. Realistically, I think it's reasonable to assume that those cars, if bought brand new, would probably lose about 40% of their value in the event he sold them in the next four to five years. When spending $100,000, that works out to be a $40,000 loss over that timeframe.

This is also why I mentioned the importance of hiring a really, really good CPA, because at this level, you might be able to restructure your income in such a way to take advantage of what's called the Section 179 tax deduction. Now, this is a tax law that allows you to depreciate 50 percent of the vehicle weighing over 6,000 pounds for business use, and then take advantage of bonus depreciation on top of that, potentially saving them tens of thousands of dollars in taxes.

But again, this is a really strong suggestion to go and hire a really good CPA because what works for me might not necessarily work for you. Next, Mark spent $20,000 on a new wedding ring for his wife. At this point, we need to take a moment to acknowledge that so far all of his purchases have been pretty selfless and with the best of intentions.

However, I think it's also really important to realize the significance of $20,000. Even though that only represents 4 percent of his after-tax winnings, it's still enough money to go and max out a 401(k), save him about $8,000 in taxes, and grow to a $150,000 nest egg 30 years from now by the time they retire. It's also equivalent to an entire year's worth of investment returns, just like the Best Buy purchase.

So again, if this were reframed as your spending an entire year's worth of investment returns on a ring, are you okay with that? It may have just put that purchase in a slightly different perspective. However, like I mentioned before, from all the things he's spending money on, he's spending it on other people. He's not out there selfishly splurging on himself—at least he's out there bringing joy to other people that he knows and loves, so you gotta respect that.

Okay, but then we get to see Mark's new house, and I gotta say that was the best possible purchase he could have made. It made me so happy to see him do that for his family. He was able to give them way more space, set them up in a proper home, and that is $165,000 very well spent. No matter what happens with everything else, he's always going to have a house and a roof over his head for himself and his family.

He's never gonna have to worry about making a mortgage payment or rent payment, and not having that type of overhead is priceless. I guess it's not really priceless; it costs $165,000. But of course, you can't just buy a house without buying furniture, so he tentatively spent another $36,000 on furniture pending his wife's approval.

And I'll admit, as happy as I am for him, that just seems like a lot of money. I'm not sure exactly how he spent the money or the quality of the furnishings that he got, but that amount of money seems rather excessive on furnishings. I have a feeling had he just shopped around for a day, he could have gotten that down to maybe about $20,000.

It's also still important to realize that a $16,000 savings is a significant amount of money, and every dollar still matters. So it might be worth it to pay close attention to finding the best values out there and try to stretch this money as far as it possibly can go. But again, like I said, if this is all done purposely so that we could each get an inside look at what it's like to spend a million dollars in 24 hours, then I totally get it.

Doing this makes really good content, and that gives Mr. Beast more money and more possibilities to do even further extremes and giveaways in the future. So if that's the case, Mark still gets some really nice stuff he didn't have before. Mr. Beast gets to do this even more, and I get content to react to, and then the money this video makes goes back to Team Trees, so we all win.

And then after that, they went back to Best Buy. Now on the bright side, Mark did spend money to buy himself equipment to start a YouTube channel. So in terms of investing back into himself, that was a good purchase, and a good CPA could argue that that would be a business tax write-off now that he's starting a channel. I'm also curious to start watching his channel, so if anyone finds this channel, comment it down below so I can go ahead and subscribe.

But anyway, all in all, with the second Best Buy trip, he spent another $30,000. Then he warmed all of our hearts by giving his mom $15,000 and his stepmom $15,000. Again, Mark really went above and beyond to make sure his family was well taken care of, and that type of selflessness is so great to see.

So now finally we have the closing numbers. It was disclosed that $15,000 went to home closing costs, and $20,000 went to bills and utilities. That means that after all was said and done, he has $77,000 left over. Of that, $27,000 was to be set aside for miscellaneous expenses, and that leaves $50,000 leftover to be invested.

And this is where my thoughts come in. Here's the thing: Mr. Beast has done some of the most incredible work we have all ever seen on YouTube, hands down. He's broken everything we thought was possible. He's planted 20 million trees, he's made people's wildest dreams come true, and he's changed so many lives for the better.

And this wouldn't be a Mr. Beast video if the winner just said, "Okay great, I'm gonna spend $10,000, and then the remaining $500,000 I'm going to invest in a broad index fund so I can set my family up for the rest of my life. Thank you very much." I mean, really, that just doesn't make good content. Let's be honest.

No, I can be totally wrong here, but it might have been a condition of winning $1 million that you have to spend $1 million in 24 hours for a follow-up YouTube video. Now that would make some really amazing content, because let's be real, we've all dreamed as kids of having an unlimited amount of money, walking into a store, buying anything you could possibly imagine, going into a car dealership, and just going and picking out whatever car. I mean, we've all had that dream.

So in this sense, Mark was able to have this once-in-a-lifetime experience, and if he had to spend all $1 million in 24 hours, I can't fault him for that. He did it in a pretty heartwarming, selfless, and generous way. Sure he could have price shopped around; he could have been thrifty, or he could have invested more of that money. But if the video is made for content, then that's not the point of the video.

This video makes you feel good. It's so nice to see him happy and excited, and it brings back your faith in humanity to see him taking care of all of the people he loves. However, regardless of all of that, here's how much $510,000 really is and what it could have done if invested long-term. Sure, this would not have made as interesting of a video, but here are my thoughts.

Now, if someone ever comes to me and says, "I just got $510,000 after taxes, what do I do with it?" Here's what I would say: First, go and spend $10,000 on whatever you want, no questions asked. You deserve it, and you deserve to do the things and get the things you've always wanted. So just go out there, spend the money; don't question it, just there you go $10,000. Enjoy.

Next, I would say the remaining money should go towards paying off whatever debt you have. If that's $10,000 in credit card debts, then go and pay it off. If it's student loans, pay it off. An auto loan? Pay it off! Even a mortgage, I would just suggest to go ahead and pay it off. My reasoning for this is because it's a lump sum one-time payment, it's easy to get carried away and spend it, especially if you already have debt.

So going and using that money to pay off whatever you owe is pretty much just like locking in profit, and it also lowers your monthly overhead at the same time. So from that perspective, it's a win-win.

Then after that, with whatever money is left over, I would suggest investing in a broad index fund covering the US stock market, international stock market, and bond market. That is what's known as the three-fund portfolio. Historically, an investment like that would yield about 7% annually, adjusted for inflation with dividends reinvested. From this, you could safely spend about 4% of your total portfolio annually without ever having to worry about running out of money.

This means that if you went and invested $500,000, you would be able to safely spend $20,000 every single year, adjusted for inflation for the rest of your life, without ever worrying about running out. You could set up your children for financial independence very early on, and you would never really have to work if you didn't really want to, because no matter what happens you would have $20,000 a year coming in.

This would also allow you to constantly take care of your family each and every year and make sure you could buy them and give them the necessities that they need to live comfortably. Now alternatively, if you got into real estate investing, it's possible that you could leverage that $500,000 to earn a relatively consistent and stable 7% return.

That means you could potentially earn $35,000 a year in rental income from a $500,000 investment and get the tax benefits of depreciating the rental property against that income. You can also choose to max out a traditional 401(k), saving more money on your taxes, and again, a CPA would be the right person to talk to in terms of saving money and how to structure this and where to put it.

But with the right investment strategy, with $500,000, you could have the option to make between $20,000 and $35,000 a year for the rest of your life and just live off the interest alone.

Now let me just make this clear: I don't say this to take away from Mr. Beast's video, and I don't mean to downplay the significance of how life-changing this is for Mark. Mr. Beast has given away more money than most people could ever even fathom. He's changed so many lives, and even if Mark goes and spends every last dollar of it, the very least you spent money on things that mean a lot to him and bring joy in his life.

Not to mention, at the end of the day, Mark did get a paid-off house and two paid-off really nice cars that will always hold some sort of value. However, with the money that's left over, it's really important now, more than ever, to play it safe, play it smart, and start investing now as young as you possibly can.

Not to mention, the items he bought could be expensive to maintain, like getting a new roof on a house or having to pay for a new water heater if a pipe breaks or something happens with that. The money needs to come from somewhere, and if he doesn't have the money to pay for it, he's gonna be forced to sell off a lot of the things or some of the things that he bought.

That's why it's so important right now to begin saving away as much as you possibly can and work to increase your income to be able to pay for all of the things that you bought. By choosing right now to place an emphasis on saving money and investing, it's almost like asking yourself: Would you rather spend $1 right now, or $10 in the future?

So everyone will have a different answer to this, and each of us has our own priorities. But at the very least, it's important to know your options and understand the power of investing long-term so that way you could make the best decision for you.

So with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to subscribe, hit the notification bell. Also, feel free to add me on Instagram; I post pretty much daily. So if you want to be a part of it there, feel free to add me there.

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And lastly, if you guys want a free stocks, Weeble is holding a promotion in the description. If you use that link and deposit $100, they will give you two free stocks. One of those stocks is going to be valued up to $1,400. If you guys want a chance to win two free stocks, with one of them valued up to a significant amount of money, feel free to do that link down in the description.

Thank you guys so much for watching, and until next time!