I'm a trustafarian

[edfurlong]

So as it turns out I'm coming into about 100k in august. This is obviously not a life changinging ammount of money, it is however about four years salary for me. I'm poor.

In my shoes what would you do with the money. Any specific low risk long or short term investments, etc.

I live in Seattle so I think buying property is out to begin with.

[Shajen]

First and foremost, pay off any outstanding debt.

Then, chunk some in your Roth IRA, and look into money market accounts.

Did you crosspost this in Stock Market forum?

GL

[pshreck]

100k tax free is indeed a life changing amount of money for many people. Yeah you cant go and buy houses and retire, but it certainly should have an effect on how your future plays out.

[M2d]

why can't you get property? especially if you live on your own already, I'd think that you could put enough of that down to make the mortgage/tax/upkeep payments come close to your current rent. maybe you come out ahead of it.

[edfurlong]

[ QUOTE ]
First and foremost, pay off any outstanding debt.

Then, chunk some in your Roth IRA, and look into money market accounts.

Did you crosspost this in Stock Market forum?

GL

[/ QUOTE ]


Thankfully I am debtless. I didn't even know there was a stockmarket forum. Is there some magical way to post in such a way that both topics end up in the same thread?

[J.R.]

imo the stock market forum is a joke

[Shajen]

not that I know of. Just highlight your post and cut n paste it there.

GL man, 100k would alter my life, and it ISN'T 4 times my salary /images/graemlins/grin.gif

[bdk3clash]

Long-term, I think it would make sense to first pay off any and all high-interest debt (and probably any other debt you have, but maybe not), and secondly make a down-payment on a house/apartment/whatever, if you don't already own your own place.

[DemonDeac]

def IRA
that money will look real good when ur older
im only 19 and thinkin about that [censored]. if i invest $1k now, it'll be $64k when i retire. how insane is that. the only problem is that when i do get to use it, ill be old and wrinkled /images/graemlins/crazy.gif

[edfurlong]

[ QUOTE ]
Long-term, I think it would make sense to first pay off any and all high-interest debt (and probably any other debt you have, but maybe not), and secondly make a down-payment on a house/apartment/whatever, if you don't already own your own place.

[/ QUOTE ]

To be honest I'm a little concerned that housing prices in seattle could come down at some point. I'm not sure how realistic that fear is though.

I could basicly afford 200k for a 600ft studio, or a moderate house thirty miles north, neither seem super atractive. However it may still be the best way to go.

My credit is also less than steller. I don't have any debt but I had the usual college credit card problems. I've never defaulted on anything but my payment history must suck. Along with the fact that I've used zero credit in the last three years or so.

[turnipmonster]

[ QUOTE ]

I live in Seattle so I think buying property is out to begin with.

[/ QUOTE ]

why? it's plenty for a very hefty down payment and to help out on your mortgage payments.

--turnipmonster

[The Armchair]

If you have 100k, you can get real estate almost anywhere.

[StevieG]

[ QUOTE ]
So as it turns out I'm coming into about 100k in august. This is obviously not a life changinging ammount of money, it is however about four years salary for me.

[/ QUOTE ]

Four years of salary is life changing. You will be able to give life long financial goals a big boost with this money.

Pay off any and all debt. Credit cards, car payments, whatever.

Make the maximum contribution you can to retirement funds. For a Roth IRA, you can contribute $3000 this year, but you have until April 15 to make last year's $3000 contribution. If you are over a certain age (50?) you can also make a catch up contribution of an extra $500. Do you have a 401k plan available? You can contribute a max of $13000 in a year, so max it starting in the summer, use the windfall to help live for the rest of the year.

Have kids? Contribute to a 529 college savings plan. Use a calculator like this one (https://calculators.putnam.com/529calc/calculator.html) to see what a big impact even just a lump sum now can make.

[edtost]

the stock market forum is home to perhaps the stupidest group of 2+2 posters imaginable.

[Shajen]

[ QUOTE ]
the stock market forum is home to perhaps the stupidest group of 2+2 posters imaginable.

[/ QUOTE ]

This is true. However, he *could* get some decent advice there.

[bdk3clash]

I would think it would be prudent to contribute to your 401k only up to the point where you max out the matching funds your employer provides, if any. Otherwise, putting the same money into a Roth IRA probably makes more sense.

[DavidC]

Keep your expenses low, live off the money, and learn to play poker such that you can make more than 25k/a? Do same, but go to university?

I don't think that investing this money is going to be of great benefit to you, as you won't be able to live off the interest, and $25k/a isn't a ton of money, even if you get "bonus interest" on your 100k.

As far as what to do with the money that you're not spending...

Because this is something that you're probably going to want to draw on in the near future, keep it in safe, predictable investments. Things like GICs are good. It doesn't even matter if they don't beat inflation. All that matters is that the money is still there when you want to withdraw it.

Keep in mind that the difference between an investment at 10% and an investment at 3% is only $7000 on 100k, but that you're guaranteed to have that money there.

I'm Canadian, so a Canada Savings Bond would be my first investment choice. I'm not sure what you have equivalent to that in the states, I think T-Bills...

An important thing to remember, if you're going to go to an investment professional about this, is that they make commissions based on what they sell you and on how often they make transactions with your money. They're going to want to "churn" your assets such that their % commission increases (1% if they make one purchase, 3% if they make a purchase, make a sale, and repurchase something else). Additionally, they're going to want to promote products that their company sells, rather than the best in the field.

I think I speak for all of us when I say that I wish I had your dilema (not considering how you came into the money).

Take care, and good luck dealing with the cash.

Just don't spend it all on coke or something. /images/graemlins/smile.gif

Edit: The other posts about reducing debt are good, and probably about buying property (though I don't know a damn thing about that). However, keep in mind that property fluctuates in value and is not liquid, so if you don't know where you want to live, I think my advice still stands, so that you DO have the cash when you want to buy property.

[bisonbison]

This is obviously not a life changinging ammount of money != it is however about four years salary for me

It is a life-changing amount.

You're not in debt, so find a financial advisor. Figure out some 5/10/25 year goals. Invest accordingingly.

[gvibes]

[ QUOTE ]

Keep in mind that the difference between an investment at 10% and an investment at 3% is only $7000 on 100k, but that you're guaranteed to have that money there.

[/ QUOTE ]

100k after 40 years at 10% = 4.5M
100k after 40 years at 3% = 325,000

Food for thought.

EDIT: And I agree that a lot of financial planners are thiefs in a shirt and tie.

[DavidC]

[ QUOTE ]
[ QUOTE ]

Keep in mind that the difference between an investment at 10% and an investment at 3% is only $7000 on 100k, but that you're guaranteed to have that money there.

[/ QUOTE ]

100k after 40 years at 10% = 4.5M
100k after 40 years at 3% = 325,000


[/ QUOTE ]

I know.

Keep in mind a few things though... it's tough to tell how much 4.5 million will be worth in 40 years. It's also tough to say that you'll get 10% cumulative over 40 years.

The other thing is that life isn't about huge amounts of money (if it were, he wouldn't have asked the question, he'd have just put the money into the stock market, right?). He may want to use the money for something relatively soon. That's the key.

If someone had posed me with this question a few years ago I probably would have had your same answer: Pick up The Warren Buffet Way, The Intelligent Investor, Security Analysis, Common Stocks and Uncommon Profits... take some time off work and make a decision about how to invest it.

However... right now I may be more inclined to tell him to do some travelling in 3rd world countries or something like that, where the money goes a long ways and there's a ton of things to experience, other than just sitting on a beach.

I'm not a financial moron, just so you know. I'm poker moron. Quite the difference. /images/graemlins/smile.gif

[M2d]

[ QUOTE ]
100k after 40 years at 10% = 4.5M
100k after 40 years at 3% = 325,000


[/ QUOTE ]
previous poster is obviously talking about the short term. he's saying that, if op doesn't have immediate targets for spending but anticipates spending a good portion of that money soon, then a low interest/low fluctuation vehicle would be better than a higher interest/higher risk one. I doubt that he, or anyone, disputes the long term value of ekeing out additional points.

[scotty34]

I believe 100K is an adequate bankroll for the $100-$200 games. /images/graemlins/cool.gif

[tolbiny]

At 25 years old.
Assuming i had 70,000 after taxes i would take 50,000 and put it into a long term investment that i would expect 8-12% return on. This would be my retirement fund and i wouldn't touch it (unless of an emergency of course) untill i was 65. By then it should be >2,000,000 and it should be enough to retire on.
i would take 5,000 and put it in my poker roll, i would pay off the last 1,500 i owe on my car, take around 5,000 and plan a really nice trip- either to Australia or Europe- maybe SE asia. Take a month and see a bunch of stuff. the last 8-9,000 i would buy a hell of a setup for multitabling, a new bed/wardrobe/desk/TV/couch and hopefully have 1-2,000 in my bank account. Thats basically it- i would use the bulk of it to secure my future, and a decent chunk to enjoy now.

[Matt Flynn]

We get little to no usable financial education in high school or college, then get finance advice from an industry that makes all of its money selling you services. Yeah, and those penis enlargement pills work and if you just take echinacea you won't get colds. Money markets and bonds are complete horseshit for a 19-year-old except as liquid cash equivalents. Anyone selling them to you either doesn't have the slightest clue about money or is making money off of you.

You need a 5% down payment and closing costs to buy a home. You do NOT need credit. You will, however, have to pay higher interest if your credit is bad. Ask about "stated income loans" and "rolling closing costs into purchase price." If your real estate agent cannot handle those or recommends against them, fire the agent immediately.

Buy the cheapest condo/townhome/home you can stand to live in, with the caveat that you want to be able to sell it. Your primary dwelling is a fair but not good investment. Anyone who tells you to buy the biggest house you can afford has no clue and should be dismissed or fired out of hand as an advisor. You can put your money to better use.

You may not, with bad credit, be able to do the really good real estate transactions. You may also have problems finding a decent (and cheap) management company. However, you can most certainly buy good rental property - JUST NOT IN SEATTLE. Seattle's too expensive for you. Plus you should get your feet wet buying your primary dwelling first. How much can you comfortably afford? Divide your current rent by $640. Multiply by $100,000. That is what you can afford easily, including Principle, Interest, Taxes and Insurance ("PITI"). Problem: you may not be able to afford more than a condo or townhome. Those are bad investments. They have "HOA dues" that can get very expensive and are not under your control. Also, they do not appreciate well. Better to live in a small detached home in the exurbs in a good school district. Even better, buy a duplex. If you can afford half the cost (as your "rent"), you rent the other half. If you move, you just rent your half too. Many a young man has become a rich uncle using that strategy, and it's the best for the underfunded and underexperienced.

When you buy the home, shop the mortgage. Do not stop at the one the real estate agent recommends. Never pay points for an owner-occupied home. "Points" are payments you make up front to reduce the interest rate on your mortgage. They are almost invariably a ripoff. Strongly consider getting a 5-year ARM loan. You are very likely to move within five years Might as well take the lower interest rate. Once you get a loan offer, walk to the next guy with a copy of your credit report and the "good faith estimate" the first mortgage guy gives you and ask him if he can do better.

When you buy, assume the house seller is going broke next week if you don't buy it. Ask how many days the house has been on the market (part of the real estate agent method of holding power over home transactions is witholding that datum from realtor.com and other basic sites). If the house has been on the market for >30 days, you are in the driver's seat. Your agent gets paid more if you pay more!!! So don't listen to them. E.g., on a seemingly good-buy $150K home that is empty and has been on the market for 60 days, offer $136,000 with $2,000 back in closing costs and a $2,000 cap on repairs, they pay all structural repairs, and you get the fridge, washer and dryer. (Be absolutely firm about the $2,000 back. It makes no difference whatsoever to the seller whether you pay $125K with nothing back or pay $127K with 2K back to closing, but it makes a huge difference to you.) They MIGHT tell you to hose off, but who cares. Move on to house B. If you end up with structural problems that are easily fixed (as most are), do not accept less than full money to fix them. I have threatened to walk three times and (with the exception of my first residential investment property, when I was underexperienced) have NEVER paid a cent towards basic structural repairs. Remember, if there's $5,000 to be had that you didn't ask for, you don't get it. Always be willing to walk.

Have fun. www.realtor.com (http://www.realtor.com) is a decent site to find out what sells for what and what rents for what. Keep in mind location and school district are what sell a home, and that dirty homes that need painting sell for WAY less than clean freshly painted ones even though cleaning and painting are cheap.

One more thought: all those guys with 401K's have no clue when then can retire or how well they'll live. They get all excited about the concept of 64K at age 65 not realising that it's really 16K or less indexed for inflation and that most mutual funds do not have that high a yield. Whereas if you buy a rental property that is relatively new and you always roll the excess rent back into the mortgage (not the best strategy but very good for illustration), you KNOW that in 20-24 years the house will be paid off and you will have the future equivalent of 2/3 of today's rent as income each month. Will that be double todays rent? Triple? Who cares! The key is it will be the equivalent. Buy a $110K house that rents for $850 and you know, in 24 years, you will have the future equivalent of $550/month (after all costs) in today's dollars. How much gross income do you live off a month? Divide that by $550 and you know how many of those $110K houses you need for basic retirement in 24 years. (Throw an extra in for insurance.)

btw with decent managing of the mortgages you need at most 5% down to buy anything.

Matt

[Ulysses]

two girls
or three girls
at the same time
that's what you should do

[DavidC]

[ QUOTE ]
two girls
or three girls
at the same time
that's what you should do

[/ QUOTE ]

I can't believe that all the other posters were shallow enough to focus on the money.

[The Armchair]

[ QUOTE ]
two girls
or three girls
at the same time
that's what you should do

[/ QUOTE ]

That takes $1m. Everyone knows that.

[StevieG]

[ QUOTE ]
[ QUOTE ]
two girls
or three girls
at the same time
that's what you should do

[/ QUOTE ]

That takes $1m. Everyone knows that.

[/ QUOTE ]

Well, the kind of chicks that'd double up on a dude like you do.