Who wants to be a multi-thousandaire?

February 17, 2009 8:47 AM

My father died and we have to sell his house. I'm going to be inheriting $200,000+. Realistically, what would you do in that situation?

I'm a 40-something female who has spent time actively changing her relationship with money this year (had to since I knew this was coming -- don't want to look back and have regrets). I'm starting to interview financial advisors right now (this book says to look for fee-based CFPs, any thoughts on that?). My basic goal right now is this... pay off all of my debts first, allocate 10% to create a better life for myself and the rest to build a solid retirement savings and hopefully live off of interest someday if the market ever decides to turn around. For the next fifteen years or so I plan to continue living off of my own income but I'm hoping that now I'll be able to allow myself more freedom to focus on projects I'm passionate about instead of freaking out about paying bills and being forced to accept work I don't enjoy.

I'm making lists of all of the ways I could utilize this money to create a life that will bring out my best self over the long term. I want to use this money towards things that will allow me to be a happier, better person and friend. I'm thinking up things ranging from the most mundane little things to the most fantastical (just 'cuz they're on the list doesn't mean I'm going to do them but I'm brainstorming), including things like getting my teeth totally fixed, traveling more, having a housekeeper once a month, surprising one of my best friends by flying across the country to help her pack when she moves, recording my music, doing volunteer work overseas, paying my nieces' night school tuition, finally decorating my apartment the way I want, taking a bunch of fun classes in things I'm really interested in, expanding my businesses, getting spa treatments once a month, hiring a personal trainer to help me get into shape quicker, etc.

If you were in my shoes, what would you do? I'm basically trying to see if there's anything I haven't thought of that I can put on the list so that my head is completely empty of any thoughts about this money long before I actually have the cash anywhere near me. When this money actually arrives, I want there to be no adrenaline rushing through my brain, by then I want to have already sorted through every crazy idea and have formulated a solid, unemotional game plan that I don't have to stress out about or second guess.

Hellllpppppp! :)

posted by anonymous to Work & Money (21 answers total)

I think you're on the right track with getting debt free and investing. It also sounds like you understand the true value of money, which is not things it can buy, but rather, the freedom that comes from not owing anyone anything.

I'd say try to find more ways to free yourself. Find a part time job with flexible scheduling, etc.
posted by tylerfulltilt at 8:53 AM on February 17, 2009

Have you looked through all the previous questions that are pretty much exactly like this (under the tag inheritance, for example)?

The advice in those threads applies equally here.

1) See an accountant about the best way to reduce your tax burden.
2) Invest it sensibly.
3) Profit
posted by chrisamiller at 8:54 AM on February 17, 2009

$200k is money but not that much money; it's not the I-won-the-lottery-and-never-have-to-work amount. Your list of ideas contains some reasonable ones, but as a whole, it sounds excessive. Remember that the $200k represents the financial sum total of your dad's life, and it would be a pity to go through all of it in a year or two.

chrisamiller has the right idea -- see an accountant and then invest it. When you invest, the reason for using a fee-only professional is that they don't have a direct interest in making you trade but rather can more honestly give correct advice. Personally, I would suggest reasonably conservative investments -- your plan to live off the interest in 15 years is unrealistic unless you already have significantly more saved up.

I would suggest paying down your debts, spending a few thousand on yourself, and then investing the rest for your retirement. Set up a plan for how quickly you allow yourself to draw down that amount and don't deviate from it. The biggest thing you should worry about is ensuring that the amount grows and that you don't find yourself having spent it a few years from now without having much to show for it.
posted by bsdfish at 9:07 AM on February 17, 2009 [5 favorites]

One thing I've been interested in recently, that may be of interest to you, is the notion of peer-to-peer lending. It sounds like you're interested in helping other people, and this seems like a way to do that while also generating a return. (I'm just starting to research this a bit more, so take this as merely an idea.)
posted by brandman at 9:17 AM on February 17, 2009

If there's a program you're interested in, you could apply some of the money towards your own education. If it leads to a more satisfying career, you'll be investing in your future financial stability.
posted by abirae at 9:35 AM on February 17, 2009

Update from the OP

Regarding comments like "I would suggest paying down your debts, spending a few thousand on yourself, and then investing the rest for your retirement." well that mirrors *exactly* what I said in the first paragraph: "My basic goal right now is this... pay off all of my debts first, allocate 10% to create a better life for myself and the rest to build a solid retirement savings..." so that shows me that people just aren't getting what I'm asking at all.

I'm looking to sort through more ideas of what I should do with that 10% before it shows up, really. That "peer to peer lending" idea was good too. And understanding why a financial advisor should be fee based is good. Those things are helpful.

I'm already actively interviewing financial advisors and accountants to figure out the investment parts so telling me to hire a financial advisor and accountant isn't really helpful either. If people read the whole post, I thought it was clear that I'm not planning to blow the entire wad of cash on stupid shit in a year or two... I thought I was kinda clear that I was starting out with solid goals to save 90% of the total right out of the gate. Guess I wasn't.

posted by jessamyn at 9:43 AM on February 17, 2009

Have you thought about renting out his house and selling it when the market goes back up?
posted by wongcorgi at 9:43 AM on February 17, 2009

Jane Bryant Quinn, whose books I find extremely useful re: money mangement, suggests putting any sudden large windfall away somewhere conservative and safe (even if returns are low) for a few months while you research and think about what to do. No hurry.

On the other hand, if you're thinking about _using_ the money in the short term for experiences, it might be worth thinking about whether there are things this money makes possible that will not be possible later, or that will be harder. My partner inherited a comparable amount the year before we started seeing each other. It has been spent down over the years, and is gone now (though our own from-income savings for retirement etc are in fine shape). It was used for things like elective surgery; supplementing income during a return to college for a career change; helping friends in need; avoiding debt during unexpected financial crises like layoffs and floods.

For the most part, when I look back at what happened to that money, I feel good about it, both about the "indulgent" pieces and the investment-in-the-future things like my partner moving into a higher-paying career after returning to school for awhile.

We now have a rubric for windfalls like tax refunds and large Christmas checks from my parents: using 70% to pay down debt or save, and 30% for indulgences. It's a good balance for us.
posted by not that girl at 9:47 AM on February 17, 2009

I like your basic plan and it's almost exactly what I would do. Have you thought about your priorities above being happier and being a better person and friend? What would make you a better person?

You haven't mentioned what you do for a living, but I would invest in some equipment that helps you do a better, more efficient job. While a housekeeping service is nice, I would prefer to have a roomba (pet hair edition) robotic vacuum and a good dishwasher.

I would also look into things that wouldn't clutter up my life. I already have a lot of "stuff." Maybe a smartphone with internet access and a camera. Maybe an ebook reader if you spend a lot on books already. Getting your teeth fixed is an excellent investment (they need to last your whole life) and if you don't have full health insurance already, it would be the time to get it.

I think I would figure out what that 10% fun money would work out to on a monthly basis and treat myself to one thing a month. Just to pace myself.
posted by CoralAmber at 9:50 AM on February 17, 2009

Take a look at scott adams' 9 point investment plan, which is really pretty reasonable.

I'd say the key points to this kind of money are:

1. Pay off your debts (except possibly your mortgage).

2. Bank a year of savings. Most guides recommend 6 months worth, but it sound like you don't have a regular salary. Consider a CD ladder for this cash, but that might be too much trouble.

3. Set aside a small chunk ($5k to $10k) to splurge and indulge yourself with.

4. Buy a home/pay off your mortgate. This is more a personal thing, but it can add to your sense of security and well being to own your home.

5. Invest the rest in stock and bond index funds. Vanguard is good. Go ahead and do it now, you can't time the market.

6. Continue to work and live as you did. Work on things that make you happy (or at least don't suck) and live without the stress of needing to make money immediately.



This isn't really retirement money, what it can do for you is to reduce the amount of stress and hassle in your life.
posted by jefftang at 9:55 AM on February 17, 2009 [1 favorite]

The first half of your OP seems to contradict the second half, which is why people are responding with things like "don't blow it all."

pay off all of my debts first, allocate 10% to create a better life for myself and the rest to build a solid retirement savings and hopefully live off of interest someday

The average American family has somewhere around $100,000 in debt [including mortgage(s)]¹. You seem to indicate you're single and childless (although you don't indicate whether you have a mortgage, so this is all pretty back-of-the-envelope), so let's (generously) assume you have only half of this. That's $50k out of the $200k right off the bat.

Then you're going to take 10% of what's left ($15k) and "create a better life for" yourself. As examples of what that would entail, you provide the following:

getting my teeth totally fixed, traveling more, having a housekeeper once a month, surprising one of my best friends by flying across the country to help her pack when she moves, recording my music, doing volunteer work overseas, paying my nieces' night school tuition, finally decorating my apartment the way I want, taking a bunch of fun classes in things I'm really interested in, expanding my businesses, getting spa treatments once a month, hiring a personal trainer to help me get into shape quicker, etc.

$15,000 isn't anywhere close to enough money to accomplish even a third of that list. Even if you had the full 10% ($20,000) you're still not coming close to the amount you'd need to do just a handful of those things.
posted by jckll at 10:05 AM on February 17, 2009 [1 favorite]

Buy into an ultra-low-load (<0>
The silly "get a maid/buy some chocolate" splurge ideas are very, very ill-timed. Plus, as has been noted, you just aren't inheriting that much - a really nice start on an early retirement egg, but hardly enough to live off of.
posted by IAmBroom at 10:29 AM on February 17, 2009

Oops... forgot about inequality signs being HTML-speak. That first sentence read:

Buy into an ultra-low-load ( < 0.5% ) index fund, and wait.
posted by IAmBroom at 10:31 AM on February 17, 2009

I read that you're planning on spending some money to pay down debts (let's assume $10,000) and then invest the balance @ 90% for retirement and 10% for new opportunities.

1) Inheritance less debt service (assuming $10,000)
$200,000 - $10,000 = $190,000

2) Retirement money:
190,000 * 90% = $171,000

3) Opportunistic money:
190,000 * 10% = $19,000


I think you're asking about #3 and what you should do with that money until opportunity shows up?

Keep it in cash or cash like instruments.

First off 10% in cash isn't really a bad thing from the whole mix of assets perspective. The liquidity is helpful in that you have the freedom to react quickly to new opportunities that may arrive. Additionally, it can serve as your emergency savings in case of any number of crises.

So what kind of cash/money investments are out there and what might one recommend? I think this is going to depend on how liquid you want to be.

Highest Liquidity:
1) Checking
2) Money Market Accounts
3) Savings

Now there are some downsides to the highest liquidity assets -- checking accounts have very low rates meaning that inflation will eat away at your principal. Personally, I keep my most liquid money in my savings account.

Liquid:
4) US Gov't Securities - Savings Bonds, Bills, Notes and Bonds
5) CDs

Now you could advance to another set of assets, ones in which you have a lockout period. Depending on what you're purchasing these can have a higher interest rate (longer lockout usually equals higher interest rate).

With the CDs, generally you pay a penalty if you want to cash them in before they mature. With the Gov't securities -- depending on what you buy -- you can transfer them to a brokerage account for resale if you need the cash right away, but you run the risk of losing principal. As a side note, interest from treasury securities are not subject to state taxes. Personally, I keep the majority of my emergency savings in treasury bills that I've laddered.
posted by cheez-it at 10:42 AM on February 17, 2009

You're absolutely on the right track. My first step would be to eradicate any debt I had, and then structure a bank account for auto-payment of all bills.
posted by dirtynumbangelboy at 10:42 AM on February 17, 2009 [1 favorite]

You left out some important details in your question: Do you own a house/apt? Also, how much is your debt?

I am also assuming here that you are single, as this is an important consideration. You must remember that you are your sole provider for the time being.

So, you need to make sure you cover your basic needs first. Prioritize. Shelter is high in the list. If you dont own a property consider buying one. Or consider keeping the house if that is an option. Second is retirement savings. As someone else mentioned, this is not retirement money. This is just a starter. Set aside a lump sum if you dont have any savings.

Third, as you have correctly stated, pay off your debts. Lets assume that you are paying 1,500 a month on debt interest. If you pay off everything, you have now 1500 to do wahtever you want on a monthly basis. You could save 500 every month (towards your retirement) and use the other 1K to save on that trip you want, or fixing your apartment, or having those fun classes. All the things you listed are actually not Urgent. You can still live without them, so dont blow it all.

Use the money wisely to make sure that in the long term you increase your wealth resources or sources of income, and then , in the short term, allocate that extra cash flow to pamper yourself, over time...not all at once!
posted by theKik at 10:48 AM on February 17, 2009

follow-up from the OP

"Have you thought about renting out his house and selling it when the market goes back up?"

Thought about it, but it's not an option. I do not live local to the house and have an independent trustee (that I don't trust) and unstable sibling who are currently causing a great deal of drama. Best option available is to take the money and run towards a more peaceful life. It's been a difficult decision. We have a unique buyer and it's cash.

"I like your basic plan and it's almost exactly what I would do. Have you thought about your priorities above being happier and being a better person and friend? What would make you a better person?"

Things like taking yoga more often, not stressing about work/money, continuing education, occasional travel... basic lifestyle choices that have been proven to make me more of a relaxed, fulfilled and happy person.

"The average American family has somewhere around $100,000 in debt [including mortgage(s)]1. You seem to indicate you're single and childless (although you don't indicate whether you have a mortgage, so this is all pretty back-of-the-envelope), so let's (generously) assume you have only half of this. That's $50k out of the $200k right off the bat." and "Do you own a house/apt? Also, how much is your debt?"

I'm figuring it'll be around or over $200,000 after I pay off my bills in their entirety. I have no mortgage, no children, no gambling addicted boyfriend or husband. Fresh slate.

"$15,000 isn't anywhere close to enough money to accomplish even a third of that list. Even if you had the full 10% ($20,000) you're still not coming close to the amount you'd need to do just a handful of those things."

Missing the point. I'm *brainstorming* and will then pick a few things that sound best and plan to do them over time, not in the first five minutes of having money in my grasp. This is a SLOW, long term plan. I'm trying to get the ideas out so I can review them and then not think about them anymore. I have no intention of doing all of these things with $20,000.

Also, without debt I will have income and can probably do many things with that as well.

posted by jessamyn at 11:14 AM on February 17, 2009

Travel would be at the top of my list, especially the kind of travel that might be challenging and strengthening, such as your idea to volunteer abroad. Learning a language opens up new perspectives as well as giving you lots more movies and books to enjoy; maybe you'd like intensive language study abroad.

I'm such a tightwad that any money I spend has to have some sort of staying power, even if it's splurge money. So instead of a personal trainer I'd buy a treadmill or whatever equipment I was likely to use for years (I've done it and I use it every day).

I would put "expanding my businesses" in the "investment" category.

For lending/donations, I like kiva.org.
posted by PatoPata at 11:18 AM on February 17, 2009

Yeah the economy sucks. Yes, $200k is not that much money. But it sounds like you're someone who hasn't had the chance to really treat yourself, and now is an opportunity.

If you're even thinking of having a cleaner come over once a month but haven't done it yet, do it. I know people who don't even have two hundred dollar bills to rub together who still get someone to come and clean once a month because it really makes a difference to live in a pleasant clean-smelling surroundings. Assuming you don't live in a McMansion it should actually be pretty cheap. It'll probably cost less than $50-75 a visit, so around $600-$700 a year. That's a fair chunk of money but hardly breaking the bank.

Similarly, splurging on good quality chocolate is an excellent investment in happiness, and indeed one of the cheaper investments you can make. Even a really excellent chocolate bar, which if eaten on a piece-by-piece basis should stretch out several days, costs $6 or less (Trader Joe's 2 pounder lasts a long time, is inexpensive, and really delicious).

Doing volunteer work oversees is cheaper than you'd think, and even better when you're not volunteering and getting paid. English teachers are in high demand everywhere and you can even support yourself there rather than dipping into your savings. Yeah, volunteering is a nice thing to do, but doing it paid is really no less honorable and still as appreciated.

Surprise your friend. Depending on the destination and origination airport, you can find flights in the $200 range. You'll, in theory at least, have a place to stay when you visit (I'd still call before the trip; the surprise can be that you are coming, not that you're there) so the only costs will be food, the plane ticket, and parking at the airport.

Travel more. Going to cheap destinations can mean a very cheap trip (think $2000 or less for 2-3 weeks including airfare). Canada and Mexico are two close and reasonable choices. If you can get to either of them by car they make very fun destinations. And for my money, there's no return on inner happiness like an investment in travel. Yeah, yeah, when I'm old and penniless I'll look back on my youth and lament.

Record your own music on your computer. If your computer didn't come with good recording software you can buy it (or Audacity is a decent choice and it's free).

If the teeth issue is purely cosmetic, ignore it. But if we're talking about things like cavities or problems that could have long term consequences, get those done now. That will be expensive, but you will miss your teeth if you don't have them later. It's no fun gumming caviar.

Don't redecorate your apartment the way you finally want it. In my opinion, the best way to decorate your surroundings is slowly, by finding amazing things every so often and putting them in. Maybe you could set aside some of to 10% to buy furniture. You can often get really nice used pieces for $50-100, so you could buy 10 nice pieces of furniture, or probably dozens of knickknacks for less than $1k.

Expanding your business might be a good idea, depending on what the business is and what you mean by "expanding". I wouldn't increase spending on promotion right now. Basically, any expansion that will translate to a need for an increase in sales is probably not a good idea. But taking actions to increase your personal efficiency or performance (say, by getting special industry-relevant training or improving your equipment) is.

Here's the main thing: set that 10% aside as your luxury fund. Don't spend any of your normal income on the ideas your listed, and keep working like you did and living off of your normal income. Use the luxury fund for things like travel and chocolate. Put whatever's left of the 200k after debts and 10% and don't touch it at all. It will keep growing a bit, and you should keep saving like you did before the $200k, as if it isn't there. Then, when it comes time for you to finally stop working it'll be like an extra $200k magically popped into your investment account. What a nice surprise!
posted by Deathalicious at 11:46 AM on February 17, 2009 [1 favorite]

I like your idea of paying your niece's tuition. I'd add to that, be aware of where small infusions of cash can make a huge difference to the younger generation --- your nieces, nephews, or the children of your close friends. For example, let's say your close friend has a 14 year old daughter. Their school is planning a trip to Russia (this happened to my daughter). The cost to the parents is 3,000$. The students raise $1,000, but the parents can only afford another 1,000. If you quietly or silently can grease the wheels with 1,000, highly focused dollars then you may make a huge difference to the child's life by opening her eyes to a wole new world, and perhaps inspiring her to a new path in life or a new passion or at the very least some life-long memories.

So that's an example, but if you keep your eyes and ears open you may encounter such situations where a small infusion of cash can have lifelong consequences for the younger generation and nudge them onto a path of a more fulfilling life. That would be a wonderful legacy for your father, and yourself, and it seems to me would transcend many of the more short term uses of the money.
posted by Rumple at 12:54 PM on February 17, 2009 [3 favorites]

including things like getting my teeth totally fixed, traveling more, having a housekeeper once a month, surprising one of my best friends by flying across the country to help her pack when she moves, recording my music, doing volunteer work overseas, paying my nieces' night school tuition, finally decorating my apartment the way I want, taking a bunch of fun classes in things I'm really interested in, expanding my businesses, getting spa treatments once a month, hiring a personal trainer to help me get into shape quicker, etc.

Categorize:
. get your teeth in good repair - that's health care; the rest is cosmetic, which is a splurge.
. Housekeeper is a small splurge.
. surprising one of my best friends by flying across the country to help her pack when she moves is a vacation, which is a splurge, but is also partly an act of charity.
. recording my music can be affordable or crazy-expensive, and is probably a life goal.
. doing volunteer work overseas, is probably a life goal and partly a charitable donation
etc.

Make being debt-free and having a retirement plan your priorities, then make a big list of possibilities, and categorize them. It will help you sort them out. Many of these things can be done affordably; maybe you'll buy a Mac to have access to music-production(not a mac user, but people seem to think this is something they can do). Frugality will help you maximize the enjoyment.

It's a lot of money, until you get it and start spending, when it won't seem like so much. You may spend some of it on a splurge and have a twinge or 2 of regret; that's not a crisis, as long as it's hundreds, not thousands. You're doing well, and have a plan; you'll be fine.

I'm sorry for the loss of your father.
posted by theora55 at 8:30 PM on February 17, 2009