In the mattress or buried in the back yard?
September 22, 2008 10:40 AM   Subscribe

Where to put what's coming to me?

I have a lot of money coming to me between now and December. Like, a six-figure lot. My question is: where do I put it? Is it safe to keep it in the bank? (in that case, would it be smarter to spread it out over several banks?) Should I put it all in Treasury bonds and CDs and Triple-A bonds? Or should I just cash the big checks and hide the money in my mattress?
posted by anonymous to Work & Money (11 answers total) 2 users marked this as a favorite
You need a full-on professional financial advisor, who will likely suggest a spread of products, including stocks, bonds, life insurance, etc, that is tailored to your age, marital status, financial goals, etc. These things can vary widely, depending on your personal needs.
posted by Cool Papa Bell at 10:52 AM on September 22, 2008

Agree with the CPB espacially since you will also need to understand and cope with the tax burden that this extra income may or may not represent. You will definitely want to consider the tax implications of any investment vehicle that you park this money in.
posted by mmascolino at 11:00 AM on September 22, 2008

Second the financial advisor advice. You also need to make sure that whoever you talk to knows a thing or two about taxes, because you could have a pretty hefty IRS bill in April if you don't take care of this properly, and if you've invested all of it someplace you can't get it out (buying a business, real estate, debt retirement, etc.), you could be in a world of hurt.

As an immediate concern, don't deposit more than $150,000 in a single bank account, as that's the maximum amount the FDIC will cover in the event of a bank failure. Those deposits should be pretty safe while you figure out what to do with the money.
posted by valkyryn at 11:00 AM on September 22, 2008

Seconding Cool Papa Bell's advice for a financial advisor, but my little tidbit of advice: as I understand it, FDIC covers you up to $100,000 per bank. With all that's happened lately, spread your money such that you don't have more than $100,000 in any one bank. (If you put it in a bank: you might fare better elsewhere? That's what the financial advisor is for!)
posted by fogster at 11:02 AM on September 22, 2008

Is it safe to keep it in the bank? (in that case, would it be smarter to spread it out over several banks?)

Yes, as long as your bank is FDIC insured, your deposits (in the form of savings accounts, CDs, etc.) will be protected by FDIC insurance. There is a $100k limit per depositor per bank on the insurance though, so if you have over $100k at a single bank and your account is not a joint account with someone else, you'll want to open an account at another bank and maintain less than $100k at each one.

Should I put it all in Treasury bonds and CDs and Triple-A bonds?

It depends on what your goals are. If your goal is to save all of your money with no risk, then you will be stuck with safe but low interest options such as CDs or high yield online savings accounts. If you want to invest your money so that you can use it in retirement, you have more options such as putting the money into the stock market. There are also different types of accounts (such as IRAs) that have different tax benefits depending on how you plan to use the money. As Cool Papa Bell mentioned, a financial advisor would be able to help with this, but be aware that some professional financial advisors stand to benefit from certain investment choices and may not give you completely sound objective advice, so choose carefully.

One other major piece of advice about large windfalls like this: Do not let this money make major changes to your spending habits. By all means, use it to pay off any debts you have and make a few extra purchases, but do not let your spending spiral out of control. Don't for example, use the money for a down payment for a home that you can't afford to actually pay for, or similar bad decisions that will catch up to you eventually.
posted by burnmp3s at 11:05 AM on September 22, 2008

don't deposit more than $150,000 in a single bank account, as that's the maximum amount the FDIC will cover in the event of a bank failure

This is wrong; the FDIC does not guarantee that much. Read the other comments.
posted by grouse at 11:19 AM on September 22, 2008

Find a fee-only financial advisor. That way you pay up front for advice, instead of using someone who makes commission by selling you medicore mutual funds and life insurance products you don't really need.
posted by junkbox at 11:35 AM on September 22, 2008 [1 favorite]

Your financial advisor will want to know what your end goal for it is, and the timeline for that, so you might want to think about those things now.

(They will ask because, as an example, if you think you'll use it all to buy a yacht in the spring, putting it in the stock market would likely be a bad idea.)
posted by small_ruminant at 11:48 AM on September 22, 2008

Nthing hiring a financial advisor, especially one that's fee only.

If you buy a CD with an FDIC-insured institution and it's less than $100K, it'll be insured. With money markets in investment banks and brokerages I believe the SIPC covers it (to $250K), but don't quote me on that.

Most importantly, identify how much risk you're willing to take, explain it to the advisor, and make sure their suggestions jibe with that. If you're saying "I want to stay all cash" and they start talking about ETFs and derivatives, they're not listening.
posted by dw at 11:50 AM on September 22, 2008

I had a vaugely similar situation and my financial advisor suggested I use the money to max out my 401k contribution. It depends a LOT on your particulars though. Age, tax bracket, long term plans, assets, debts, etc. You really need to talk to someone. And don't forget that 6 figures of income could well mean 5 figures (or more!) in taxes.
posted by meta_eli at 11:51 AM on September 22, 2008

With that title and teaser, I was really expecting something different when I walked in here :) But definitely go with a Fee Only adviser.
posted by willmize at 12:23 PM on September 22, 2008

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