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What to do with significant windfall?

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What to do with significant windfall?  Reply with quote  

Hello All!

So I have one of those questions I think everyone dreams of getting, and luckily I'm in that position.

The short of it is I just got a financial windfall of just over $200k ($215k to be exact, after paying what we have to to uncle sam) and my fiance and I are trying to be smart about it and use it in the best way for our future.

The way we see it we have a few options (or combination of options) and they boil down to these:

1. Downpayment for a home
2. invest for retirement (what ever way that may be, 401k, etc)
3. Invest in a business idea we have (would eat up about 40k of it)
4. Blow it all in a drug fueled vacation and toy binge (haha, just kidding!).

Here's the basics of our financial situation as of right now:

Me 36 years old, income 74k a year, retirement: 401k at approx $30k and currently contributing 10% of my income a year. I got a late start on retirement, and didn't start saving until my current job started about 3 years ago.

Fiance is 26, currently earns 50k a year (with a higher ceiling than me). Works in government and just started her pension last year. It's at 2% @ 62 formula. She doesn't have any other retirement savings.

We have zero debt other than one car loan with about 10k left on it (payment is $250 a month). We currently rent a condo for $1300 a month. And I have two kids under 5, half time, from my previous relationship.

We really would like to purchase a home and are considering taking a significant portion of the $ for a down payment. In our area we'd be looking at about $400k for a 4 bedroom home. Considering putting down $150k and keeping out payment as close to $1500 a month as possible to give us flexibility with out income to save for other purposes. But bottom line is we're not sure if this makes the most financial sense.

Hoping to get people's input on what would be best, or the pros and cons of the different options.

Thanks so much!!!.
Post Mon Jul 24, 2017 6:29 pm
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In general, the thing that will have the biggest affect on your far-future is your longterm investments - eg, if you invest the whole $200k @ 11%/yr it will be about $4.6M in 30 years. And if you keep your $30k 401k and add $18,500/yr to it , it will be about $1.4M @ 11%/yr in 20 years (retirement) .

Anything you do that derails those longterm investments cuts into your future $6M.

The Lottery Officials who track winners claim that the average big winner goes broke in about 7 years. They fragment their winnings - a few $1000 to payoff CCs, maybe $20k to payoff a car, maybe $30k more to replace a car, $200k to pay-off a house, $200k more to payoff mom's house - and then they invest the last remaining $10,000 'for their future". They tend to think of 'good' places where they can 'place' their winnings. (Tip - that is how your arrived at a $150k down-payment on a house).

In your case, I would not prepay the car loan - and I would negotiate for a small down payment on the new house - sometimes you can get 3%-down deal, sometimes it will take 10% - but for sure don't spend $150,000 on house equity.

With your $124,000/yr income and your 2 good jobs, the two of you have a great opportunity to be multi millionaires in a few years - it takes patience. Avoid the temptation to start your own business - 'be your own boss" , 'no more working for the Man", lol. The fastest, surest way to wealth is put your steady income stream to its highest and best use and let the power of compound interest work for you.
Post Mon Jul 24, 2017 8:47 pm
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Post Tue Jul 25, 2017 10:57 am
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Post Thu Mar 01, 2018 6:22 am
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