What to do with a windfall? Advice needed!

[vacationer1954]

I've been earning over that on an acct for like three years now, it's not statistically particularly risky.

In finance not risky means β = 0. What is the β for the investment Irin's husband is talking about?

 

[cornflake]

In finance not risky means β = 0. What is the β for the investment Irin's husband is talking about?

I have no idea, I was talking about mine and I didn't say not risky I said not particularly statistically risky.

 

[vacationer1954]

I'm sorry what I meant that there is a way she can know how risky what her husband is suggesting is. If β = 0 or very close to it then she can feel more comfortable going in that direction (and she should tell us all about the investment so we all can benefit! ) If |β| is closer to 1.0 then I would be more worried. We've earned 17.3% over three years but there definitely was risk.

 

[punkin]

I don't know of any safe investment that will currently pay 9% - 10%. Being a trader is not a safe investment; one of my tax clients managed to lose over $20,000 in two years by being a day trader in addition to his regular job.

Mike (CPA, Retired but still doing taxes).

This is so true.

 

[Irin997]

Wow thanks so much for all of the replies!

DH and I talked a little bit last night and the first thing we're going to to is absolutely nothing. We've deposited the checks into our savings and it's going to sit right now until we decide what we want to do with it.

We have a financial adviser that we're going to talk to and see what he suggests we do. I do think we will pay off the car loan as that is currently the largest payment but we're not even going to touch the $2,000 student loan because that is only at 1% interest. We may decide to put some toward the $11,000 student loan.....but I'm not sure.

But at the moment, we're going to sit on the cash until we decide firmly how we want to handle the money. I honestly think that is the best decision as we just received this money on Christmas - the shock is still setting in!

 

[Irin997]

I don't know of any safe investment that will currently pay 9% - 10%. Being a trader is not a safe investment; one of my tax clients managed to lose over $20,000 in two years by being a day trader in addition to his regular job.

Mike (CPA, Retired but still doing taxes).

We wouldn't necessarily be looking into a "safe" investment. We would be looking into something that has proven good long term growth with a good return over the last 10 years.

I'm honestly thinking that splitting it into 3rds is the way to go. 1/3 save, 1/3 invest, and 1/3 to debt.

 

[Jenny3]

I'd split it; pay down debt with half and invest the other half.

Or I'd get myself a new kitchen

 

[crisi]

When we were young, we got a nice windfall, we used it to pay down debt. It made such a difference in our lives not to have those cash flow issues. We took the payments that we had been making and moved those to the house and savings. Before I was 40 the house was paid for, and before I was 45 we had college tuition for two kids still in middle school in 529s.

We have a mortgage again. We took it out to help my brother in law who passed away last year by buying a second small house. This summer we sold the house. I could have paid off the mortgage, but I decided to keep it. The mortgage is small, and I know that I want to finish my basement at some point in time, so I want the cash on hand and don't want to be at the whim of the market (where most of my money is tied up).

In the meantime, I've been pretty aggressively paying that mortgage.

I'd talk to a financial planner - like you intend - and map out your long term goals. Being a SAHM is expensive in terms of loss of income - and you'll want BOTH savings and cash flow to support it. You have a lot of debt other than your mortgage that I would make a priority - unless you have a lot of other savings or some other sort of safety net, leveraging debt to make money isn't a great idea - and my suspicion is that you aren't there yet. If my suspicions are true, if you invest that money you could find yourself in a situation where you are home with a kid, the market crashes, your husband - whose job is dependent on the market - is either out of work or not making much money in a panic, and your nest egg is worth half of what it was - with the debt and cash flow you have now. However, I could be wrong.