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I received a $125,000 payment from my father's life insurance after he passed away. It's currently sitting in a benefit account with the company that earns .4% apy.
Here's my situation
Age: 31
Employment: stable. Varies btw $45 & 55K per year depending on whether I sign an "extra" contract. This job comes with a defined benefit pension & health insurance.
I rent an apartment for $635, will probably go up to $700 next lease. At this time it's enough space for me although I wouldn't mind a better neighborhood.
Single. No dependents.
Assets: 19000 in cash
car worth about 10000 on KBB, paid off
Debts: 34000 student loans, int rate 4.56%
8000 personal loan, int rate 7.9%
3500 credit cards, 2500 of them 0% until Nov 2015; the other 1000 was set to be paid next paycheck.
My intuition is to pay off the credit cards and personal loan right away, but I'm not sure about the student loans.
I know it sounds like I'm in terrible debt. I was doing a pretty good job of paying it off. My debt was $63K 1.5 years ago, reduced to $46K right now and was going to be under $40K by the end of this year and paid off by end of 2017 and I was on track. I'm not sure whether to pay everything off in one lump or continue what I was doing and save or invest the money.
I'm not psychologically suited to putting it in the market. The main reason I went into 60K debt was because I made investments with most of my life savings in 2006, at that time around $35K. The market crashed in 2008, and while my investments were down more than 50% I had family who got sick and needed help, so I needed cash. So I had to sell the shares, lock in my losses, and spend down what was left to help my family, then take some loans out to survive while I was in school. After school was done I didn't have a good job for more than 2 years.
As a result I'm pretty traumatized by the idea of the stock market, especially since it's at 16000 and I think it's a bubble. It was bad for me in 2009-10. I became very depressed because I believed I had made a crushing life mistake that I'm obviously still paying for now. It was bad. If There were times when I thought about killing myself. I don't want to repeat that.
If I put money into stocks I won't be able to relax about it, I'll obsessively check it and be anxious all the time.
So my primary investment goal would be to preserve the principal for the long term and avoid stocks at least until this current bubble turns downward, since I clearly have little tolerance for risk.
Hire a fee based financial advisor in one of the brokerage houses and have the money professionally invested & managed. Shop for this service and find the one with the lowest fees. They are professionals at managing risk vs reward and will relieve you of the need to figure out the best way to deal with those risks or rewards. By employing a fee based advisor, you eliminate the conflict of interest that arises when they are commission based so they need to sell products/services to you to make money. You want an advisor who is interested in your economic health, not their own at your expense.
I did this with my retirement savings about 10 years ago and it is by far & away, the best financial decision I have ever made. You're starting out young with a lovely nest egg. Now is the time to do it. When you get into your late 40's.... you'll be real happy you did it, real happy.
while i agree many times a financial planner can add value i disagree with finding the lowest fee one you can.
would you go to a doctor or lawyer because they were the cheapest or do you want the best you can find?
in fact i find many fee based not the best out there . many are only fee based because they lack the knowledge or certification to sell certain products or they would.
there are pluses and minuses to all the different fee structures out there. you want the best one for the job.
it so happens the best one i know is asset based as well as sells certain high quiality products.
You have stated in no uncertain terms that you are leery of the stock market. I had similar experiences when I started investing. My mistake was to not have an emergency fund, so when the market was down, a costly event forced me to sell my investments at a terrible time. When I was out of the market, it climbed again, and I missed out.
However, stocks are historically one of the best long term performers. I suggest that a portion of your money go to the stock market. Keep it low enough that if (when) a market correction occurs, you do not pull it out, and do not fret over it. When it looks really sucky, maybe buy some more. Then patiently wait, watch and learn a way to do well investing. Keep careful track of the percentages. This time, invest with tactics that will let you win.
Personally, I like mutual funds like Wellesley from Vanguard. Costs are low and diversification is good.
would you go to a doctor or lawyer because they were the cheapest or do you want the best you can find?
If there were any way to tell which doctor is the cheapest, I'd go to that doctor at least 50% of the time. Right now, there is no way to know if the doctor you are going to is cheap or expensive until you get the full bill 3 months later.
I received a $125,000 payment from my father's life insurance after he passed away. It's currently sitting in a benefit account with the company that earns .4% apy.
Here's my situation
Age: 31
Employment: stable. Varies btw $45 & 55K per year depending on whether I sign an "extra" contract. This job comes with a defined benefit pension & health insurance.
I rent an apartment for $635, will probably go up to $700 next lease. At this time it's enough space for me although I wouldn't mind a better neighborhood.
Single. No dependents.
Assets: 19000 in cash
car worth about 10000 on KBB, paid off
Debts: 34000 student loans, int rate 4.56%
8000 personal loan, int rate 7.9%
3500 credit cards, 2500 of them 0% until Nov 2015; the other 1000 was set to be paid next paycheck.
My intuition is to pay off the credit cards and personal loan right away, but I'm not sure about the student loans.
I know it sounds like I'm in terrible debt. I was doing a pretty good job of paying it off. My debt was $63K 1.5 years ago, reduced to $46K right now and was going to be under $40K by the end of this year and paid off by end of 2017 and I was on track. I'm not sure whether to pay everything off in one lump or continue what I was doing and save or invest the money.
I'm not psychologically suited to putting it in the market. The main reason I went into 60K debt was because I made investments with most of my life savings in 2006, at that time around $35K. The market crashed in 2008, and while my investments were down more than 50% I had family who got sick and needed help, so I needed cash. So I had to sell the shares, lock in my losses, and spend down what was left to help my family, then take some loans out to survive while I was in school. After school was done I didn't have a good job for more than 2 years.
As a result I'm pretty traumatized by the idea of the stock market, especially since it's at 16000 and I think it's a bubble. It was bad for me in 2009-10. I became very depressed because I believed I had made a crushing life mistake that I'm obviously still paying for now. It was bad. If There were times when I thought about killing myself. I don't want to repeat that.
If I put money into stocks I won't be able to relax about it, I'll obsessively check it and be anxious all the time.
So my primary investment goal would be to preserve the principal for the long term and avoid stocks at least until this current bubble turns downward, since I clearly have little tolerance for risk.
Definitely pay off al your debts first, even the student loans. Then keep out an emergency fund and invest the rest. My advice is to become familiar with the teaching of Dave Ramsey and buy a copy of "My total money makeover" to fully understand how to best handle your money situation. Some people may not think that Dave is a good mentor, but he has changed the financial lives of many people for the better.
I say become debt free. Take a sum say 5-10% and take some sort of vacation to honor your father by enjoying yourself and then come back and deal with the rest. Your getting a second chance to start out debt free. Just don't mess it up. Even if you do at least you will have the memory of the vacation your father provided for you.
If your a sports fan go to Vegas during March madness or during the football season Stay at the Las Vegas Hilton. They have a great sports book to watch games. Also you can take a tram to other casinos on the strip. One more tip as long as you have a bet receipt drinks are free so do a team parlay for about ten bucks then sit back and enjoy many games.
Another option is an Alaskan fishing trip. On the real do something and sit back and just say thanks dad. Make it more than just about money.
You should pay off all your student loans - now, while you have the money - or you will be saddled with them forever!
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