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I had a dear friend who inherited $100,000 at age 26. She took a few friends on some incredible trips, lived without working for a few years and before she knew it , it was all gone. She is now 64, stuggling even with a good education, sweating health issues until she can get on medicare and realizes what a horrendous mistake she made in her youth.
Of course most of us do make alot of mistakes in our youth but what a shame she doesn't have one cent to fall back on at this age. I'm glad I didn't inherit any money at a young age as I probably would have wasted it too. We just don't seem to understand we will need that security as we age.
buy some 6 month cds for now.
If you need a car get a 7 year old bmw low mileage 740 for a less than 1/4 cost of new. It will last another 10 years and more with oil changes ,brakes ,tires ,and shocks every few years.
buy a home when your ready.
I had a coworker who inherited over $300k from an aunt. Her and her husband cruised through that money like it was water. 3 short years later, they are completely and udderly BROKE. They both bought new cars, went on vacation, and stashed money away in long-term savings accounts--of which they broke the terms and lost even more money before spending what they had left. DO NOT FALL INTO THE SPENDING TRAP. If you couldn't afford it BEFORE you inherited the money, then DO NOT BUY IT. Your money will be GONE before you know it. Learn from people who have made dumb mistakes...
You may *think* you're just going to spend $50k or so, but that $50k turns into $60k, which turns into $100k, which turns into negative bank accounts and nothing to show for it. The biggest mistake you could make is changing your lifestyle with this inheritance. Put the money away long-term and pretend like you never received it.
I agree with this advice. I know osmeone who inherited a smaller amount of money, but essentially did the same thing. Years later, they have absolutely nothing to show for the money.
The decedant passed a legacy on to you. You now have a responsibility to carry that legacy forward. Do something with the money that will honor them. $200k is not that much money, unless you leverage it. As someone else said, it can grow substantially if invested properly.
Ignore the current trend in the stock market. In fact, now is a GREAT time to invest. If you looked at a trend analysis of the market over the last 100 years, you would see that major catostrophic evnts like the Great Depression and Black Monday are notthing but little hiccups.
There is a reason why most lottery winners wish are broke within a couple years - and they have usually won a lot more than your $200k. Learn a lesson from them.
Some people go crazy when they inherit money, it's ridiculous! Too many have the attitude "easy come, easy go" and decide to blow most of it on a fancy car or lavish trips when what they really should be doing is putting it away so they can EARN money. One of my siblings who has been a royal screw-up in life is basically living for an inheritance I feel, he doesn't understand the value of a dollar and I doubt, ever will. When each of us kids graduated from high school (4), my parents offered to pay for our college education or give us the amount if we wanted to skip college and go to the workplace. Three of us went off to college, my brother decided to take the lump sum and go blow it on a year of fun. What does he have to show for it? A 7 year old BMW. He's finally getting his life straightened out (about time) and has decided to get an associate degree so he can earn a living wage. I still don't believe he understands how to save money, he lives for today and doesn't worry about tomorrow. Great idea in philosophy class but not so much in the real world.
Sorry for venting but as a whole, I feel my generation sucks at managing money. I know there isn't going to be any Social Security when I get the age to retire so I'm socking quite a bit away right now in order to prepare for the harsh reality that too many are ignoring.
My husband and I were in a similar position a few years ago. This is what we did...
We spent 1% of it on a very nice vacation. Then, we parked the remainder in a jumbo CD. For two years, we banked the interest (At the time it was over 5%! Can you imagine?) and kept living and saving as usual. At the end of two years, we had an extra $60k that we added to the principal to purchase a house for cash. It was the best thing we ever did, and I don't regret it at all, even though the house we bought has lost value. No mortgage is a wonderful thing, especially since my husband and I are still fairly young. We live quite comfortably on less than half of our annual income. Our retirement and college savings funds are chugging along, and we no longer worry about the future. BTW, I still drive the 11-year-old Honda that I bought before the windfall. It's going in for a transmission replacement on Monday, because I plan to keep driving it for several more years. Recently, we chose to become a one-car family, but until that point my spouse drove an even older, used Subaru.
Other posters may advise you to invest the money and finance a house, which also has merits. That said, I think most all of us will agree that buying a new car, especially a convertible, is a temptation best avoided.
Last edited by formercalifornian; 02-04-2010 at 10:33 AM..
I had a dear friend who inherited $100,000 at age 26. She took a few friends on some incredible trips, lived without working for a few years and before she knew it , it was all gone. She is now 64, stuggling even with a good education, sweating health issues until she can get on medicare and realizes what a horrendous mistake she made in her youth.
Of course most of us do make alot of mistakes in our youth but what a shame she doesn't have one cent to fall back on at this age. I'm glad I didn't inherit any money at a young age as I probably would have wasted it too. We just don't seem to understand we will need that security as we age.
Wow. That's a lot of money back in the day she got it. An average wage back then was maybe 10k.
Hi,
I inherited 200K. I have no debts. We are looking to buy a house and already have savings of 20% downpayment + emergency fund (in addition to the 200K).
I'm 30, is it foolish to blow 30K -40K of it on a new car?
I would love to get a convertible but we're planning on having kids in the next year or so, so I don't think that's pratical. But am thinking about upgrading my 2 dr Honda to a 4dr car (like a lexus or a bmw).
Where do you live geographically? Housing costs would weigh heavily in my decision if I were you.
I don't see anything wrong with splurging using 10% of the money and being prudent with the rest. I came into a chunk about 2 years ago and splurged pretty heavily but I already had all my financial stuff in order so it was complete gravy.
After you've made your splurge with 1% or so, park the rest of the money somewhere inaccessible. Some people may have extraordinary powers of financial virtue, but I'm not one of them. I struggle with temptation, so I have to keep the money out of sight.
Right now, my husband and I keep a fairly significant emergency fund, and it sits in our savings account where it can be tapped very easily for budget overruns. Because we have this fund, it really doesn't matter in the short term if we spend several hundred or several thousand more than we've budgeted for the month. Of course, over the long haul, it could make quite a difference in our retirement years. Recently, we recognized this hole in our plan and decided to ladder our emergency fund in CDs, so it isn't all available at once but would be released in stages if disaster struck.
I'm a big fan of creating systems for saving and investing that don't require constant vigilance, because as I said I'm no model of personal virtue. I'm much more likely to stick with a plan if it means one or two big decisions rather than a whole bunch of little ones. With every choice I have to make, I'm vulnerable to temptation, so I'd rather just take a deep breath and leap. Does this make sense?
Also, don't tell anybody who doesn't need to know about the money to prevent pressure to upgrade your lifestyle. The less people know, the better.
Last edited by formercalifornian; 02-04-2010 at 10:17 AM..
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