#FinancialAdvice #InvestingOptions #IncomeGeneratingIdeas
Hey everyone! So, we recently received a generous gift of 200k and I’m looking for some advice on how to make the most out of it. Here’s a little background:
– I work full-time and support my family, while my spouse stays home with our two kids 👨👩👧👦
– We already save money monthly and max out my 401k 💰
– We own our home and have a rental property that brings in some income 🏡
– Thinking of buying another property in cash or even exploring the option of opening a franchise 🤔
What would you do in our situation? Any suggestions on how we can make smart investments with this money to generate additional income? I’m excited about this opportunity and want to make the most of it! Thank you in advance for your advice!
How old are you and how much do you have saved for retirement? College fund?
What are your goals in life?
How much are you currently saving?
What do you find to be most important to your family?
I would not recommend a franchise as you’re basically paying someone for a job.
Pay off any high interest debt.
If possible, max your IRA
Put the rest of the money into an index fund
Have your spouse go back to work
Win
Congrats! Sounds like things are going really well for you guys.
For now, I’d create a CD ladder. Interest rates aren’t too shabby for savers these days. I don’t see a rental house penciling out too well in this environment.
I wouldn’t be jumping at the chance to turn that 200k into a job for your spouse. Two kids can keep you plenty busy and even though there are many moments that seem wide open, once you add obligations things can start to feel too busy.
When the time does come to make a big investment decision, and you guys really want to go for something, my only recommendation is to go tangible asset-heavy.
Do not buy an existing business beyond book value, do not buy a franchise, some kind of certification, etc – these are all intangibles that will be no different than having lit your money on fire if things don’t go well.
If you invest in an asset heavy business idea, you’re basically converting that 200k worth of cash into assets that you can convert back into cash later (albeit likely somewhat less than 200k) if you so choose.
Also, you probably already have this, but in case you don’t, get an umbrella policy.
I am not positive but a gift that large might have to have taxes paid on it.
Index funds. Preferably in tax advantaged accounts.
Open an account with treasurydirect.gov.
A 1Yr Treasury bill currently yields 5.1%. Paid in the form of a discount; ie you pay $189,800 today, get $200k a year later. Longer duration (notes & bonds) pay interest every six months.
Another option for *income* is dividend stocks. Look at names like EPD, AMLP, O, V. Keep in mind that the larger the dividend, the less likely the stock will go up. After all they’re paying you rather than putting that money back in the business. A dividend focused ETF like SCHD is a more balanced approach.
One downside of these income producing strategies is you’ll pay tax on the income at a rate higher than long-term capital gains. You’ll want to consider your need for income vs growth.
In my non professional advice, I’d put it in VTSAX for about 10% safe growth per year. When I had something closer to 500k+, I’d switch it all to SPYI + JEPQ for safe and high monthly dividends which would become a new source of income. The principle amount would grow far slower or remain stagnant, but check the math on what sort of income that brings in while the principle sits safe. I’d be no rich man, but I’d retire if I’m burnt out / work if I’d like to build the income a bit more
Roughly checking out the percent paid in dividends for those two high dividend low growth stocks right now, if I’m mathing with 500k, is about 4300$ monthly while the principle sits. JEPI may replace SPYI, but check their price histories and what makes em safe