mo money mo problems

JarsJars Registered User regular
this year both of my grandparents died and now that everything has been taken care of the process of settling the estate has started. now I don't know exactly how much money is coming from it but I have been told that I should expect some. a lot, really. possibly six figures, enough to be life changing. so for the next few months I have to think about what do do with it. this is going to be quite a bit of an information dump over what my circumstances are. right now I:

am 32, and do not have my own place yet. no one is dependent on me besides myself
I have a steady job as an aide in special education but it pays very little. I make around $13,000 a year. but I'm a state employee of new york, I have full health care, full dental, paid vacations, and a pension. all totalled up my compensation is closer to $17-18,000.
as far as jobs go I think it's pretty good. but ways to advance are kind of limited and involve things that do not appeal to me(such as becoming a teacher). this is important for a reason I will mention be low. I have a 4 year degree but no post graduate or any cirtifications.
I have no debts. no college loans, no car payment, or anything. I do have some savings, and a few investments.
my car has about 2-3 more years left on it, but I think even without the money I've planned enough to take care of that.

now, for the money. my family(in other words the people giving me the money) have encouraged me to either go back to school, or buy a house. of the two I do not like the idea of going back to school. I do not like school, I'm not good at school. I also don't want to become a teacher anyway, which would be the obvious progression from my current position.

buying a house is much more appealing to me but the big thing on my mind is tied with my career. to me buying a house is pretty much saying this is where I will be. Right now I have no attatchments, I can effectively pick up and go to the other side of the world if I had a job there. buying a house would be advantageous in several ways, especially by cutting my commute way down since it's currently a little over 30 minutes and I could be much closer to work. but essentially committing myself both to the area and my job for the forseeable future is scary. I'm afraid of doing it because maybe 3 years from now I won't want to be here, or worse- I can't be here because I don't make enough money. having to face both my career future and my living conditions at the same time makes me very nervous.

maybe I should just spend it all on hookers and blow

Posts

  • DaimarDaimar A Million Feet Tall of Awesome Registered User regular
    One of my cousins went the hookers and blow route after his father died, he ended up farther in debt than before the payout so I wouldn't recommend that. There's nothing saying you have to spend the money as soon as you receive it, just stick it into a secure savings or several types of savings and try to come to grips with that much extra wealth. If you have nothing to spend it on right away then just leave it tucked away.

    One thing to do, since you have substantial assets, make your own will so that if something does happen to you then at least your beneficiaries lives are easier for not having to fight over who gets what and dying without a will is a legal nightmare if you have to try and get money out of banks and such.

    Also, if anyone comes asking you for a loan so they can start up their own business it is time to stop talking to that person.

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  • PyrianPyrian Registered User regular
    First things first: Don't count your assets until they clear.

    If you don't want to go back to school and don't want to buy a house, then don't. Seriously, don't let anybody pressure you into it.

    That being said... Try to avoid frittering it away. If that's a serious temptation to you, maybe try an income generating type of investment, and restrict your hooker (or whatever) expenditures to your interest but not your principle.

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  • CambiataCambiata Commander Shepard The likes of which even GAWD has never seenRegistered User regular
    edited July 2017
    To echo and emphasize what Daimar said, it's a natural human condition that when a person receives a large windfall all at once they tend to spend it quickly and then end up in debt, worse off before they started.

    If it were me, I'd pay off any debts then put the rest in savings. If you don't feel now is the right time for you to have a house then don't buy one. Definitely do not go to school just because your family thinks you should. The hard part is going to be, I think, that that money is just sitting there available and you'll suddenly see things you couldn't afford before becoming very tempting. That's where the whole human nature thing comes in. If possible, try setting aside at least part of it in something like a 401k or a CD - something you can't easily retrieve it from when thoughts of a Maserati become to strong (not that you're thinking of that, it's just an example).

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  • MugsleyMugsley Registered User regular
    Two things:

    1) Talk to a CPA. Make sure you're not going to lose a substantial chunk of the inheritance because you jump about 4-5 tax brackets.

    2) Talk to a financial planner. They can give you more information about what your options can be as far as where to put the money.

    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

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  • JarsJars Registered User regular
    edited July 2017
    Pyrian wrote: »
    First things first: Don't count your assets until they clear.

    If you don't want to go back to school and don't want to buy a house, then don't. Seriously, don't let anybody pressure you into it.

    That being said... Try to avoid frittering it away. If that's a serious temptation to you, maybe try an income generating type of investment, and restrict your hooker (or whatever) expenditures to your interest but not your principle.

    I am interested in buying one. I can't stay here forever.

    I am not spending it on hookers and blow, juuuuuust to make that clear.

    I'm fairly up on all the inheritance taxes and what not, that stuff has pretty much been settled. I just haven't been told exactly how much it is. our lawyer is the same one that settled my great grandfather's esate and has been our lawyer for decades on account of being on the high school swimming team with my father.

    Jars on
  • PyrianPyrian Registered User regular
    In most cases buying a house is a good investment. I wouldn't worry too much about being tied down by it. Selling a house and buying a new one is a pain in the neck, no question, but it's not like you can't. Sometimes it might even be better than having to break a lease.

  • MichaelLCMichaelLC In what furnace was thy brain? ChicagoRegistered User regular
    edited July 2017
    Talk to a CPA.

    They can set you up with accounts that will keep you from blowing the big wad; as Pyrian said.

    Other advice is people will suddenly be your best friend. Resist the impulse to help them, because there is always another car repair, or student loan, or dance recital. If that is against your nature, have the CPA set up a certain amount each year to go charity/family.

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  • JarsJars Registered User regular
    edited July 2017
    eh I don't have anyone to try and bum money off me in the first place. I'm not the kind of person to spend it all at once- housing prices where I work are very low, it's rural.

    Jars on
  • bowenbowen How you doin'? Registered User regular
    Tuck it away, figure out what you would like to spend it on. Invest some of it, but avoid high risk returns. I'd suggest picking up a CD (some are at 2-3% returns right now) and sitting on it for a year and see what you feel like spending it on. If you don't have anything, just save it until you do. Personally I'd just get myself set up with a 6 month emergency fund and invest the rest.

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  • Angel_of_BaconAngel_of_Bacon Moderator mod
    I would agree with those saying put it into some safe investment, until such time that you figure out a solid plan of what else you might want to do with it.

    It sounds like you're currently unsure of where you want to go with your future/if your current situation is sustainable in the long run, so I would look at the money as something to give you some financial breathing room while you figure that out.

    I dunno if I have much to contribute as to how to go about figuring that out- surely there's career advisers or something out there? (I'm totally ignorant on this because my career's always been a pretty straight path, personally.)

    I would resist being pressured into spending it on something that just locks you in further to a life path you're not interested in in the long run. It may be exactly what those people would do with the money in that position, and it might be the right decision for them- but you're not them, and you're the one that has to live with the decisions you make- so make sure it's the right call for you before plunking down the cash.

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  • Jebus314Jebus314 Registered User regular
    It doesn't sound like it would really benefit your personal life to buy a house. As in, it doesn't sound like you are at a stage in life where you really want one.

    If that is the case you don't need to find one large expenditure to use the money on, you can just start investing smaller amounts in different ways.

    From a purely investment point of view, buying a house is typically a good idea, but there are some big downsides. Realestate is a long term investment (think 10-30 years). You can obviously sell whenever if you have too, but if you are doing less than a 5 year turn around chances are you will break even or lose money. It's also a very involved investment. If you or someone else is living in it it will require work to maintain. That severely eats into your return if you pay someone to do all the work, or it requires a fair amount of your time. I'm way over simplifying, but as an investment I probably wouldn't do it unless you have spare time to work on it and are pretty sure you will stay there for at least 5-10 years.

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  • JarsJars Registered User regular
    edited July 2017
    at the moment I do have some investments. a fair amount actually. but a lot of that is possible because I live with my mother right now so my living expenses are very low. I do want to move out but that's the eternal question of financial stability versus getting out of your parent's house. renting doesn't appeal to me, since there's no return on it you pay off someone else's return.

    Jars on
  • TerrendosTerrendos Decorative Monocle Registered User regular
    I definitely say invest it, then forget about it (don't actually forget about it, but don't touch it). Having that sort of principle in a retirement account at your age is going to make a big difference in how and when you choose to retire in 30+ years. If you can do without it, do without it. Spend $100 on a nice steak dinner in memory of the deceased, then sock away the rest.

    And yeah, it may be worth setting up a will of your own, if you're going to have that size of investment portfolio.

    firewaterwordMegafrostdjmitchella
  • firewaterwordfirewaterword Satchitananda Pais Vasco to San FranciscoRegistered User regular
    Mugsley wrote: »
    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

    Pretty sure that roth deposits are limited to 5.5k a year. 6.5k if one is older than 50.

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  • Eat it You Nasty Pig.Eat it You Nasty Pig. tell homeland security 'we are the bomb'Registered User regular
    edited July 2017
    assuming it's basically a cash payout (disbursed IRA, liquidated assets, whatever) your first step should be to figure out your tax liability; it sounds like the estate is being handled by someone competent so at some point you'll get the forms and can just have them withhold whatever tax burden you expect (i.e. so that you don't get to next year and go oh god I owe the IRS $20,000)

    after that, max out a Roth and if you don't want to buy a house or go to school, stick it in some sort of large cap index fund

    ed: that said a good alternative to buying an actual house would be a condo; it has similar benefits to housebuying in terms of building equity and reducing monthly rent and such as major maintenance is usually handled through an HOA. Also they're comparatively easy to move on from if you decide you need to do that in 5-10 years.

    Eat it You Nasty Pig. on
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  • JarsJars Registered User regular
    I know how it's being distributed: when my grandfather died in february a trust was set up and all the money was put in it. there were some discussions about what to do with the trust, but then my grandmother died in june and those abruptly ended. so the way it is currently set up is that trust is being divided 4 ways amongs the children, and since the total value is under 4 million there are no death or estate taxes owed. since my grandparents lived so long the children are all old and retired themselves so all the money is going to be gifted to the grandchildren from the children since we are all in "this will dramatically effect our lives" stages.

  • MadicanMadican No face Registered User regular
    I would second the calls for a financial planner, while making sure said planner is a fiduciary so you know they have your best interests in mind and not their own.

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  • SwashbucklerXXSwashbucklerXX Swashbucklin' Canuck Registered User regular
    edited July 2017
    Yeah, financial planners (the good ones) can be super useful even beyond their obvious function. Ours hooked us up with a great mortgage broker, for example.

    One other thing to keep in mind if you decide to buy a house/condo is the property taxes. With your low income, you'll definitely want to keep the house value reasonable and put a good chunk of the inheritance money into an income-producing stream so you can afford those (and maintenance) every year. At least if you're rural you probably don't have to worry too much about your property value skyrocketing and making the taxes unaffordable (and in that case I guess you could always sell anyway), so that's cool.

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  • EncEnc A Fool with Compassion The Land of Flowers (and Dragons)Registered User regular
    An Idea a few of my family members up north did was use their windfall to buy an apt in NYC and then rent it out and live in a place with a far lower cost of living. The income allows them to live quite well in Maine.

  • CauldCauld Registered User regular
    I would just put it into a savings/investment account and largely forget about it until you've decided what you want to do. I've had a decent amount (less than you're talking about here) in an account ever since I've graduated from college and it brings tremendous peace of mind. I left the country for a year, secure in the idea that I had savings if needed. I moved across the country without a job secure in that same safety net, etc.

    Also, this isn't what you asked about, but have you considered becoming a special needs therapist? I hear it pays well and can be done contractually/part time. My wife is strongly considering it. Not sure if you would need to go back to school for it though.

  • BurtletoyBurtletoy Registered User regular
    Mugsley wrote: »
    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

    Pretty sure that roth deposits are limited to 5.5k a year. 6.5k if one is older than 50.

    I think this is true, but I also think that if you haven't maxed out the 5.5k in the past (3? 5?) years, you can also contribute that past amount to get it up to 5.5k per year.

  • localh77localh77 Registered User regular
    Burtletoy wrote: »
    Mugsley wrote: »
    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

    Pretty sure that roth deposits are limited to 5.5k a year. 6.5k if one is older than 50.

    I think this is true, but I also think that if you haven't maxed out the 5.5k in the past (3? 5?) years, you can also contribute that past amount to get it up to 5.5k per year.

    I wish, but no, I don't think this is true, I've never heard of it before. Wouldn't hurt to throw $5500/year for a few years going forward, though.

  • localh77localh77 Registered User regular
    The other thing I wanted to mention is that in general, the receiver of a gift/inheritance doesn't have to pay any tax. If there is any tax due (which there usually isn't if the estate is under $5M), it's paid by the giver/estate.

    The main exception is if you inherit a tax deferred plan like an IRA, in which case you have to pay tax as you make withdrawals. But I wouldn't expect you to owe any tax as a result of the inheritance itself.

    All the advice so far has been good, I just wanted to throw that out there.

    CauldDoctorArch
  • DjeetDjeet Registered User regular
    Before you make plans to spend I'd wait for the estate to be settled. I've been through 2 estate settlements that were both amicable and they took 1-1.5 years to be fully settled. And then I'd wait til you had to settle taxes for the year of the settlement just to avoid any potential nasty surprises.

    I would hold off making any major changes (such as buying/renting your own place) until everything is settled and you have a better idea what you want to do moving forward, whether that be sticking it out until you get full pension, going to school, getting certs, buying a place, or moving out of city/state.

    You have been afforded an opportunity many do not get, which is that you are living within your means, but now you have some time and resources to determine if you want to make a major change in profession/occupation. I too would have suggested using a chunk of it for education, as that will likely increase your earning power. If you don't want to study education you could develop things you wanted to try, but wasn't pragmatic at the time, or didn't have time or resources for like the arts: drawing, painting, music, writing, etc. But that might not be what you're interested in.

    I would ignore the feeling that you had to do anything with the money soon after you receive it. Even if you stick it in a savings account for a bit, it'll still be there to use later once you have something like a plan for what you want to do.

    Elvenshae
  • BurtletoyBurtletoy Registered User regular
    localh77 wrote: »
    Burtletoy wrote: »
    Mugsley wrote: »
    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

    Pretty sure that roth deposits are limited to 5.5k a year. 6.5k if one is older than 50.

    I think this is true, but I also think that if you haven't maxed out the 5.5k in the past (3? 5?) years, you can also contribute that past amount to get it up to 5.5k per year.

    I wish, but no, I don't think this is true, I've never heard of it before. Wouldn't hurt to throw $5500/year for a few years going forward, though.

    Huh. My girlfriend had told me that and she deals with most of this financial stuff, but looking it up, I didn't see anything. Sorry to mislead!

  • SimpsoniaSimpsonia Registered User regular
    I would recommend perusing the /r/PersonalFinance subreddit, specifically they have a lot of sidebars relating on what to do in the effect of Windfalls. One of the biggest resources listed there is the Boggleheads article on windfalls. It might seem like a lot, and it is. But handling windfalls like this is more than just avoiding the temptation of hookers and blow.

    MugsleyCelestialBadger
  • dispatch.odispatch.o Registered User regular
    I will probably be in a similar position to the OP here within the next 5 years and have been looking into this stuff.

    Pay off any debts.
    Savings account

    - Use savings to max a Roth IRA for the next few years

    - Use savings to supplement my income and max the 401k matching from my employer. While you can't directly deposit with matching from an employer, if you're not currently at the maximum amount they will match, it's a good step to get what is essentially free money.

    - Invest in a reliable vehicle. I'm not going to run out and buy a new BMW, but a reliable vehicle is very important (to me) and would allow me to eventually purchase a home that has a modest commute, or switch apartments/visit family and friends.

    - Don't touch the money except for the above IRA and 401k budget.

    In my situation, if I were out of debt and had a reliable vehicle my employer actually has a very good tuition reimbursement plan, I just can't afford to go to school because of the time investment and lack of transportation right now. Were that not the case, if there were some associates or bachelors degree that would improve my pay or job security I would definitely consider that as a kind of "only you know if school is a good idea" type of advice.

    There's no rule that says if you have money, you need to spend it. It doesn't really expire and many housing markets (basically all of the coastal states) are in a weird bubble / boom that makes buying a home a pretty difficult task even for someone with cash on hand. I also suggest you not tell anyone about the money who doesn't need to know. I do think you should go out to a decent dinner and actually enjoy what your family has left you while you think about stuff.

    firewaterwordElvenshae
  • firewaterwordfirewaterword Satchitananda Pais Vasco to San FranciscoRegistered User regular
    edited August 2017
    Burtletoy wrote: »
    localh77 wrote: »
    Burtletoy wrote: »
    Mugsley wrote: »
    I recommend you put all or most into a Roth IRA. You can withdraw the principle at any time without penalty, but you're making additional retirement savings interest in the meantime.

    Pretty sure that roth deposits are limited to 5.5k a year. 6.5k if one is older than 50.

    I think this is true, but I also think that if you haven't maxed out the 5.5k in the past (3? 5?) years, you can also contribute that past amount to get it up to 5.5k per year.

    I wish, but no, I don't think this is true, I've never heard of it before. Wouldn't hurt to throw $5500/year for a few years going forward, though.

    Huh. My girlfriend had told me that and she deals with most of this financial stuff, but looking it up, I didn't see anything. Sorry to mislead!

    Not to get too in the weeds with this, but the extra $1k deposit allowed when one is 50 or older is also referred to as a "catch-up" contribution, which might be what you're thinking about.

    firewaterword on
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  • MugsleyMugsley Registered User regular
    @Jars depending on how deep you want to go -- and whether it interests you -- you could use the money to purchase (or at least make a healthy down payment; which I would recommend over purchasing outright) a duplex and live in half of it. This way, you can generate rental income from the other half so you aren't overly burdened with the mortgage payments, while also owning your own place.

    Those with interest in the Financial Independence, Retire Early (FIRE) "movement," eventually move into a new home and rent out both halves for additional income.

  • JasconiusJasconius sword criminal mad onlineRegistered User regular
    edited August 2017
    i think that unless this money is truly gigantic (say, over half a million), then buying a house might be a risk

    if you only make $15k a year, most of your take-home salary will be spent just on house upkeep and taxes for your home, forcing you to dip into your finite savings to live (unless you live in a very low cost of living area)

    Since you have low income, you might want to talk to a retirement advisor about how having this money might impact your access to social security (if any), because that seems like it would be quite relevant to you.

    Don't rush into anything. I think a CPA might be a little extreme (remember, these people cost money), but definitely talk to a retirement planner.

    Jasconius on
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  • schussschuss Registered User regular
    Yeah, figure out what you want to do that makes more than 15k a year first, as it may require a location change. Next, I'd rent for at least a year. Until you've managed your own household a bit, don't jump into houses. Crawl before you walk.

    firewaterworddispatch.oPacificstarElvenshae
  • PacificstarPacificstar Registered User regular
    If you do consider buying a house, make sure you don't buy where it so expensive that you can't afford property taxes. Also try to avoid HOA's they can be really horrible.

    SiskaThro
  • CelestialBadgerCelestialBadger Registered User regular
    Absolutely do not buy a house. You are correct to assess yourself as being likely to move in the near future, and that makes houses a pain in the ass. Either you have to sell them from afar, or rent them out from afar, which means paying money to a management company.

    Don't leap into education yet, either, until you know what you really want to do, which you don't right now.

    Take a look at this website about "Early retirement." Take everything with a pinch of salt, because the community is a leeeetle bit nuts, but you can do what they are scrimping and saving to do without the suffering. Particularly look at their "Investments" forum because they are a community of people looking to live on the return from investments.

    http://www.mrmoneymustache.com/

    If you can get your big lump sum of money set up to provide regular income via investments, you can basically do what you like, without worrying about wages. You can exist on a special ed assistant's income if you have an extra $20k a year coming in to boost your wages from "starvation" to "comfortable."

    Also read this wiki and forum:

    https://www.bogleheads.org/wiki/Main_Page

    A little reading on boring investments now could have you sitting pretty for life. And if your money is tied up in investments you won't be tempted to fritter it away on hookers and blow :)

    Space Pickle
  • KPCKPC Registered User regular
    edited August 2017
    Buy/build a tiny house. If you want it to be mobile, consider building it on a trailer or inside a shipping container. Travel the states/world and bring your house with you.

    Edit: Keep 6 months of expenses in a liquid savings account, save/invest the rest and/or build more tiny houses and rent them out for income.

    KPC on
  • CelestialBadgerCelestialBadger Registered User regular
    If you want to live in a movable tiny house, buy an RV. Otherwise don't buy any houses, tiny or otherwise, until you are sure you want to settle down where you are (you will know when this is due to life events, if ever.) Houses are a millstone around your neck unless you are willing to commit to living in them for 10+ years.

    dispatch.oschussElvenshaeSmrtnikNightDragonDonnicton
  • MugsleyMugsley Registered User regular
    Yeah, this is just going in circles now

  • Marty81Marty81 Registered User regular
    You say you already have some investments. Why not continue building on those?

  • DragonDragon Registered User regular
    edited August 2017
    I just want to throw in here that buying a house, even if you pay it off in full, doesn't mean you'll never have bills for it. Every year you will have to pay property taxes so unless you've either set aside a large chunk of your inheritance or can save that much every month from your income, I wouldn't buy a house. My property taxes alone are 1700$. So if you're bringing in 13k a year there goes a large portion of your income.

    If you're getting this money in I would do as other have suggested and either stash it away or start investing. You can talk to financial advisors, they're generally pretty good at finding you a good course that would suit your lifestyle.

    As far as your family giving you stipulations....screw that. Your inheritance goes to you. Period.

    And if you must go the hooker route might I suggest going to the Bunny Ranch in Nevada....at least they get tested so you wont get a disease XD

    Dragon on
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