What to do with $70,000+?

**NJDebbie** · 11-26-2010, 01:09 PM

I'm not one to give you advice on what to do with your money, but I just want to tell you that it is refreshing to see a 27 year old and no debt! Congrats!

**loansta** · 11-26-2010, 01:15 PM

Thank you! I also paid my way entire way through college....I don't want people to think Daddy gave me any of this.

Not trying to brag either - just want to encourage others!!

**Ima saver** · 11-26-2010, 01:55 PM

Congratulations on saving so much, so young!

**kork13** · 11-26-2010, 02:44 PM

Simply-put, you should try to reinvest it. How? Well, now that's the sticky situation. And right now, it's even trickier. Based on it previously being in a CD, am I correct to assume that you want to protect the money from losses if at all possible? That dramatically restricts your options (but is entirely reasonable, so I'm not knocking it). Stocks would give you a decent return, but you sacrifice principal security for those gains. And you're not going to get a decent rate on a bond/CD unless you lock it away long term (5-10 years), but if the Fed finally starts raising rates again, bonds will lose sale value, and CDs will leave you stuck with 4% while comparable CD rates rise to 5%, 6%, and above.

The best recommendation I could give you is to go shopping for individual bonds that you can hold through to maturity. Corporate bonds are easier, municipals have tax advantages. Look for something from a good, stable, reliable company (or well-rated municipality), look at finding a dividend rate that you'd be happy with even if rates start rising around you (you can probably aim for between 5-7%). Then when you buy the bonds, HOLD ONTO THEM! If you hold onto them until maturity, you have in hand a guaranteed return on your investment. That's not to say that there aren't the associated risks, but as long as the company/municipality doesn't go bankrupt, you should be able to maintain the bond without too much worry.

If that's a bit too risky for your taste, you'll likely have to sacrifice either safety or return. Give on safety, go for stocks (traditionally high-dividend stocks would be a good option); give on return, go for mid-to-long term CDs--the returns won't be pretty, but they'll be secure.

Disclaimer: I've never worked with individual bonds, so take what I say with a grain of salt--most of that is based solely on what I understand of the theory of bond investments.

**nick__45** · 11-26-2010, 10:43 PM

How about going to Costco Rico and spend 20k living for king for 6 months, you deserve it. Keep in mind, stock value can be worthless in a matter of hours, remember Enron and Madoff? Didn't GM stock went for next to nothing or what? Guns, when invested properly is a wealth preservation just like gold. Unlike gold, they can't take it away from you by force. But like gold, you may strike lucky and get rich if you time the market right.

**nick__45** · 11-26-2010, 10:48 PM

Also, most people here is in no person to give you advice as most are in debt or was in debt up to their eyeballs. If you haven't already, buy a house. If you have a secure job, buy another house and use it as rental. It doesn't have to be fancy since you're going to rent it out anyway. Have it safe and secure and let someone else pay the mortgage for you. Section 8 people always pay on time because the government is the one cutting the check and they can't use that check for anything else except paying you. If you go with that route, either leave the drywall paint or figure out the durable/washable/cleanable type because these animals don't give a rat about other people's property. Go through a realtor by paying a flat fee once to have him/her inspect and verified the condition of the house in writing and in video documentation. Then use that to get damage payment if you have to.

**disneysteve** · 11-27-2010, 12:19 PM

Originally posted by nick__45 View Post

Also, most people here is in no person to give you advice as most are in debt or was in debt up to their eyeballs.

Please don't make comments and judgements about other posters. There are lots of people here who are successful. There are lots of people here who have had problems and worked through them, which is exactly who you want to get advice from if you are in a similar situation. And there are plenty of people here who aren't doing so well and could benefit from advice from those who are doing better. This forum attracts all types, all ages, all income levels and I think it has something to offer everyone.

Keep in mind, stock value can be worthless in a matter of hours, remember Enron and Madoff? Didn't GM stock went for next to nothing or what?

It is true that any single stock could have wild swings in value over a short period of time or even become worthless. That's why most advisors recommend not putting all of your eggs in one basket. Diversify. Invest in mutual funds that own hundreds of stocks rather than buying just a few individual stocks. Don't over invest in your own employer's stock. Don't have more than 5-10% of your portfolio in any single company. And don't just invest in stocks. Also invest in bonds, real estate, commodities, etc. The people who got wiped out when Enron went under were primarily people who had nearly their whole future tied up in that one company. I have no sympathy for folks like that. If you bet the farm on one company, you deserve what you get.

**Joan.of.the.Arch** · 11-27-2010, 05:37 PM

Originally posted by nick__45 View Post

How about going to Costco Rico and spend 20k living for king for 6 months....

I'm sure you meant Costa Rica, but Costco Rico is probably an appropriate slip, given how often Costco (a large warehouse membership store) comes up as a topic of discussion in these forums

Incidentally, I've been poor but I've never been in debt up to my eyeballs. I've only been in debt up to my ankles, the bottom of my ankles.

I do, however, highly respect people who've managed to climb out of debt to live below their means so that they actually have a calmer life and less worry about the future. Those can be some smart, wise, empathetic people.

**Like2Plan** · 11-28-2010, 05:00 AM

loansta,
You have done quite well for yourself (even without the advice from this board

).

I think there are several ways to approach this, but there isn't really a quick sound bite answer.

One way is to learn about investing (read books and magazines and ask questions and so on) and direct your investmenst yourself. This will take some time and you may have a few mistakes and misdirections along the way.

Another way is to get the help of a fee only financial planner. Ideally, the planner will find out what your short term, long term and retirement goals are and structure a comphrehensive investment plan for you based on your risk tolerance. There are several ways you could invest your money depnding on how soon you are going to need it (buying a house in 5 years is not really a long way off.) Once you decide on an investment plan--there are different ways to fund it. For example, some folks set up CD ladders for their emergency money. This is so that not all the money is tied up in one CD and they come due at different times of the year. For, stocks, do you buy the whole lot at once or do you buy in over several months? Hopefully, your planner can help you decide the best strategy for your goals.

**bjl584** · 11-29-2010, 11:23 AM

Originally posted by nick__45 View Post

Also, most people here is in no person to give you advice as most are in debt or was in debt up to their eyeballs. If you haven't already, buy a house. If you have a secure job, buy another house and use it as rental. It doesn't have to be fancy since you're going to rent it out anyway. Have it safe and secure and let someone else pay the mortgage for you. Section 8 people always pay on time because the government is the one cutting the check and they can't use that check for anything else except paying you. If you go with that route, either leave the drywall paint or figure out the durable/washable/cleanable type because these animals don't give a rat about other people's property. Go through a realtor by paying a flat fee once to have him/her inspect and verified the condition of the house in writing and in video documentation. Then use that to get damage payment if you have to.

I find many of your posts and advice to be rather reckless and judgemental. OP is doing excellent for his age. Can we please stick to the issue at hand without veering off into philosphical tyraids?

OP,
You have a wonderful start for your age. Money is a great steward of itself. You need to get at least some of that money reinvested so that it can work for you. Sit down and figure out your priorities over the next 5 to 10 years. House buying? Marriage? Kids? Base your decisions on where life will be taking you (or where you think life will be taking you.) You may need some of that money for a downpayment on a house. Maybe a new car at some point. Maybe college for kids that you may have. Maybe retirement. Sit down with your fiance and set some goals then do some planning. Good luck.

**JoshuaHeckathorn** · 11-29-2010, 02:50 PM

If you're maxing out your ROTH and 401K each year on an income of $60K, then it sounds like you're saving enough for retirement at the moment. I would take this $75K and park it in an online savings account (ING, HSBC, Ally, etc.) so you can keep it liquid and take advantage of future increases in interest rates. Match your savings with goals you have coming up in your life (marriage, house, cars), and then keep doing what you're doing. You're off to a great start.

**jIM_Ohio** · 11-29-2010, 04:09 PM

Originally posted by JoshuaHeckathorn View Post

If you're maxing out your ROTH and 401K each year on an income of $60K, then it sounds like you're saving enough for retirement at the moment. I would take this $75K and park it in an online savings account (ING, HSBC, Ally, etc.) so you can keep it liquid and take advantage of future increases in interest rates. Match your savings with goals you have coming up in your life (marriage, house, cars), and then keep doing what you're doing. You're off to a great start.

I would look to take the 75k and keep it in short term or mid term investments.

I would also look at low risk and moderate risk profiles for those investments.

How much of each depends on EF.

Try this for size, then adjust.

Take 1 month expenses then put it in a short term CD, think 3, 6 or 12 months (what is short term to you?)
If a 3 month CD works, do that 3 times (so a CD maturing in March, April and May for example)
If its 6 months, they would mature in May-June-July Aug-Sep-Oct-Nov
if its 12 months they would mature each month

12 months is a larger cash position than 3 months...
if you do 3 months, then consider adding another CD which is a larger position for longer duration...
or doing 3 month CDs with 3 of them, then 3 different 3 year CDs... this will help you cover interest rate and reinvestment risks.

Then take what you choose NOT to add to the CD ladder, and find a good moderate risk investment for the balance. 3 suggestions might be Vanguard Wellesley (a 40-60 fund), T Rowe Price Spectrum Income (I own this fund, 15% equity/85% bonds- RPSIX), or Permament Portfolio (I own this fund- PRPFX, about 25% equities, 25% bonds, 25% cash and 25% gold). Each have different risk reward characteristics.

If the 75k ever has a specific purpose, move it to CASH as soon as possible. Even the moderate risk suggestions change in value daily.

**JoshuaHeckathorn** · 11-30-2010, 09:01 AM

Originally posted by jIM_Ohio View Post

Try this for size, then adjust.

Take 1 month expenses then put it in a short term CD, think 3, 6 or 12 months (what is short term to you?)
If a 3 month CD works, do that 3 times (so a CD maturing in March, April and May for example)
If its 6 months, they would mature in May-June-July Aug-Sep-Oct-Nov
if its 12 months they would mature each month

12 months is a larger cash position than 3 months...
if you do 3 months, then consider adding another CD which is a larger position for longer duration...
or doing 3 month CDs with 3 of them, then 3 different 3 year CDs... this will help you cover interest rate and reinvestment risks.

Why would a young person want to mess with CD ladders when the rates are so painfully low these days? A 6-month CD might offer .75%, but you can easily beat that with an online savings account and the cash is free to move at will.

What to do with $70,000+?